<PAGE> 1
[AIM LOGO APPEARS HERE]
AIM VARIABLE INSURANCE FUNDS, INC.
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
AIM V.I. VALUE FUND
P
PROSPECTUS
MAY 1, 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 (the "Funds") are nine investment portfolios comprising
series of AIM Variable Insurance Funds, Inc. (the "Company"), an
open-end, series, management investment company. Shares of the Funds
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 Funds may be offered, in the
future, to certain pension or retirement plans. The investment
objectives of the Funds are described on the inside cover page. The
address for AIM Variable Insurance Funds, Inc. is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173, and its telephone number is
(713) 626-1919.
UP TO 50% OF THE SECURITIES IN WHICH THE AIM V.I. DIVERSIFIED INCOME
FUND INVESTS MAY BE SECURITIES RATED IN THE LOWER RATING CATEGORIES
OF NATIONALLY RECOGNIZED STATISTICAL RATING ORGANIZATIONS ("NRSROS"),
OR ARE UNRATED, AND ARE COMMONLY KNOWN AS "JUNK BONDS." INVESTMENT IN
NON-INVESTMENT GRADE DEBT SECURITIES ARE SUBJECT TO GREATER RISK OF
LOSS OF PRINCIPAL AND INTEREST, AND MAY ENTAIL OTHER RISKS THAT ARE
DIFFERENT FROM OR MORE PRONOUNCED THAN THOSE INVOLVED IN HIGHER-RATED
SECURITIES. INVESTORS SHOULD CAREFULLY ASSESS THE RISKS ASSOCIATED
WITH AN INVESTMENT IN THIS FUND. SEE "RISK FACTORS" UNDER "INVESTMENT
PROGRAMS."
This prospectus sets forth basic information about the Funds that
prospective investors should know before investing. It should be read
and retained for future reference. A Statement of Additional
Information dated May 1, 1997, 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.
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 OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THE FUNDS' SHARES ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED
OR ENDORSED BY, ANY BANK, AND THE FUNDS' 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 FUNDS INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF PRINCIPAL.
THERE IS NO ASSURANCE THAT THE AIM V.I. MONEY MARKET FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE PAGE
---- ----
<S> <C> <C> <C>
About the Funds........................... 2 Determination of Net Asset Value.......... 20
Financial Highlights...................... 3 Dividends, Distributions and Tax
Performance............................... 8 Matters................................. 21
Investment Objectives and Programs........ 8 General Information....................... 22
Risk Factors.............................. 16 APPENDIX A................................ A-1
Management................................ 17 APPENDIX B................................ B-1
Purchase and Redemption of Shares......... 20 APPENDIX C................................ C-1
</TABLE>
- --------------------------------------------------------------------------------
ABOUT THE FUNDS
The following is a brief description of the investment objectives and programs
of the Funds:
AIM V.I. CAPITAL APPRECIATION FUND ("CAPITAL APPRECIATION FUND") is a
diversified portfolio which seeks to provide capital appreciation through
investments in common stocks, with emphasis on medium-sized and smaller emerging
growth companies.
AIM V.I. DIVERSIFIED INCOME FUND ("DIVERSIFIED INCOME FUND") is a diversified
portfolio which seeks to achieve a high level of current income primarily by
investing 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").
AIM V.I. GLOBAL UTILITIES FUND ("GLOBAL UTILITIES FUND") is a non-diversified
portfolio which seeks to achieve a high level of current income, and as a
secondary objective to achieve capital appreciation, by investing primarily in
common and preferred stocks of public utility companies (either domestic or
foreign).
AIM V.I. GOVERNMENT SECURITIES FUND ("GOVERNMENT FUND") is a diversified
portfolio which seeks 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.
AIM V.I. GROWTH FUND ("GROWTH FUND") is a diversified portfolio which seeks to
provide growth of capital through investments primarily in common stocks of
leading U.S. companies considered by AIM to have strong earnings momentum.
AIM V.I. GROWTH AND INCOME FUND ("GROWTH & INCOME FUND") is a diversified
portfolio which seeks to provide growth of capital, with current income as a
secondary objective by investing primarily in dividend paying common stocks
which have prospects for both growth of capital and dividend income.
AIM V.I. INTERNATIONAL EQUITY FUND ("INTERNATIONAL FUND") is a diversified
portfolio which seeks to provide long-term growth of capital by investing in
international equity securities, the issuers of which are considered by AIM to
have strong earnings momentum.
AIM V.I. MONEY MARKET FUND ("MONEY MARKET FUND") is a diversified portfolio
which seeks to provide as high a level of current income as is consistent with
the preservation of capital and liquidity by investing in a diversified
portfolio of money market instruments.
AIM V.I. VALUE FUND ("VALUE FUND") is a diversified portfolio which seeks 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
markets generally. Income is a secondary objective.
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK and AIM Institutional Funds are registered
service marks and La Familia AIM de Fondos, La Familia AIM de Fondos and Design
and aimfunds.com are service marks of A I M Management Group Inc.
2
<PAGE> 3
The Capital Appreciation Fund, Diversified Income Fund, Global Utilities Fund,
Government Fund, Growth Fund, Growth & Income Fund, International Fund, Money
Market Fund and Value Fund are separate series of shares of AIM Variable
Insurance Funds, Inc., 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"). Each Fund has its own investment
objective(s) and policies designed to meet specific investment goals, operates
as an open-end management investment company and expects to be treated as a
regulated investment company for federal income tax purposes. Each Fund is
diversified except Global Utilities Fund. For more information on
diversification, see "Risk Factors" in this Prospectus.
Each Fund invests in securities of different issuers and industry
classifications in an attempt to spread and reduce the risks inherent in all
investing. Each 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 each
Fund, continuously reviews and, from time to time, changes the portfolio
holdings of each of the Funds in pursuit of each Fund's objective(s).
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of each of
the Funds (except the Global Utilities Fund and the Growth & Income Fund) for
the fiscal year ended December 31, 1996, the eleven months ended December 31,
1995, the fiscal year ended January 31, 1995, and for the period May 5, 1993
(date operations commenced) through January 31, 1994. Financial highlights for a
share outstanding of each of the Global Utilities Fund and the Growth & Income
Fund for the fiscal year ended December 31, 1996, the eleven months ended
December 31, 1995 and for the period May 2, 1994 (date operations commenced)
through January 31, 1995, are also shown below. The financial highlights have
been audited by Tait, Weller & Baker, independent auditors, whose unqualified
reports thereon are included in the Statement of Additional Information.
Additional information about the performance of the Funds is contained in the
Funds' annual report to shareholders, which may be obtained without charge upon
request.
AIM V.I. CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -------------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............. $ 16.55 $ 12.05 $ 12.58 $ 10.00
-------- -------- ------- -------
Income from investment operations:
Net investment income....................... 0.02 0.04 0.05 --
Net gains (losses) on securities (both
realized and unrealized).................. 2.89 4.46 (0.54) 2.59
-------- -------- ------- -------
Total from investment operations............ 2.91 4.50 (0.49) 2.59
-------- -------- ------- -------
Less distributions:
Dividends from net investment income........ (0.03) -- (0.04) (0.01)
-------- -------- ------- -------
Net asset value, end of period................... $ 19.43 $ 16.55 $ 12.05 $ 12.58
======== ======== ======= =======
Total return(a).................................. 17.58% 37.38% (3.91)% 25.90%
======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)....... $370,063 $212,152 $88,177 $35,354
======== ======== ======= =======
Ratio of expenses to average net assets........ 0.73%(b) 0.75%(c) 0.84% 1.06%(c)
======== ======== ======= =======
Ratio of net investment income to average net
assets...................................... 0.18%(b) 0.39%(c) 0.46% 0.07%(c)
======== ======== ======= =======
Portfolio turnover rate........................ 59% 37% 81% 34%
======== ======== ======= =======
Average broker commission rate(d).............. $ 0.0592 N/A N/A N/A
======== ======== ======= =======
</TABLE>
- ---------------
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $293,306,287.
(c) Annualized.
(d) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
3
<PAGE> 4
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------ ------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 10.00 $ 9.12 $ 10.46 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income............................ 0.73 0.69 0.76 0.54
Net gains (losses) on securities (both realized
and unrealized)................................ 0.28 0.94 (1.42) 0.29
------- ------- ------- -------
Total from investment operations................. 1.01 1.63 (0.66) 0.83
------- ------- ------- -------
Less distributions:
Dividends from net investment income............. (0.68) (0.75) (0.68) (0.35)
Distributions from net realized capital gains.... -- -- -- (0.02)
------- ------- ------- -------
Total distributions.............................. (0.68) (0.75) (0.68) (0.37)
------- ------- ------- -------
Net asset value, end of period........................ $ 10.33 $ 10.00 $ 9.12 $ 10.46
======= ======= ======= =======
Total return(a)....................................... 10.19% 18.11% (6.35)% 8.33%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $63,624 $44,630 $25,271 $14,530
======= ======= ======= =======
Ratio of expenses to average net assets(c).......... 0.86%(b) 0.88%(e) 0.91% 1.05%(e)
======= ======= ======= =======
Ratio of net investment income to average net
assets(d)........................................ 7.09%(b) 7.65%(e) 8.07% 6.78%(e)
======= ======= ======= =======
Portfolio turnover rate............................. 76% 72% 100% 57%
======= ======= ======= =======
</TABLE>
- ---------------
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $51,024,610.
(c) After waiver of advisory fee and expense reimbursement. Ratios of expenses
to average net assets prior to waiver of advisory fees and/or expense
reimbursements are 1.03% and 1.69% (annualized) for January 31, 1995 and
1994, respectively.
(d) After waiver of advisory fee and expense reimbursement. Ratios of net
investment income to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 7.95% and 6.14% (annualized) for January
31, 1995 and 1994, respectively.
(e) Annualized.
AIM V.I. GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
-------------------- -----------
1996 1995 1995
------- ------ -----------
<S> <C> <C> <C>
Net asset value, beginning of period...................... $ 11.64 $ 9.69 $10.00
------- ------ ------
Income from investment operations:
Net investment income................................ 0.40 0.29 0.27
Net gains (losses) on securities (both realized and
unrealized)........................................ 0.99 1.98 (0.33)
------- ------ ------
Total from investment operations..................... 1.39 2.27 (0.06)
------- ------ ------
Less distributions:
Dividends from net investment income................. (0.41) (0.31) (0.25)
Distributions from capital gain...................... (0.07) (0.01) --
------- ------ ------
Total distributions.................................. (0.48) (0.32) (0.25)
------- ------ ------
Net asset value, end of period............................ $ 12.55 $11.64 $ 9.69
======= ====== ======
Total return(a)........................................... 12.07% 23.73% (0.56)%
======= ====== ======
Ratios/supplemental data:
Net assets, end of period (000s omitted)................ $13,576 $8,394 $2,958
======= ====== ======
Ratio of expenses to average net assets................. 1.40%(b)(c) 1.47%(c)(e) 1.31%(e)(f)
------- ------ ------
Ratio of net investment income to average net assets.... 3.56%(b)(d) 3.76%(d)(e) 4.39%(e)(f)
======= ====== ======
Portfolio turnover rate................................. 47% 58% 69%
======= ====== ======
Average broker commission rate(g)....................... $0.0477 N/A N/A
======= ====== ======
</TABLE>
- ---------------
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $11,229,919.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
are 1.55% and 2.44% for 1996 and 1995, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees are 3.42% and 2.79% for 1996 and 1995, respectively.
(e) Annualized.
(f) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and expense reimbursements are 2.80%
and 2.90%, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
4
<PAGE> 5
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- ------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period.................. $ 10.17 $ 9.39 $ 10.24 $ 10.00
------- ------- ------- -------
Income from investment operations:
Net investment income............................ 0.58 0.54 0.53 0.38
Net gains (losses) on securities (both realized
and unrealized)................................ (0.35) 0.74 (0.88) 0.10
------- ------- ------- -------
Total from investment operations................. 0.23 1.28 (0.35) 0.48
------- ------- ------- -------
Less distributions:
Dividends from net investment income............. (0.53) (0.50) (0.50) (0.24)
------- ------- ------- -------
Total distributions.............................. (0.53) (0.50) (0.50) (0.24)
------- ------- ------- -------
Net asset value, end of period........................ $ 9.87 $ 10.17 $ 9.39 $ 10.24
======= ======= ======= =======
Total return(a)....................................... 2.29% 13.84% (3.42)% 4.78%
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)............ $24,527 $19,545 $12,887 $10,643
======= ======= ======= =======
Ratio of expenses to average net assets............. 0.91%(b) 1.19%(c) 0.95%(d) 1.00%(c)(d)
======= ======= ======= =======
Ratio of net investment income to average net
assets........................................... 5.80%(b) 5.78%(c) 5.51%(e) 4.74%(c)(e)
======= ======= ======= =======
Portfolio turnover rate............................. 32% 41% 29% 0%
======= ======= ======= =======
</TABLE>
- ---------------
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $21,494,183.
(c) Annualized.
(d) Ratios of expenses to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 1.10% and 1.80% (annualized) for January,
1995 and 1994, respectively.
(e) Ratios of net investment income to average net assets prior to waiver of
advisory fees and/or expense reimbursements are 5.35% and 3.94% (annualized)
for January, 1995 and 1994, respectively.
AIM V.I. GROWTH FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
-------------------- ------------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 14.44 $ 10.71 $ 11.59 $ 10.00
-------- -------- ------- -------
Income from investment operations:
Net investment income........................... 0.07 0.09 0.06 0.02
Net gains (losses) on securities (both realized
and unrealized)............................... 2.52 3.65 (0.88) 1.59
-------- -------- ------- -------
Total from investment operations................ 2.59 3.74 (0.82) 1.61
-------- -------- ------- -------
Less distributions:
Dividends from net investment income............ (0.06) (0.01) (0.06) (0.02)
Distributions from capital gains................ (0.72) -- -- -
-------- -------- ------- -------
Total distributions........................ (0.78) (0.01) (0.06) (0.02)
-------- -------- ------- -------
Net asset value, end of period....................... $ 16.25 $ 14.44 $ 10.71 $ 11.59
======== ======== ======= =======
Total return(a)...................................... 18.09% 34.89% (7.11)% 16.07%
======== ======== ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)........... $178,638 $102,600 $45,497 $25,115
======== ======== ======= =======
Ratio of expenses to average net assets............ 0.78%(b) 0.84%(c) 0.95% 0.85%(c)(d)
======== ======== ======= =======
Ratio of net investment income to average net
assets.......................................... 0.79%(b) 0.95%(c) 0.71% 0.51%(c)(d)
======== ======== ======= =======
Portfolio turnover rate............................ 143% 125% 179% 99%
======== ======== ======= =======
Average broker commission rate(e).................. $ 0.0629 N/A N/A N/A
======== ======== ======= =======
</TABLE>
- ---------------
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $140,923,834.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 1.50% and (0.14)%,
respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
5
<PAGE> 6
AIM V.I. GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
DECEMBER 31,
------------------- JANUARY 31,
1996 1995 1995
-------- ------- ------------
<S> <C> <C> <C>
Net asset value, beginning of period........................ $ 12.68 $ 9.98 $10.00
-------- ------- ------
Income from investment operations:
Net investment income.................................. 0.16 0.14 0.11
Net gains (losses) on securities (both realized and
unrealized).......................................... 2.36 3.11 (0.02)
-------- ------- ------
Total from investment operations....................... 2.52 3.25 0.09
-------- ------- ------
Less distributions:
Dividends from net investment income................... (0.14) (0.14) (0.11)
Distributions from capital gains....................... (0.03) (0.41) --
-------- ------- ------
Total distributions.................................... (0.17) (0.55) (0.11)
-------- ------- ------
Net asset value, end of period.............................. $ 15.03 $ 12.68 $ 9.98
======== ======= ======
Total return(a)............................................. 19.95% 32.65% 0.90%
======== ======= ======
Ratios/supplemental data:
Net assets, end of period (000s omitted).................. $209,332 $38,567 $7,380
======== ======= ======
Ratio of expenses to average net assets................... 0.78%(b) 0.78%(c) 1.07%(c)(d)
======== ======= ======
Ratio of net investment income to average net assets...... 2.05%(b) 1.92%(c) 1.95%(c)(d)
======== ======= ======
Portfolio turnover rate................................... 148% 145% 96%
======== ======= ======
Average broker commission rate(e)......................... $ 0.0644 N/A N/A
======== ======= ======
</TABLE>
- ---------------
(a) Total return is not annualized for periods less than one year.
(b) Ratios are based on average net assets of $104,198,711.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.72% and 1.30%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- ------------------
1996 1995 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period................. $ 13.66 $ 11.03 $ 12.49 $ 10.00
-------- ------- ------- -------
Income from investment operations:
Net investment income........................... 0.07 0.07 0.06 --
Net gains (losses) on securities (both realized
and unrealized)............................... 2.67 2.58 (1.49) 2.49
-------- ------- ------- -------
Total from investment operations................ 2.74 2.65 (1.43) 2.49
-------- ------- ------- -------
Less distributions:
Dividends from net investment income............ (0.04) (0.02) (0.03) --
-------- ------- ------- -------
Net asset value, end of period....................... $ 16.36 $ 13.66 $ 11.03 $ 12.49
======== ======= ======= =======
Total return(a)...................................... 20.05% 24.04% (11.48)% 24.90%
======== ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)........... $165,738 $82,257 $55,019 $23,533
======== ======= ======= =======
Ratio of expenses to average net assets............ 0.96%(b) 1.15%(c) 1.27%(d) 1.98%(c)(e)
======== ======= ======= =======
Ratio of net investment income to average net
assets.......................................... 0.78%(b) 0.75%(c) 0.60%(d) (0.15)%(c)(e)
======== ======= ======= =======
Portfolio turnover rate............................ 59% 67% 64% 26%
======== ======= ======= =======
Average broker commission rate(f).................. $ 0.0209 N/A N/A N/A
======== ======= ======= =======
</TABLE>
- ---------------
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $123,199,030.
(c) Annualized.
(d) Ratios of expenses and net investment income to average net assets prior to
waiver of advisory fees are 1.28% and 0.59%, respectively.
(e) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 3.06% and (1.23)%,
respectively.
(f) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
6
<PAGE> 7
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............... $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- ------- -------
Income from investment operations:
Net investment income......................... 0.05 0.05 0.04 0.02
------- ------- ------- -------
Less distributions:
Dividends from net investment income.......... (0.05) (0.05) (0.04) (0.02)
------- ------- ------- -------
Net asset value, end of period..................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======= =======
Total return....................................... 4.97% 5.69%(a) 3.98% 2.27%(a)
======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)......... $63,529 $65,506 $31,017 $13,891
======= ======= ======= =======
Ratio of expenses to average net assets.......... 0.55%(b) 0.53%(a) 0.63%(c) 0.95%(a)(d)
======= ======= ======= =======
Ratio of net investment income to average net
assets........................................ 4.84%(b) 5.40%(a) 4.14%(c) 2.29%(a)(d)
======= ======= ======= =======
</TABLE>
- ---------------
(a) Annualized.
(b) Ratios are based on average net assets of $66,213,747.
(c) Ratios of expenses and net investment income to average net assets prior to
waiver of advisory fees are 0.70% and 4.07%, respectively.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.53% and 1.70%, respectively.
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- --------------------
1996 1995 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of period............ $ 16.11 $ 11.83 $ 12.17 $ 10.00
-------- -------- -------- -------
Income from investment operations:
Net investment income...................... 0.30 0.11 0.10 0.02
Net gains (losses) on securities (both
realized and unrealized)................. 2.09 4.18 (0.35) 2.17
-------- -------- -------- -------
Total from investment operations........... 2.39 4.29 (0.25) 2.19
-------- -------- -------- -------
Less distributions:
Dividends from net investment income....... (0.10) (0.01) (0.09) (0.02)
Dividends from realized capital gains...... (0.92) -- -- --
-------- -------- -------- -------
Total distributions................... (1.02) (0.01) (0.09) (0.02)
-------- -------- -------- -------
Net asset value, end of period.................. $ 17.48 $ 16.11 $ 11.83 $ 12.17
======== ======== ======== =======
Total return(a)................................. 15.02% 36.25% (2.03)% 21.94%
======== ======== ======== =======
Ratios/supplemental data:
Net assets, end of period (000s omitted)...... $369,735 $257,212 $109,257 $38,255
======== ======== ======== =======
Ratio of expenses to average net assets....... 0.73%(b) 0.75%(c) 0.82% 1.00%(c)(d)
======== ======== ======== =======
Ratio of net investment income to average net
assets..................................... 2.00%(b) 1.11%(c) 1.17% 0.51%(c)(d)
======== ======== ======== =======
Portfolio turnover rate....................... 129% 145% 143% 87%
======== ======== ======== =======
Average broker commission rate(e)............. $ 0.0429 N/A N/A N/A
======== ======== ======== =======
</TABLE>
- ---------------
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $304,940,393.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and/or expense reimbursements were
1.35% and 0.16%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
7
<PAGE> 8
- --------------------------------------------------------------------------------
PERFORMANCE
Each Fund's performance may be quoted in advertising in terms of yield or
total return. See the Statement of Additional Information for further details
concerning performance comparisons used in advertisements by the Funds.
A 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, a Fund may
separate its cumulative and average annual total returns into income results and
capital gain or loss.
Yield is computed in accordance with a standardized formula described in the
Statement of Additional Information and can be expected to fluctuate from time
to time. Accordingly, the yield information may not provide a basis for
comparison with investments which pay a fixed rate of interest for a stated
period of time. Yield is the annualized percentage rate of net income (exclusive
of capital changes) earned by a Fund over a specified period. It is a function
of the type and quality of a Fund's investments, its maturity and its operating
expense ratio.
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 any Fund. Such a practice will
have the effect of increasing the Fund's yield and total return. Quotations of a
Fund's performance will not reflect charges levied at the separate account
level.
The performance of each Fund will vary from time to time and past results are
not necessarily indicative of future results. A 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 a Fund is not insured or guaranteed.
These factors should be carefully considered by the investor before making an
investment in a Fund.
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVES AND PROGRAMS
Set forth in this section is a statement of each Fund's investment objective
along with a description of the investment policies, strategies and practices of
each Fund. The investment objective of each 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 that Fund's outstanding shares (within the meaning of
the 1940 Act). Each 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. Each 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 any Fund should
recognize that there are risks in the ownership of any security and that no
assurance can be given that any particular Fund will achieve its investment
objective(s).
AIM V.I. CAPITAL APPRECIATION 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. AIM will be particularly
interested in companies that are likely to benefit from new or innovative
products, services or processes that should enhance such companies' prospects
for future growth in earnings. As a result of this policy, the market prices of
many of the securities purchased and held by the Fund may fluctuate widely. Any
income received from securities held by the Fund will be incidental, and an
investor should not consider a purchase of shares of the Fund as equivalent to a
complete investment program. The Capital Appreciation Fund's portfolio is
primarily comprised of securities of two basic categories of companies: (1)
"core" companies, which AIM considers to have experienced above-average and
consistent long-term growth in earnings and to have excellent prospects for
outstanding future growth, and (2) "earnings acceleration" companies which AIM
believes are currently enjoying a dramatic increase in profits.
AIM V.I. DIVERSIFIED INCOME FUND. The Fund's investment objective is to seek
to achieve a high level of current income. The Fund will seek to achieve its
investment objective by investing primarily in: (i) foreign government
securities, (ii) foreign and domestic corporate debt securities, (iii) U.S.
Government securities, including U.S. Government Agency Mortgage-Backed
Securities and (iv) lower-rated or unrated high yield debt securities (commonly
known as "junk bonds") of U.S. and foreign companies. Under normal
circumstances, the Fund's assets will be invested in each of these four sectors.
The Fund may invest up to 10% of its total assets in common stocks, preferred
stocks, similar equity securities and convertible securities of U.S. and foreign
companies. The Fund does not intend to invest more than 50% of its total assets
in lower-rated or unrated high yield securities or more than 50% of its total
assets in foreign debt securities. (For a description of the various rating
categories of corporate debt securities in which the Fund may invest, see
Appendix A to this Prospectus. For a description of U.S. Government Agency
Mortgage-Backed Securities, see Appendix B to this Prospectus.) However, the
Fund may from time to time invest up to 100% of its total assets in U.S.
Government securities and, as a defensive measure, may invest up to 100% of its
total assets in money market securities. For a discussion of the investment
risks
8
<PAGE> 9
associated with investments in high yield securities and foreign securities, see
"Risk Factors" in this Prospectus. For further discussion of the extent of the
Fund's intended investment, see "Certain Investment Strategies and Techniques"
in this Prospectus.
During the fiscal year ended December 31, 1996, the percentage of average
annual assets of the Portfolio calculated on a dollar weighted basis, which was
invested in securities within the various rating categories (based on the higher
of Standard and Poor's Corporation and Moody's Investors Service, Inc. ratings
as described in Appendix A), and in unrated securities determined by AIM to be
of comparable quality, was as follows:
<TABLE>
<CAPTION>
PERCENTAGE
----------
<S> <C>
AAA/Aaa..................................................... 32.70%
AA/Aa....................................................... 14.31%
A/A......................................................... 12.82%
BBB/Baa..................................................... 12.92%
BB/Ba....................................................... 8.07%
B/B......................................................... 17.45%
CCC/Caa..................................................... 1.12%
CC/Ca....................................................... 0%
C/C......................................................... 0%
Unrated..................................................... 0.61%
-----
Total Average Annual Assets....................... 100%
</TABLE>
AIM V.I. GLOBAL UTILITIES 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). Under normal
circumstances, at least 65% of the Fund's total assets will be invested in
securities of public utility companies (either domestic or foreign). Public
utility companies include companies that provide electricity, natural gas or
water and other sanitary services to the public, and telephone or telegraph
companies and other companies providing public communications services. The Fund
may also invest in developing utility technology companies and in holding
companies which derive a substantial portion of their revenues from
utility-related activities. Generally, a holding company will be considered to
derive a substantial portion of its revenues from utility-related activities if
such activities account for at least 40% of its revenues. The Fund may invest up
to 25% of its total assets in convertible securities. When AIM deems it
appropriate, the Fund may also purchase the bonds of such companies. Investments
in non-convertible bonds, however, will not exceed 25% of the Fund's total
assets. The Fund may invest up to 10% of its total assets in lower-rated or
unrated high yield securities. (For a description of the various rating
categories of corporate debt securities in which the Fund may invest, see
Appendix A to this Prospectus.) During the fiscal year ended December 31, 1996,
the Fund invested less than 5% of its net assets in below investment grade debt
securities. The Fund may also invest up to 80% of its total assets in securities
of foreign companies, including investments in American Depositary Receipts
("ADRs"), European Depositary Receipts ("EDRs") and underlying securities of
foreign issuers. For a discussion of the investment risks associated with
investments in non-investment grade debt securities and foreign securities, see
"Risk Factors" in this Prospectus. For a further discussion of the Fund's
intended investments, see "Certain Investment Strategies and Techniques" in this
Prospectus.
A portfolio of utility company securities is subject to a different degree of
volatility than a more broadly diversified portfolio. Economic, operational or
regulatory changes that affect utility companies will have a material impact
upon the value of the securities that the Fund owns. Events, such as changing
weather patterns, emergencies involving nuclear power plants, or rapidly
changing fuel prices that have no direct connection with companies whose
securities are owned by the Fund may affect the prices of those securities.
Moreover, a portfolio of utilities industry securities is subject to the risks
unique to that industry, such as inflationary or other increases in fuel and
operating expenses, possible increases in the interest costs of loans needed for
capital construction programs, compliance with environmental regulations,
possible adverse changes in the regulatory climate and availability of fuel
sources.
A description of the utilities industry is contained in the Statement of
Additional Information.
AIM V.I. GOVERNMENT SECURITIES 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. The government securities
which may be purchased by the Fund include but are not limited to (1) U.S.
Treasury obligations such as Treasury Bills (maturities of one year or less),
Treasury Notes (maturities of one to ten years) and Treasury Bonds (generally
maturities of greater than ten years) and (2) obligations issued or guaranteed
by U.S. Government agencies and instrumentalities ("Agency Securities") which
are supported by any of the following: (a) the full faith and credit of the U.S.
Treasury, such as obligations of the Government National Mortgage Association
("GNMA"), (b) the right of the issuer to borrow an amount limited to a specific
line of credit from the U.S. Treasury, such as obligations of the Federal
National Mortgage Association ("FNMA"), the Federal Home Loan Bank and the U.S.
Postal Service or (c) the credit of the agency or instrumentality, such as
obligations of the Federal Home Loan Mortgage Corporation ("FHLMC") and Federal
Farm Credit System. Although their close relationship with the U.S. Government
is believed to make them high-quality securities with minimal credit risks, the
U.S. Government is not required by law to support the agencies and
instrumentalities listed in (b) and (c), above. Accordingly, such securities may
involve risk of loss of
9
<PAGE> 10
principal and interest; however, historically there have not been any defaults
of such issues. For a listing of some of the types of Agency Securities in which
the Fund may invest, see Appendix B to this Prospectus.
The Fund's investments include high coupon U.S. Government Agency
Mortgage-Backed Securities, which provide a higher coupon at the time of
purchase than the prevailing market rate yield. The prices of high coupon U.S.
Government Agency Mortgage-Backed Securities do not tend to rise as rapidly as
those of traditional fixed rate securities at times when interest rates are
decreasing, and tend to decline more slowly at times when interest rates are
increasing. The Fund may purchase such securities at a premium, which means that
a faster principal prepayment rate than expected will reduce the market value of
and income from such securities, while a slower prepayment rate will tend to
increase the market value of and income from such securities.
The composition and weighted average maturity of the Fund's portfolio will
vary from time to time, based upon the determination of AIM of how best to
further the Fund's investment objective. The Fund may invest in government
securities of all maturities, short-term, intermediate-term and long-term. The
Fund intends to maintain a dollar-weighted average portfolio maturity of between
three and ten years. This policy regarding portfolio maturity is a
non-fundamental policy of the Fund.
AIM V.I. GROWTH 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.
Current income will not be an important criterion of investment selection, and
any such income should be considered incidental. It is anticipated that common
stocks will be the principal form of investment by the Fund. For other types of
investments, see "Certain Investment Strategies and Techniques" in this
Prospectus. The Fund's portfolio is primarily comprised of securities of two
basic categories of companies: (1) "core" companies, which AIM considers to have
experienced above-average and consistent long-term growth in earnings and to
have excellent prospects for outstanding future growth, and (2) "earnings
acceleration" companies which Fund management believes are currently enjoying a
dramatic increase in profits.
AIM V.I. GROWTH AND INCOME FUND. The Fund's investment objective is to seek
growth of capital, with current income as a secondary objective. Although the
amount of the Fund's current income will vary from time to time, it is
anticipated that the current income realized by the Fund will generally be
greater than that realized by mutual funds whose sole objective is growth of
capital. The Fund seeks to achieve its objective by generally investing at least
65% of its net assets in stocks of companies believed by management to have the
potential for above average growth in revenues and earnings. The Fund generally
will also invest at least 80% of its net assets in securities which pay income
to the Fund.
AIM V.I. INTERNATIONAL EQUITY 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. Any income realized by the Fund will be
incidental and will not be an important criterion in the selection of portfolio
securities.
In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to the Growth Fund with respect to that Fund's investment in United
States equities markets. The Fund will utilize to the extent practicable a fully
managed investment policy providing for the selection of securities which meet
certain quantitative standards determined by AIM. AIM will review carefully the
earnings history and prospects for growth of each company considered for
investment by the Fund. It is expected that the Fund's portfolio, when fully
invested, will generally be comprised of two basic categories of foreign
companies: (1) "core" companies, which AIM considers to have experienced
consistent long-term growth in earnings and to have strong prospects for
outstanding future growth, and (2) companies that AIM believes are currently
experiencing a greater than anticipated increase in earnings. If a particular
foreign company meets the quantitative standards determined by AIM, its
securities may be acquired by the Fund regardless of the location of the company
or the percentage of the Fund's investments in the company's country or region.
However, AIM will also consider other factors in making investment decisions for
the Fund, including such factors as the prospects for relative economic growth
among countries or regions, economic and political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. For
a discussion of the investment risks associated with investments in foreign
securities, see "Risk Factors" in this Prospectus. For a discussion of the
extent of the Fund's intended investment in foreign countries, see "Certain
Investment Strategies and Techniques" in this Prospectus.
AIM V.I. MONEY MARKET 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. The Fund seeks to achieve its objective by investing
in a diversified portfolio of high quality U.S. dollar denominated money market
instruments and other similar instruments with maturities of 397 days or less
from the date of purchase, and will maintain a dollar weighted-average portfolio
maturity of 90 days or less. Securities subject to repurchase agreements may
bear longer maturities.
The Fund invests in a broad range of U.S. Government and foreign government
obligations, and bank and commercial instruments that may be available in the
money markets. Such obligations include U.S. Treasury obligations and repurchase
agreements secured by such obligations. The Money Market Fund intends to invest
in bankers' acceptances, certificates of deposit, repurchase agreements, time
deposits, variable rate master demand notes, taxable municipal securities and
commercial paper, and U.S. Government direct obligations and U.S. Government
agencies' securities. Bankers' acceptances, certificates of deposit and time
deposits may be purchased from U.S. or foreign banks. All of these instruments,
which are collectively referred to as "Money Market Obligations," are briefly
described in Appendix C to this Prospectus and are described more fully in the
Statement of Additional Information.
10
<PAGE> 11
The Fund will limit investments in Money Market Obligations to those which are
denominated in U.S. dollars and which at the date of purchase are "First Tier"
securities as defined in Rule 2a-7 under the 1940 Act, as such Rule may be
amended from time to time. Generally, "First Tier" securities are securities
that are rated in the highest rating category by two NRSROs, or, if only rated
by one NRSRO, are rated in the highest rating category by that NRSRO, or, if
unrated, are determined by AIM (under the supervision of and pursuant to
guidelines established by the Board of Directors) to be of comparable quality to
a rated security that meets the foregoing quality standards. For a more complete
definition of a "First Tier" security, see the definition set forth in the
Statement of Additional Information.
The Money Market Fund may invest up to 100% of its total assets in obligations
issued by banks. While the Fund will limit its investments in bank instruments
to U.S. dollar denominated obligations, it may invest in Eurodollar obligations
(i.e., U.S. dollar-denominated obligations issued by a foreign branch of a
domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated
obligations issued by a domestic branch of a foreign bank) and obligations of
foreign branches of foreign banks. The Money Market Fund will limit its
aggregate investments in foreign bank obligations, including Eurodollar
obligations and Yankee dollar obligations, to 25% of its total assets at the
time of purchase, provided that there is no limitation upon the Fund's
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligation is unconditionally liable in the event that the
foreign branch for any reason fails to pay on the Eurodollar obligation; and (b)
Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to
the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign
bank obligations include time deposits, which are non-negotiable deposits
maintained in a bank for a specified period of time at a stated interest rate.
For a discussion of the risks pertaining to investments in foreign securities,
see "Risk Factors" in this Prospectus.
AIM V.I. VALUE 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 and would be satisfied principally from the
income (interest and dividends) generated by the common stocks, convertible
bonds and convertible preferred stocks that make up the Fund's portfolio. The
Fund should not be purchased by those who seek income as their primary
investment objective.
In addition to the securities described above, the Fund may also acquire
preferred stocks and debt instruments having prospects for growth of capital.
Although these different types of securities can be expected to generate amounts
of income to satisfy the Fund's secondary objective, they will be purchased for
their potential for growth of capital.
The primary thrust of AIM's search for undervalued equity securities is in
four categories: (1) out-of-favor cyclical growth companies; (2) established
growth companies that are undervalued compared to historical relative valuation
parameters; (3) companies where there is early but tangible evidence of
improving prospects which are not yet reflected in the price of the company's
equity securities; and (4) companies whose equity securities are selling at
prices that do not reflect the current market value of its assets and where
there is reason to expect realization of this potential in the form of increased
equity values.
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES. Each of the Funds has the
flexibility to invest, to the extent described below, in a variety of
instruments designed to enhance its investment capabilities. Each of the Funds
may invest in money market obligations, foreign securities (including ADRs and
EDRs), repurchase agreements, reverse repurchase agreements, taxable municipal
securities, illiquid securities and Rule 144A securities; the Diversified Income
Fund and the Government Fund may invest in U.S. Government Agency
Mortgage-Backed Securities; each of the Funds may purchase or sell securities on
a delayed delivery or when-issued basis and may borrow money; each of the Funds,
other than the Money Market Fund, may 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.
Each of the Funds, other than the Money Market 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. Each of the Funds, other
than the Money Market 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. When deemed appropriate for temporary or defensive
purposes, each of the Funds may hold cash or cash equivalent Money Market
Obligations. Of course, the Money Market Fund invests exclusively in Money
Market Obligations. While none of the Funds other than the Money Market Fund is
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 that a 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 their respective investment objectives,
AIM may invest all or substantially all of the assets of the Diversified Income
Fund, the Global Utilities Fund and the International Fund in cash or Money
Market Obligations, including repurchase agreements, denominated in foreign
currencies.
11
<PAGE> 12
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES. The Diversified Income Fund
and the Government Fund may invest in U.S. Government Agency Mortgage-Backed
Securities. These securities are obligations issued or guaranteed by the United
States Government or by one of its agencies or instrumentalities, including but
not limited to GNMA, FNMA, or FHLMC. U.S. Government Agency Mortgage-Backed
Certificates provide for the pass-through to investors of their pro-rata share
of monthly payments (including any principal prepayments) made by the individual
borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of
such securities and the servicers of the underlying mortgage loans. GNMA, FNMA
and FHLMC each guarantee timely distributions of interest to certificate
holders. GNMA and FNMA guarantee timely distributions of scheduled principal.
FHLMC has in the past guaranteed only the ultimate collection of principal of
the underlying mortgage loan; however, FHLMC Gold Participation Certificates now
guarantee timely payment of monthly principal reductions. Although their close
relationship with the U.S. Government is believed to make them high-quality
securities with minimal credit risks, the U.S. Government is not obligated by
law to support either FNMA or FHLMC. However, historically there have not been
any defaults of FNMA or FHLMC issues. See Appendix B for a more complete
description of GNMA securities.
Mortgage-backed securities consist of interests in underlying mortgages
generally with maturities of up to thirty years. However, due to early
unscheduled payments of principal on the underlying mortgages, the securities
have a shorter average life and, therefore, less volatility than a comparable
thirty-year bond. The value of U.S. Government Agency Mortgage-Backed
Securities, like other traditional debt instruments, will tend to move in the
opposite direction compared to interest rates.
CONVERTIBLE SECURITIES. To the extent consistent with their respective
investment objectives, each of the Funds (except the Money Market 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
Funds 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, each applicable Fund invests in such
securities without regard to corporate bond ratings.
FOREIGN SECURITIES. To the extent consistent with their respective investment
objectives, each of the Funds may invest in foreign securities. It is not
anticipated that such foreign securities will constitute more than: (i) 20% of
the value of the total assets of each Fund (except the Value Fund, the
Diversified Income Fund, the Global Utilities Fund and, the International Fund
); (ii) 25% of the value of the total assets of the Value Fund; (iii) 50% of the
value of the total assets of the Diversified Income Fund; and (iv) 80% of the
value of the total assets of the Global Utilities Fund.
The Diversified Income Fund may invest in debt obligations which may be
denominated in the U.S. dollar or in other currencies issued or guaranteed by
foreign corporations, certain supranational entities (such as the World Bank,
Asian Development Bank and European Economic Community), and foreign governments
(including political subdivisions having taxing authority) or their agencies or
instrumentalities. The Diversified Income Fund may also invest in debt
obligations issued by U.S. corporations denominated in non-U.S. dollar
currencies. No more than 25% of the Diversified Income Fund's total assets, at
the time of purchase, will be invested in government securities of any one
foreign country. At the present time, AIM does not intend to invest more than
10% of the Diversified Income Fund's total assets in securities issued by
foreign governments or foreign companies located in developing countries in
various regions of the world. A "developing country" is a country in the initial
stages of its industrial cycle. Investments in emerging markets or developing
countries involve exposure to economic structures that are generally less
diverse and mature and to political systems which can be expected to have less
stability than those of more developed countries. Such countries may have
relatively unstable governments, economies based on only a few industries, and
securities markets which trade only a small number of securities. Historical
experience indicates that emerging markets have been more volatile than the
markets of more mature economies; such markets have also from time to time
provided higher rates of return and greater risks to investors. AIM believes
that these characteristics of emerging markets can be expected to continue in
the future.
The Global Utilities Fund may invest up to 80% 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 Global Utilities Fund will be invested in securities of
issuers located in at least four countries, one of which will be the United
States, although for defensive purposes, it may invest 100% of its total assets
in securities of U.S. issuers. In some foreign countries, utility companies are
partially owned by government agencies. In some cases, foreign government
agencies may have significant investments in businesses other than utility
companies. 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 Global Utilities Fund may invest in companies located within
emerging or developing countries.
Under normal market conditions the International Fund will invest at least 70%
of its total assets in marketable equity securities (including common and
preferred stock and depositary receipts for stock) and may invest up to 20% of
its total assets in securities exchangeable for or convertible into stock of
foreign companies. The issuers of such securities will, along with their
predecessors, have been in continuous operation for three years or more and
(except in the case of certain ADRs and other securities representing
12
<PAGE> 13
underlying securities of foreign issuers) will be listed on a recognized foreign
securities exchange or traded in a foreign over-the-counter market.
Under normal market conditions, the International Fund intends to invest in
the securities of foreign companies located in at least four countries outside
the United States. The International Fund will emphasize investment in foreign
companies in the developed countries of Western Europe and the Pacific Basin,
but the Fund may also invest to a lesser extent in the securities of companies
located in developing countries in various regions of the world. At the present
time, AIM does not intend to invest more than 20% of the International Fund's
total assets in securities issued by foreign governments or foreign companies
located in developing countries. For a discussion of the risks pertaining to
investments in foreign obligations, see "Risk Factors" in this Prospectus.
ADRS AND EDRS. To the extent consistent with their respective investment
objectives each of the Funds (except the International Fund which is discussed
separately below) 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.
The International Fund normally will invest at least 80% of its total assets
in marketable equity securities, including common and preferred stock and other
securities having the characteristics of stock (such as an equity or ownership
interest in a company). The International Fund may satisfy the foregoing
requirement in part through the ownership of securities which are convertible
into, or exchangeable for, common stocks, or by investment in the securities of
foreign issuers which are in the form of ADRs, EDRs and other securities
representing underlying securities of foreign issuers.
REPURCHASE AGREEMENTS. Each of the Funds 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), a 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 Funds will each enter into reverse repurchase agreements solely for
temporary or defensive purposes to facilitate the orderly sale of portfolio
securities to accommodate abnormally heavy redemption requests should they
occur. The Funds 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. Each of the Funds may enter into reverse repurchase
agreements in amounts not exceeding 33 1/3% of the value of their respective
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. Each Fund may enter
into delayed delivery agreements and may purchase securities on a "when-issued"
basis.
Delayed delivery agreements are commitments by a 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 Funds will only make commitments to purchase
such debt securities with the intention of actually acquiring the securities,
but a Fund may sell these securities before the settlement date if it is deemed
advisable.
If a Fund enters into a delayed delivery agreement or purchases a when-issued
security, the Fund will direct its custodian bank to segregate cash or other
high grade securities (including Money Market Obligations) in an amount equal to
its delayed delivery agree-
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ments 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 such 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 a Fund
if, as a result, more than 25% of the Fund's net assets would become so
committed.
DOLLAR ROLL TRANSACTIONS. In order to enhance portfolio returns and manage
prepayment risks, the Diversified Income Fund and the Government Fund may engage
in dollar roll transactions with respect to mortgage securities issued by GNMA,
FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage security
held in the portfolio to a financial institution such as a bank or
broker-dealer, and simultaneously agrees to repurchase a substantially similar
security (same type, coupon and maturity) from the institution at a later date
at an agreed upon price. The mortgage securities that are repurchased will bear
the same interest rate as those sold, but generally will be collateralized by
different pools of mortgages with different prepayment histories. During the
period between the sale and repurchase, the Fund will not be entitled to receive
interest and principal payments on the securities sold. Proceeds of the sale
will be invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the sale, could
generate income for the Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. See "Borrowing," below for the applicable limitation on dollar
roll transactions.
BORROWING. Each of the Funds may borrow money to a limited extent from banks
(including the Funds' custodian bank) for temporary or emergency purposes
subject to the limitations under the 1940 Act. Each Fund will restrict
borrowings, reverse repurchase agreements and dollar roll transactions to an
aggregate of 33 1/3% of the Fund's total assets at the time of the transaction.
No Fund will purchase additional securities when any borrowings from banks
exceed 5% of the Fund's total assets.
ILLIQUID SECURITIES. None of the Funds will invest more than 15% of their
respective net assets in illiquid securities, including restricted securities
which are illiquid. The Money Market Fund will not invest more than 10% of its
net assets in illiquid securities.
RULE 144A SECURITIES. Each of the Funds 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
Funds may each 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. Each Fund (except the Money Market Fund) may,
from time to time, lend securities from their respective portfolios, with a
value not exceeding 33 1/3% of their respective total assets, to banks, brokers
and other financial institutions, and receive in return collateral in the form
of cash or securities issued or guaranteed by the U.S. Government 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
applicable 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. Each Fund (except the Money Market 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 Funds 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 applicable Fund's total
assets at any given time.
OPTIONS. Each of the Funds, other than the Money Market 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
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<PAGE> 15
the delivery of property. A call option is covered if, for example, the Fund
owns or has the right to acquire 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
with its custodian cash, U.S. Treasury bills or other high-grade short-term debt
obligations with a value equal to the exercise price of the put option.
These Funds may write call options on securities or securities indexes for the
purpose of increasing their return (through receipt of premiums) or to provide a
partial hedge against a decline in the value of their portfolio securities or
both. These Funds 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 a 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.
Each of the Funds noted above 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.
These Funds 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 "straddle."
Options purchased or written by a 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 a 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.
Each of the Funds, except the Money Market 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 applicable 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 Funds 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 applicable Fund's total assets. The Funds will not
purchase options if, at the time of the investment, the aggregate premiums paid
for outstanding options will exceed 5% of the applicable Fund's total assets.
FUTURES AND FORWARD CONTRACTS. Each of the Funds, other than the Money Market
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 their assets or assets
they intend to acquire. In addition, they may purchase and sell stock index
futures contracts to hedge the value of the portfolio against changes in market
conditions. These Funds 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 Funds
are authorized to invest in futures contracts and related options with respect
to non-U.S. instruments, they will limit such investments to those which have
been approved by the Commodity Futures Trading Commission ("CFTC") for
investment by U.S. investors. These Funds may enter into futures contracts and
buy and sell related options, provided
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<PAGE> 16
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 a
Fund's total assets will be committed to initial margin deposits required
pursuant to futures contracts. Percentage investment limitations on a Fund's
investment in options on futures contracts are set forth above under "Options."
To the extent that any of the Funds invests in securities denominated in
foreign currencies (which is substantially all of the securities held by the
International Fund and a significant portion of securities held by the
Diversified Income Fund and the Global Utilities Fund), 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, each of
the Funds, other than the Money Market 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 their currency exposure, the Funds may each buy and sell
currencies either in the spot (cash) market or in the forward market (through
forward contracts generally expiring within one year). The Funds may each 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 such a Fund
purchases a security denominated in a foreign currency for settlement in the
near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the applicable Fund can secure an exchange rate between the
trade and settlement dates for that purchase or sale transaction. This practice
is sometimes referred to as "transaction hedging." Position hedging is the
purchase or sale of foreign currency with respect to portfolio security
positions denominated or quoted in a foreign currency. 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 Global Utilities Fund and the International Fund may enter into forward
contracts for transaction hedging purposes with respect to all or a substantial
portion of their trades. The other Funds will commit no more than their
respective portfolio investments in foreign securities to foreign exchange
hedges.
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, a 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. Each of the Funds 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.
PORTFOLIO TURNOVER. (All Funds except the Money Market Fund.) Any particular
security will be sold, and the proceeds reinvested, whenever such action is
deemed prudent from the viewpoint of a Fund's investment objective(s), without
regard to the impact on the portfolio turnover rate. Each Fund's historical
portfolio turnover rates are included in the Financial Highlights tables above.
A higher rate of portfolio turnover may result in higher transaction costs,
including brokerage commissions. Also, to the extent that higher portfolio
turnover results in a higher rate of net realized capital gains to a Fund, the
portion of the Fund's distributions constituting taxable capital gains may
increase. See "Dividends, Distributions and Tax Matters."
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RISK FACTORS
Investors should consider carefully the following special factors before
investing in any of the Funds.
NON-INVESTMENT GRADE DEBT SECURITIES. The Diversified Income Fund, and to a
lesser extent the Global Utilities Fund, seek to meet their respective
investment objectives 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 above-named Funds, and increased issuer
defaults on junk bonds.
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<PAGE> 17
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 a 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 a Fund's securities, and judgment plays a more important role
in determining such valuations. Increased illiquidity in the junk bond market
also may affect a Fund's ability to dispose of such securities at desirable
prices.
In the event a 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.
FOREIGN SECURITIES. Investments by a Fund in foreign securities whether
denominated in U.S. dollars or foreign currencies, may entail the following
risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities
also may entail some or all of the risks described below.
CURRENCY RISK. The value of the 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.
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 Funds as discussed in the previous section.
NON-DIVERSIFIED PORTFOLIO (GLOBAL UTILITIES FUND ONLY). The Global Utilities
Fund is a non-diversified portfolio, which means that it may invest a greater
proportion of its assets in the securities of a smaller number of issuers and
therefore may be subject to greater market and credit risk than a more broadly
diversified portfolio. (A diversified portfolio may not invest more than 5% of
its assets in obligations of one issuer, with respect to 75% of its total
assets.)
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MANAGEMENT
The overall management of the business and affairs of the Funds is vested with
the Company's Board of Directors. The Board of Directors approves all
significant agreements between each of the Funds and persons or companies
furnishing services to a 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 each 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 of AIM. Information concerning the Board of Directors may be found in the
Statement of Additional Information.
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INVESTMENT ADVISOR. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100,
Houston, TX 77046-1173, serves as the investment advisor to each Fund pursuant
to a new master investment advisory agreement, dated February 28, 1997 (the
"Advisory Agreement"). A previous master investment advisory agreement between
AIM and the Funds, with substantially identical terms to the Advisory Agreement,
was in effect prior to February 28, 1997. AIM was organized in 1976, and,
together with its subsidiaries, manages or advises 46 investment company
portfolios (including the Funds). As of April 1, 1997, the total assets of the
investment company portfolios advised or managed by AIM and its subsidiaries
were approximately $63.4 billion. AIM is a wholly owned subsidiary of AIM
Management. AIM Management is an indirect subsidiary of AMVESCO plc, (formerly
INVESCO plc). AMVESCO 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. It
is anticipated that AMVESCO plc will change its name to AMVESCAP plc on or after
May 8, 1997.
Under the terms of the Funds' Advisory Agreement, AIM supervises all aspects
of each 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 each Fund which are not required
to be performed by AIM under the Advisory Agreement. Pursuant to a master
administrative services agreement dated February 28, 1997 (the "Administrative
Services Agreement") between the Company and AIM with respect to each 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
previous master administrative services agreement between the Company and AIM
with respect to each Fund, with substantially identical terms to the
Administrative Services Agreement, was in effect prior to February 28, 1997. AIM
is entitled to receive from each 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 Funds and other funds
advised by AIM in selecting broker-dealers to effect portfolio transactions on
behalf of the Funds.
PORTFOLIO MANAGEMENT. AIM uses a team approach and a disciplined investment
process in providing investment advisory services to all its accounts, including
the Funds. AIM's investment staff consists of 123 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
Funds (except the Money Market Fund, for which no such disclosure is required)
and their titles, if any, 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:
Robert M. Kippes, Jonathan C. Schoolar and David P. Barnard are responsible
for the day-to-day management of the CAPITAL APPRECIATION FUND'S portfolio
securities. Mr. Kippes is Vice President of A I M Capital Management, Inc. ("AIM
Capital"), a wholly owned subsidiary of AIM, and has been responsible for the
Fund since its inception in 1993. Mr. Kippes has been associated with AIM and/or
its subsidiaries since 1989 and has 7 years of experience as an investment
professional. Mr. Schoolar is Senior Vice President and Director of AIM Capital,
Vice President of AIM and Vice President of the Company and has been responsible
for the Fund since its inception in 1993. He has been with AIM and/or its
subsidiaries since 1986 and has 13 years of experience as an investment
professional. Mr. Barnard is Vice President of AIM Capital and has been
responsible for the Fund since 1993. Mr. Barnard has been associated with AIM
and/or its subsidiaries since 1982 and has 22 years of experience as an
investment professional.
Robert G. Alley, John L. Pessarra and Carolyn L. Gibbs are responsible for
day-to-day management of the DIVERSIFIED INCOME FUND'S portfolio securities. Mr.
Alley is Senior Vice President of AIM Capital, Vice President of AIM and Vice
President of the Company, and has been affiliated with AIM and/or its
subsidiaries since 1992. Mr. Alley has been responsible for the Fund since its
inception in 1993, and has 25 years of experience as an investment professional.
Mr. Pessarra is currently Vice President of AIM Capital and has been associated
with AIM and/or its subsidiaries since 1990. Mr. Pessarra has been responsible
for the Fund since its inception in 1993, and has 13 years of experience as an
investment professional. Ms. Gibbs is currently Vice President of AIM Capital
and has been associated with AIM and/or its subsidiaries since 1992 and has 12
years of experience as an investment professional. Ms. Gibbs has been
responsible for the Fund since 1995.
Claude C. Cody IV, Robert G. Alley and Craig A. Smith are responsible for
day-to-day management of the GLOBAL UTILITIES FUND'S portfolio securities. Mr.
Cody is Vice President of AIM Capital and has been responsible for the Fund
since its inception in 1994. Mr. Cody has been associated with AIM and/or its
subsidiaries since 1992 and has 21 years of experience as an investment
professional. Mr. Alley has been responsible for the Fund since its inception in
1994. Mr. Alley's background is discussed above with respect to the management
of the Diversified Income Fund. Mr. Smith is Vice President of AIM Capital and
has been responsible for the Fund since 1996. Mr. Smith has been associated with
AIM since 1989, and has 7 years of experience as an investment professional.
Karen Dunn Kelley, Meggan M. Walsh and Paula A. Permenter are responsible for
day-to-day management of the GOVERNMENT FUND'S portfolio securities. Ms. Kelley
is Senior Vice President of AIM Capital, Vice President of AIM and Vice
President of the Company and has been responsible for the Fund since its
inception in 1993. Ms. Kelley has been associated with AIM and/or its
subsidiaries
18
<PAGE> 19
since 1989 and has 15 years of experience as an investment professional. Ms.
Walsh is Vice President of AIM Capital and has been responsible for the Fund
since its inception in 1993. Ms. Walsh has been associated with AIM and/or its
subsidiaries since 1991 and has 10 years of experience as an investment
professional. Ms. Permenter has been responsible for the Fund since 1996. Ms.
Permenter has been associated with AIM since 1996 and has 9 years of experience
as an investment professional. Prior to joining AIM, she was an Associate Trader
and Investment Assistant with Van Kampen American Capital Asset Management, Inc.
Jonathan C. Schoolar, Robert M. Kippes and David P. Barnard are primarily
responsible for day-to-day management of the GROWTH FUND'S portfolio securities.
Mr. Schoolar's background is discussed above with respect to the management of
the Capital Appreciation Fund. Mr. Schoolar has been responsible for the Fund
since its inception in 1993. Mr. Kippes' background is discussed above with
respect to the management of the Capital Appreciation Fund. Mr. Kippes has been
responsible for the Fund since its inception in 1993. Mr. Barnard is Vice
President of AIM Capital and has been responsible for the Fund since its
inception in 1993. Mr. Barnard has been associated with AIM and/or its
subsidiaries since 1982 and has 22 years experience as an investment
professional.
Lanny H. Sachnowitz and Joel E. Dobberpuhl are primarily responsible for
day-to-day management of the GROWTH & INCOME FUND'S portfolio securities. Mr.
Sachnowitz is Vice President of AIM Capital and has been responsible for the
Fund since its inception in 1994. Mr. Sachnowitz has 10 years of experience as
an investment professional and has been associated with AIM and/or its
subsidiaries since 1987. Mr. Dobberpuhl is Vice President of AIM Capital and has
been responsible for the Fund since 1995. Mr. Dobberpuhl has 8 years of
experience as an investment professional and has been associated with AIM and/or
its subsidiaries since 1990.
A. Dale Griffin III, Paul A. Rogge, Barrett K. Sides, Dominic H. R. Moross and
Clas G. Olsson are responsible for day-to-day management of the INTERNATIONAL
FUND'S portfolio securities. Mr. Griffin is Vice President of AIM Capital and
has been responsible for the Fund since its inception in 1993. Mr. Griffin has
been associated with AIM and/or its subsidiaries since 1989 and has 10 years
experience as an investment professional. Mr. Rogge is Vice President of AIM
Capital and has been associated with AIM and/or its subsidiaries since 1991. Mr.
Rogge has been responsible for the Fund since its inception in 1993 and has 6
years of experience as an investment professional. Mr. Sides is Assistant Vice
President of AIM Capital and has been associated with AIM and/or its affiliates
since 1990. Mr. Sides has been responsible for the Fund since 1995 and has 7
years of experience as an investment professional. Mr. Moross is Assistant Vice
President of AIM Capital and has been associated with AIM and/or its
subsidiaries since 1993. Mr. Moross has been responsible for the Fund since 1995
and has 3 years of experience as an investment professional. Prior to joining
AIM, he was a management graduate trainee with Maxwell Communications PLC. Mr.
Olsson has been responsible for the Fund since 1997. Mr. Olsson has been
associated with AIM and/or its subsidiaries since 1994 and has 3 years of
experience as an investment professional. Prior to joining AIM, he was a broker
assistant with Merrill Lynch.
Joel E. Dobberpuhl and Robert A. Shelton are responsible for day-to-day
management of the VALUE FUND'S portfolio securities. Mr. Dobberpuhl's background
is discussed above with respect to the management of the GROWTH & INCOME FUND.
Mr. Dobberpuhl has been responsible for the Fund since its inception in 1993.
Mr. Shelton has been responsible for the Fund since 1997. Mr. Shelton has been
associated with AIM and/or its subsidiaries since 1995 and has 6 years of
experience as an investment professional. Prior to joining AIM, he was a
financial analyst for CS First Boston.
ADVISORY FEES. As compensation for its services AIM is paid an investment
advisory fee, which is calculated separately for each Fund at an annual rate of
the applicable Fund's average daily net assets. For the fiscal year ended
December 31, 1996, compensation paid to AIM pursuant to the Advisory Agreement
and the total expenses of each Fund stated as a percentage of each Fund's
average daily net assets, were as follows:
<TABLE>
<CAPTION>
COMPENSATION COMPENSATION
TO AIM EXPENSE RATIO TO AIM EXPENSE RATIO
(AFTER WAIVER AND (AFTER WAIVER AND (BEFORE WAIVER AND (BEFORE WAIVER AND
REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT) REIMBURSEMENT)
----------------- ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund......... 0.64% 0.73% 0.64% 0.73%
AIM V.I. Diversified Income Fund........... 0.60% 0.86% 0.60% 0.86%
AIM V.I. Global Utilities Fund............. 0.51% 1.40% 0.65% 1.55%
AIM V.I. Government Securities Fund........ 0.50% 0.91% 0.50% 0.91%
AIM V.I. Growth Fund....................... 0.65% 0.78% 0.65% 0.78%
AIM V.I. Growth and Income Fund............ 0.65% 0.78% 0.65% 0.78%
AIM V.I. International Equity Fund......... 0.75% 0.96% 0.75% 0.96%
AIM V.I. Money Market Fund................. 0.40% 0.55% 0.40% 0.55%
AIM V.I. Value Fund........................ 0.64% 0.73% 0.64% 0.73%
</TABLE>
AIM may from time to time voluntarily waive or reduce their respective fees.
Fee waivers or reductions, other than those contained in the Advisory Agreement,
may be modified or terminated at any time.
ADMINISTRATOR. The Company has entered into an Administrative Services
Agreement, with AIM, pursuant to which AIM has agreed to provide certain
accounting and other administrative services to the Funds, including the
services of a principal financial officer of the Funds and related staff. As
compensation to AIM for its services under the Administrative Services
Agreement, the Funds reimburse AIM for expenses incurred by AIM or its
subsidiaries in connection with such services.
19
<PAGE> 20
AIM received reimbursement of administrative services costs from the Company
on behalf of each of the Funds, pursuant to the Administrative Services
Agreement for the fiscal year ended December 31, 1996, as follows:
<TABLE>
<CAPTION>
PERCENTAGE
OF AVERAGE
NET ASSETS
-----------
<S> <C>
AIM V.I. Capital Appreciation Fund.......................... 0.02%
AIM V.I. Diversified Income Fund............................ 0.10%
AIM V.I. Global Utilities Fund.............................. 0.43%
AIM V.I. Government Securities Fund......................... 0.18%
AIM V.I. Growth Fund........................................ 0.03%
AIM V.I. Growth and Income Fund............................. 0.04%
AIM V.I. International Equity Fund.......................... 0.05%
AIM V.I. Money Market Fund.................................. 0.04%
AIM V.I. Value Fund......................................... 0.02%
</TABLE>
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 Funds. A previous master distribution agreement
between the Company and AIM Distributors, with substantially identical terms to
the Distribution Agreement, was in effect prior to February 28, 1997. 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 Funds to
insurance company separate accounts.
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
The Company offers the shares of the Funds, on a continuous basis, to both
registered and unregistered separate accounts of affiliated and unaffiliated
Participating Insurance Companies to fund variable annuity contracts (the
"Contracts") and variable life insurance policies ("Policies"). Each separate
account contains divisions, each of which corresponds to a Fund in the Company.
Net purchase payments under the Contracts are placed in one or more of the
divisions of the relevant separate account and the assets of each division are
invested in the shares of the Fund which corresponds to that division. Each
separate account purchases and redeems shares of these Funds for its divisions
at net asset value without sales or redemption charges. Currently more than one
insurance company separate account invests in the Funds.
Each 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. Each 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, in the future, may offer the shares of its Funds to certain
pension and retirement plans ("Plans") qualified under the Internal Revenue
Code. The relationships of Plans and Plan participants to the Fund would be
subject, in part, to the provisions of the individual plans and applicable law.
Accordingly, such relationships could be different from those described in this
Prospectus for separate accounts and owners of Contracts and Policies, in such
areas, for example, as tax matters and voting privileges. The 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. At the same time, the Company and the
separate accounts (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 for any material irreconcilable
conflict that may possibly arise and to determine what action, if any, should be
taken to remedy or eliminate the conflict. If a material irreconcilable conflict
arises between separate accounts (or Plans), a separate account (or Plan) may be
required to withdraw its participation in a Fund. If it becomes necessary for
any separate account (or Plan) to replace Shares of a Fund with another
investment, the Fund may have to liquidate portfolio securities on a
disadvantageous basis.
- --------------------------------------------------------------------------------
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each of the Funds 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
20
<PAGE> 21
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, President's Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset
value per share of a 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 such Fund. The determination of a
Fund's net asset value per share is made in accordance with generally accepted
accounting principles.
VALUATION OF INVESTMENTS OF ALL FUNDS EXCEPT THE MONEY MARKET FUND. Among
other items, a 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.
VALUATION OF THE MONEY MARKET FUND'S INVESTMENTS. The Money Market Fund uses
the amortized cost method of valuing the securities held by the Fund and rounds
the Fund's per share net asset value to the nearest whole cent; therefore, it is
anticipated that the net asset value of the shares of the Fund will remain
constant at $1.00 per share. However, the Company can give no assurance that the
Fund can maintain a $1.00 net asset value per share.
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 that has entered into the futures contract
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 Funds declare and distribute dividends
representing substantially all net investment income as follows:
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
DECLARED PAID
--------- ---------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund.......................... annually annually
AIM V.I. Diversified Income Fund............................ annually annually
AIM V.I. Global Utilities Fund.............................. annually annually
AIM V.I. Government Securities Fund......................... annually annually
AIM V.I. Growth Fund........................................ annually annually
AIM V.I. Growth and Income Fund............................. annually annually
AIM V.I. International Equity Fund.......................... annually annually
AIM V.I. Money Market Fund.................................. daily daily
AIM V.I. Value Fund......................................... annually annually
</TABLE>
Substantially all net realized capital gains, if any, are distributed on an
annual basis, except for the Money Market Fund, which may distribute net
realized short-term gains more frequently.
All such distributions will be automatically reinvested, at the election of
Participating Insurance Companies, in shares of the Fund issuing the
distribution at the net asset value determined on the reinvestment date.
TAX MATTERS. Each series of shares of the Company is treated as a separate
association taxable as a corporation. Each Fund intends to qualify under the
Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company ("RIC") for each taxable year. As a RIC, a Fund will not be
subject to federal income tax to the extent it distributes to its shareholders
its net investment income and net capital gains.
In order to qualify as a regulated investment company, each 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 whose assets are invested in a Fund will not
be subject to federal income tax on distributions made by the Fund prior to the
receipt of payments under the Contracts, each 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 a Fund to engage in transactions involving options, futures
contracts, forward contracts and foreign currency and related deposits.
Any 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
21
<PAGE> 22
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 a Fund in certain
"passive foreign investment companies" may be limited in order to avoid
imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to foreign
withholding taxes on income from its investments. In any year in which more than
50% in value of a Fund's total assets at the close of the taxable year consists
of securities of foreign corporations, the Fund may elect to treat any foreign
taxes paid by it as if they had been paid by its shareholders. The insurance
company segregated asset accounts holding Fund shares should consider the impact
of this election.
Holders of Contracts under which assets are invested in the Funds should refer
to the prospectus for the Contracts for information regarding the tax aspects of
ownership of such Contracts.
- --------------------------------------------------------------------------------
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 nine separate portfolios (i.e., the Funds).
The authorized capital stock of the Company consists of 2,500,000,000 shares
of common stock with a par value of $.001 per share, of which 250,000,000 shares
are classified AIM V.I. CAPITAL APPRECIATION 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 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.
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. 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 all classes 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
class will have the exclusive right to vote on matters pertaining to
distribution plans, if any such plans are adopted, relating solely to such
class. Shareholders of the Funds do not have cumulative voting rights.
The Company understands 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. 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 Contracts will also be voted for or against any proposition in
the same proportion as the shares for which voting instructions are received by
that separate account. If an insurance company determines, however, that it is
permitted to vote any such shares of the Funds in its own right, it may elect to
do so, subject to the then current interpretation of the 1940 Act and the rules
thereunder.
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. Each Fund's shares, when issued, are fully paid and
non-assessable.
As of April 1, 1997, IDS Life Insurance Company, through its separate
accounts, owned more than 25 percent of the shares of the Growth and Income
Fund, and, therefore, could be deemed to "control" such Fund, as that term is
defined in the Investment Company Act of 1940. As of April 1, 1997, Connecticut
General Life Insurance Company, through its separate accounts, owned more than
25 percent of the shares of each of the Funds and, therefore, could be deemed to
"control" each Fund, as that term is defined in the Investment Company Act of
1940. As explained above, however, insurance company separate accounts vote
their shares of a Fund in accordance with instructions received from Contract
owners, annuitants and beneficiaries and, in this sense, would not "control"
such Fund.
CUSTODIAN AND TRANSFER AGENT. State Street Bank and Trust Company, 225
Franklin Street, Boston, MA 02110, serves as custodian for the Funds' 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.
OTHER INFORMATION. This Prospectus sets forth basic information that investors
should know about the Funds 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.
22
<PAGE> 23
APPENDIX A
- --------------------------------------------------------------------------------
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 stong 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.
A-1
<PAGE> 24
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.
A-2
<PAGE> 25
*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.
A-3
<PAGE> 26
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
The following list includes certain common Agency Securities, as defined in
the Prospectus, and does not purport to be exhaustive.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest and
participation certificates issued and guaranteed by the Export-Import Bank of
the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U. S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Authority of
the U. S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U. S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued and
guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consists of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued and
guaranteed by FNMA, a federally chartered and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage pass-through
certificates issued and guaranteed by FNMA. FNMA Certificates represent a
fractional undivided ownership interest in a pool of mortgage loans either
provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from primary
lenders that satisfy certain criteria developed by FNMA, including depth of
mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates backed by that loan pool alone, or may package a pool made up of
loans purchased from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may be
included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loan must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust indenture
for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing and administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, all under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest rate
borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee. Lenders servicing the
underlying mortgage loans receive as compensation a portion of the fee paid to
FNMA, the excess yields on pooled loans with coupon rates above the lowest rate
borne by any mortgage loan in the pool and certain other amounts collected, such
as late charges.
B-1
<PAGE> 27
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually through
securities dealers. The lender of a single lender pool typically markets all
Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amount of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
GNMA Certificates differ from bonds in that the principal is paid back monthly
by the borrower over the term of the loan rather than returned in a lump sum at
maturity. GNMA Certificates are called "modified pass-through" securities
because they entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid to
the issuer and GNMA, regardless of whether or not the mortgagor actually makes
the payment. Payment of principal of and interest on GNMA Certificates of the
"modified pass-through" type is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less than
the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose little risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it is
not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single-family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
As a consequence of the fees paid to GNMA and the issuer of GNMA Certificates,
the coupon rate of interest of GNMA Certificates is lower than the interest paid
on the VA-guaranteed or FHA-insured mortgages underlying the Certificates.
The yield which will be earned on GNMA Certificates may vary from their coupon
rates for the following reasons: (i) Certificates may be issued at a premium or
discount, rather than at par; (ii) Certificates may trade in the secondary
market at a premium or discount after issuance; (iii) interest is earned and
compounded monthly which has the effect of raising the effective yield earned on
the Certificates; and (iv) the actual yield of each Certificate is affected by
the prepayment of mortgages included in the mortgage pool underlying the
Certificates and the rate at which principal so prepaid is reinvested. In
addition, prepayment of mortgages included in the mortgage pool underlying a
GNMA Certificate purchased at a premium may result in a loss to the Fund.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION ("GSA") PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and long-term
bonds issued by public housing and urban renewal agencies in connection with
programs administered by the Department of Housing and Urban Development of the
U.S. Government, the payment of which is secured by the U.S. Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and interest
by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
TITLE XI BONDS -- are bonds issued in accordance with the provisions of Title
XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
B-2
<PAGE> 28
APPENDIX C
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Funds reserve 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. All variable rate master demand notes acquired by the Money Market Fund
will be payable within a prescribed notice period not to exceed seven days.
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 negotiations.
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.
C-1
<PAGE> 29
STATEMENT OF
ADDITIONAL INFORMATION
AIM VARIABLE INSURANCE FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
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
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: MAY 1, 1997
RELATING TO PROSPECTUS DATED: MAY 1, 1997
<PAGE> 30
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Rule 144A Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Utilities Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Foreign Exchange Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
HEDGING AND OTHER INVESTMENT TECHNIQUES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
INVESTMENT RESTRICTIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Non-fundamental Restrictions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Directors and Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Remuneration of Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
AIM Funds Retirement Plan for Eligible Directors/Trustees . . . . . . . . . . . . . . . . . . . . . 23
Deferred Compensation Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Investment Advisory and Administrative Services Agreements . . . . . . . . . . . . . . . . . . . . . . . . . 25
The Distribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DETERMINATION OF NET ASSET VALUE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
</TABLE>
i
<PAGE> 31
<TABLE>
<S> <C>
MISCELLANEOUS INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Audit Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Legal Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Custodian and Transfer Agent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32
Principal Holders of Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . FS
</TABLE>
ii
<PAGE> 32
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
May 1, 1997 (referred to collectively as the "Prospectuses" and separately as a
"Prospectus"), which relate to one or more of the nine series portfolios of the
Company (referred to collectively as the "Funds" and separately as a "Fund").
One or more of the Company's nine 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 nine separate Funds as
follows: the AIM V.I. Capital Appreciation Fund ("Capital Appreciation Fund"),
the AIM V.I. Diversified Income Fund ("Diversified 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 V.I. Growth Fund ("Growth Fund"), the AIM V.I. Growth and Income Fund
("Growth & Income Fund"), the AIM V.I. International Equity Fund
("International Fund"), the AIM V.I. Money Market Fund ("Money Market Fund"),
and 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.
1
<PAGE> 33
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' average annual and cumulative total return for the fiscal
year ended December 31, 1996 and average annual and cumulative total returns
for the period May 5, 1993 (commencement of operations) through December 31,
1996, were as follows:
<TABLE>
<CAPTION>
Since
Inception
------------------------
Year Ended Average
December 31, Annual Cumulative
1996 Return Return
------------ --------- ---------
<S> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 17.58% 20.08% 95.40%
AIM V.I. Diversified Income Fund 10.19% 7.89% 32.04%
AIM V.I. Global Utilities Fund* 12.07% 12.79% 37.89%
AIM V.I. Government Securities Fund 2.29% 4.59% 17.84%
AIM V.I. Growth Fund 18.09% 15.93% 71.75%
AIM V.I. Growth and Income Fund* 19.95% 19.40% 60.54%
AIM V.I. International Equity Fund 20.05% 14.60% 64.64%
AIM V.I. Money Market Fund 4.97% 4.31% 16.69%
AIM V.I. Value Fund 15.02% 18.69% 87.21%
</TABLE>
* 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.
2
<PAGE> 34
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 and
unrealized appreciation and depreciation) 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
3
<PAGE> 35
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, 1996 were 4.95% and 5.07%,
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
4
<PAGE> 36
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
5
<PAGE> 37
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. The Funds will not knowingly pay a higher
spread than the lowest available in principal transactions as a result of its
receipt of research services from a dealer.
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.
6
<PAGE> 38
For the fiscal year ended December 31, 1996, 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:
<TABLE>
<CAPTION>
Commissions Transactions
----------- ------------
<S> <C> <C>
AIM V. I. Capital Appreciation Fund $ 28,903 $ 18,994,712
AIM V. I. Global Utilities Fund $ 436 $ 172,301
AIM V. I. Growth Fund $ 34,178 $ 26,764,978
AIM V. I. Growth & Income Fund $ 17,263 $ 13,967,796
AIM V. I. International Equity Fund $ 326 $ 302,754
AIM V. I. Value Fund $ 38,002 $ 29,214,988
</TABLE>
As of December 31, 1996, 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.
<TABLE>
<CAPTION>
DAIWA SECURITIES DRESDNER
FUNDS AMERICA, INC. SECURITIES
(USA), INC.
<S> <C> <C>
AIM V. I. Capital Appreciation Fund $ 26,887,387 N/A
AIM V.I. Diversified Fund $ 1,400,000 N/A
AIM V.I. Global Utilities Fund $ 1,515,191 N/A
AIM V.I. Government Securities Fund $ 1,746,103 N/A
AIM V.I. Growth Fund $ 1,834,472 N/A
AIM V.I. Growth and Income Fund $ 11,372,723 N/A
AIM V.I. International Equity Fund $ 9,477,779 N/A
AIM V.I. Money Market Fund $ 9,120,800 $3,833,494
AIM V.I. Value Fund $ 33,466,561 N/A
</TABLE>
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, 1996. 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 $1,304,000 and $714,062, respectively. AIM V.I. Money Market
Fund had entered into a master note agreement with Morgan Stanley Group Inc.
having a market value of $3,000,000. AIM V.I. Money Market Fund had entered
into a promissory note agreement with Goldman, Sachs & Co. having a market
value of $3,000,000.
7
<PAGE> 39
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 year ended December 31, 1996, the eleven months ended
December 31, 1995, the fiscal year ended January 31, 1995 and for the period
May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
December 31, December 31, January 31, January 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $ 405,056 $400,895 $161,528 $48,753
AIM V.I. Diversified Income Fund $ 1,670 $ 74,475 $ 17,471 $ -0-
AIM V.I. Global Utilities Fund $ 16,365 $ 24,107 $ 9,280* $ N/A
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ 578,444 $315,627 $173,691 $54,735
AIM V.I. Growth and Income Fund $ 417,167 $177,420 $ 20,436* $ N/A
AIM V.I. International Equity Fund $ 557,527 $312,071 $ 89,187 $85,606
AIM V.I. Money Market Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Value Fund $1,126,384 $862,938 $362,126 $76,623
</TABLE>
* 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
(i) "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"), or
(ii) securities guaranteed as to payment of principal and
interest by the U.S. Government.
As of the date of this Statement of Additional Information, Rule 2a-7
defines a "First Tier Security" as any "Eligible Security" (as defined in Rule
2a-7 and set forth in this Statement of Additional Information under
"Determination of Net Asset Value") that:
8
<PAGE> 40
(i) is rated (or that has been issued by an issuer that is
rated with respect to a class of short-term debt obligations, or any
security within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs(1) in the highest
rating category for short-term debt obligations (within which there
may be sub-categories or gradations indicating relative standing); or
(ii) is a security described in paragraph (a)(5)(ii) of Rule
2a-7 (i.e. a security that at the time of issuance was a long-term
security but that has a remaining maturity of 397 days or less) whose
issuer has received from the Requisite NRSROs a rating, with respect
to a class of short-term debt obligations (or any security within that
class) that now is comparable in priority and security with the
security, in the highest rating category for short-term debt
obligations (within which there may be sub-categories or gradations
indicating relative standing); or
(iii) is an Unrated Security that is of comparable quality to
a security meeting the requirements of clauses (i) and (ii) above, as
determined by the Company's Board of Directors.
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. To the extent that the ratings applied by an NRSRO to Money
Market Obligations may change as a result of changes in these rating systems,
the Fund will attempt to use comparable ratings as standards for its
investments in Money Market Obligations in accordance with the investment
policies described herein.
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
- --------------
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 security, that NRSRO. At present the NRSROs
are: Standard & Poor's 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
a "+" or "-") do not count as rating categories.
9
<PAGE> 41
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.
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 high-quality debt securities 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 high-quality debt securities 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 cash or other high
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<PAGE> 42
quality debt securities 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 cash or securities 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.
The Capital Appreciation Fund will not, however, purchase securities of any
company with a record of less than three years' continuous operation (including
that of predecessors) if such purchase would cause the Fund's investment in all
such companies, taken at cost, to exceed 5% of the value of the Fund's total
assets.
WARRANTS
The Growth & Income 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. The investment in warrants by the Fund, valued at
the lower of cost or market, may not exceed 5% of the value of its net assets
and not more than 2% of such value may be warrants which are not listed on the
New York or American Stock Exchanges.
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<PAGE> 43
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. At the present
time, it is not possible to predict with certainty how the market for Rule 144A
securities will develop.
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.
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<PAGE> 44
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
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<PAGE> 45
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
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<PAGE> 46
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 "straddle," 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.
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
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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
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<PAGE> 48
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.
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MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during the last five years are set forth below.
<TABLE>
<CAPTION>
POSITIONS HELD
---------------
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (78) Director and Chairman of the Board of Directors,
11 Greenway Plaza, Suite 100 Chairman A I M Management Group Inc., A I M Advisors,
Houston, TX 77046 Inc., A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc.
and Fund Management Company; and Vice Chairman
and Director, AMVESCO plc.
BRUCE L. CROCKETT (53) Director Formerly, Director, President and Chief
906 Frome Lane Executive Officer, COMSAT Corporation
McLean, VA 22102 (includes COMSAT World Systems, COMSAT Mobile
Communications, COMSAT Video Enterprises,
COMSAT RSI and COMSAT International Ventures);
President and Chief Operating Officer, COMSAT
Corporation; President, World Systems
Division, COMSAT Corporation; and Chairman,
Board of Governors of INTELSAT; (each of the
COMSAT companies listed above is an
international communication, information and
entertainment-distribution services company).
OWEN DALY II (72) 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.
</TABLE>
- ------------------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
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<TABLE>
<CAPTION>
POSITIONS HELD
---------------
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
JACK FIELDS (45) Director Formerly, Member of the U.S. House of
2607 Old Humble Road Representatives.
Humble, Texas 77338
**CARL FRISCHLING (60) Director Partner, Kramer, Levin, Naftalis & Frankel
919 Third Avenue (law firm). Formerly, Partner, Reid & Priest
New York, NY 10022 (law firm); and, prior thereto, Partner,
Spengler Carlson Gubar Brodsky & Frischling
(law firm).
*ROBERT H. GRAHAM (50) Director and Director, President and Chief Executive
11 Greenway Plaza, Suite 100 President Officer, A I M Management Group Inc.; Director
Houston, TX 77046 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., A I M Institutional
Fund Services, Inc. and Fund Management
Company; Director, AMVESCO plc.
JOHN F. KROEGER (72) Director Director, Flag Investors International Fund,
37 Pippins Way Inc., Flag Investors Emerging Growth Fund,
Morristown, NJ 07960 Inc., Flag Investors Telephone Income Fund,
Inc., Flag Investors Equity Partners Fund,
Inc., Total Return U.S. Treasury Fund, Inc.,
Flag Investors Intermediate Term Income Fund,
Inc., Managed Municipal Fund, Inc., Flag
Investors Value Builder Fund, Inc., Flag
Investors Maryland Intermediate Tax-Free
Income Fund, Inc., Flag Investors Real Estate
Securities Fund, Inc., Alex. Brown Cash
Reserve Fund, Inc. and North American
Government Bond Fund, Inc. (investment
companies). Formerly, Consultant, Wendell &
Stockel Associates, Inc. (consulting firm).
</TABLE>
- --------------------
** A director who is an "interested person" of the Company as defined in
the 1940 Act.
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
19
<PAGE> 51
<TABLE>
<CAPTION>
POSITIONS HELD
---------------
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
LEWIS F. PENNOCK (54) Director Attorney in private practice in Houston,
6363 Woodway, Suite 825 Texas.
Houston, TX 77057
IAN W. ROBINSON (74) 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 (57) 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 (52) Senior Vice Senior Vice President and Treasurer,
11 Greenway Plaza, Suite President and A I M Advisors, Inc.; and Vice President and
100 Treasurer Treasurer, A I M Management Group Inc.,
Houston, TX 77046 A I M Capital Management, Inc.,
A I M Distributors, Inc., A I M Fund Services,
Inc., A I M Institutional Fund Services, Inc.
and Fund Management Company.
GARY T. CRUM (49) Senior Vice Director and President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; Director and Senior Vice
Houston, TX 77046 President, A I M Management Group Inc. and
A I M Advisors, Inc.; and Director,
A I M Distributors, Inc. and
AMVESCO plc.
SCOTT G. LUCAS (37) Senior Vice Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 President Management, Inc.; and Vice President,
Houston, TX 77046 A I M Management Group Inc. and
A I M Advisors, Inc.
</TABLE>
- ----------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
20
<PAGE> 52
<TABLE>
<CAPTION>
POSITIONS HELD
---------------
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
***CAROL F. RELIHAN (42) Senior Vice Senior Vice President, General Counsel and
11 Greenway Plaza, Suite President and Secretary, A I M Advisors, Inc.; Vice
100 Secretary President, General Counsel and Secretary,
Houston, TX 77046 A I M Management Group Inc.; Vice President
and General Counsel, Fund Management Company;
and Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and A I M Institutional Fund
Services, Inc.
DANA R. SUTTON (38) Vice President and Vice President and Fund Controller,
11 Greenway Plaza, Suite 100 Assistant Treasurer A I M Advisors, Inc.; and Assistant Vice
Houston, TX 77046 President and Assistant Treasurer, Fund
Management Company.
ROBERT G. ALLEY (48) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc.; and Vice President, A I M
Houston, TX 77046 Advisors, Inc. Formerly, Senior Fixed Income
Money Manager, Waddell and Reed, Inc.
STUART W. COCO (41) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc. and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
MELVILLE B. COX (53) Vice President Vice President and Chief Compliance Officer,
11 Greenway Plaza, Suite 100 A I M Advisors, Inc., A I M Capital
Houston, TX 77046 Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc., A I M Institutional
Fund Services, Inc. and Fund Management
Company.
KAREN DUNN KELLEY (36) Vice President Senior Vice President, A I M Capital
11 Greenway Plaza, Suite 100 Management, Inc. and Vice President,
Houston, TX 77046 A I M Advisors, Inc.
JONATHAN C. SCHOOLAR (35) Vice President Director and Senior Vice President,
11 Greenway Plaza, Suite 100 A I M Capital Management, Inc.; and Vice
Houston, TX 77046 President, A I M Advisors, Inc.
</TABLE>
- -------------------------
*** Mr. Arthur and Ms. Relihan are married to each other.
21
<PAGE> 53
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, Fields,
Frischling, Kroeger (Chairman), Pennock, Robinson 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 (Chairman), Fields, Frischling, Kroeger, Pennock, Robinson and Sklar. 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, Daly, Fields, Kroeger, Pennock (Chairman), 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 mutual funds advised or managed by AIM. All of the
Company's executive officers hold similar offices with some or all of such
mutual funds.
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.
22
<PAGE> 54
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1996 for each director of the
Company:
<TABLE>
<CAPTION>
RETIREMENT
BENEFITS
AGGREGATE ACCRUED TOTAL
COMPENSATION BY ALL AIM COMPENSATION
DIRECTOR FROM COMPANY(1) FUNDS(2) FROM ALL AIM FUNDS(3)
-------- --------------- ---------- ---------------------
<S> <C> <C> <C>
Charles T. Bauer $ 0 $ 0 $ 0
Bruce L. Crockett 8,889 38,621 68,000
Owen Daly II 8,776 82,607 68,000
Jack Fields(4) 0 0 0
Carl Frischling(5) 8,889 56,683 68,000
Robert H. Graham 0 0 0
John F. Kroeger 8,513 83,654 66,000
Lewis F. Pennock 8,645 33,702 67,000
Ian W. Robinson 8,889 64,973 68,000
Louis S. Sklar 8,696 47,593 66,500
</TABLE>
- -------------------
(1) The total amount of compensation deferred by all Directors of the
Company during the fiscal year ended December 31, 1996, including
interest earned thereon, was $36,400.
(2) During the fiscal year ended December 31, 1996, the total amount of
expenses allocated to the Company in respect of such retirement benefits
was $8,549. Data reflects compensation estimated for the calendar year
ended December 31, 1996.
(3) Messrs. Bauer, Crockett, Daly, Frischling, Graham, Kroeger, Pennock,
Robinson and Sklar each serves as a Director or Trustee of a total of 10
AIM Funds. Data reflects compensation estimated for the calendar year
ended December 31, 1996.
(4) Mr. Fields was not serving as a Director during the fiscal year ended
December 31, 1996.
(5) See page 25 for fees paid to Mr. Frischling's law firm.
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
23
<PAGE> 55
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 various compensation
and years of service classifications. The estimated credited years of service
as of December 31, 1996 for Messrs. Crockett, Daly, Frischling, Kroeger,
Pennock, Robinson and Sklar are 9, 10, 19, 19, 15, 9 and 7 years, respectively.
ESTIMATED BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of Annual Compensation
Years of Paid By All AIM Funds
Service With
the AIM Funds $80,000 $86,500 $89,500
------------- ------- ------- -------
<S> <C> <C> <C>
10 $60,000 $64,875 $67,125
9 $54,000 $58,388 $60,413
8 $48,000 $51,900 $53,700
7 $42,000 $45,413 $46,988
6 $36,000 $38,925 $40,275
5 $30,000 $32,438 $33,563
</TABLE>
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
24
<PAGE> 56
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, 1996, 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 $3,382, $2,902, $2,978, $2,168,
$3,079, $2,947, $3,038, $2,950 and $3,429, 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 AND ADMINISTRATIVE SERVICES AGREEMENTS
Each Fund has entered into a master investment advisory agreement (the
"Advisory Agreement") and a master administrative services agreement (the
"Administrative Services Agreement"), each dated February 28, 1997, with AIM.
A prior investment advisory agreement and a prior administrative services
agreement, with substantially identical terms to the Advisory Agreement and
Administrative Services Agreement, respectively, were in effect prior to
February 28, 1997. See "Management" in the Prospectus.
AIM was organized in 1976, and along with its subsidiaries, manages or
advises 46 investment company portfolios. As of April 1, 1997, the total
assets of the investment company portfolios advised or managed by AIM and its
subsidiaries were approximately $63.4 billion. AIM Management is an indirect
subsidiary of AMVESCO plc, (formerly INVESCO plc). AMVESCO plc and its
subsidiaries are an independent investment management group engaged in
institutional investment management and retail fund businesses in the United
States, Europe and the Pacific Region. It is anticipated that AMVESCO plc will
change its name to AMVESCAP plc on or after May 8, 1997.
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 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 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
25
<PAGE> 57
continuance of the Agreement until June 30, 1998. The Advisory Agreement
became effective on February 28, 1997. The Advisory Agreement provides that
the Company or AIM may terminate such agreement with respect to any Fund(s) on
sixty (60) days' written notice without penalty. The Advisory Agreement
terminates automatically in the event of its assignment.
Pursuant to the Advisory Agreement, AIM receives a fee from each of AIM
V.I. Capital Appreciation Fund, AIM V.I. Global Utilities Fund, AIM V.I.
Growth Fund, AIM V.I. Growth and Income 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:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $250,000,000 0.65%
Over $250,000,000 0.60%
</TABLE>
Pursuant to the Advisory Agreement, AIM receives a fee from AIM V.I.
Diversified Income Fund calculated at the following annual rate, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $250,000,000 0.60%
Over $250,000,000 0.55%
</TABLE>
Pursuant to the Advisory Agreement, AIM receives a fee from AIM V.I.
Government Securities Fund calculated at the following annual rate, based on
the average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $250,000,000 0.50%
Over $250,000,000 0.45%
</TABLE>
Pursuant to the Advisory Agreement, AIM receives a fee from AIM V.I.
International Equity Fund calculated at the following annual rate, based on the
average daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $250,000,000 0.75%
Over $250,000,000 0.70%
</TABLE>
Pursuant to the Advisory Agreement, AIM receives a fee from AIM V.I.
Money Market Fund calculated at the following annual rate, based on the average
daily net assets of the Fund during the year:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
---------- -----------
<S> <C>
First $250,000,000 0.40%
Over $250,000,000 0.35%
</TABLE>
26
<PAGE> 58
Each Fund paid to AIM a management fee (net of fee waivers) for the
fiscal year ended December 31, 1996, the eleven months ended December 31, 1995,
the fiscal year ended January 31, 1995 and for the period May 5, 1993 (date
operations commenced) through January 31, 1994 , under the Advisory Agreement
and a prior, substantially identical advisory agreement, as follows:
<TABLE>
<CAPTION>
December 31, December 31, January 31, January 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $1,884,838 $ 882,870 $ 402,307 $ 23,119
AIM V.I. Diversified Income Fund $ 306,235 $ 193,008 $ 98,044 $ -0-
AIM V.I. Global Utilities Fund $ 57,054 $ -0- $ -0-* $ N/A
AIM V.I. Government Securities Fund $ 107,471 $ 71,080 $ 42,430 $ -0-
AIM V.I. Growth Fund $ 916,484 $ 434,620 $ 231,152 $ -0-
AIM V.I. Growth and Income Fund $ 678,242 $ 46,017 $ -0-* $ N/A
AIM V.I. International Equity Fund $ 924,578 $ 457,559 $ 317,747 $ -0-
AIM V.I. Money Market Fund $ 264,855 $ 168,901 $ 85,967 $ -0-
AIM V.I. Value Fund $1,955,091 $ 1,078,007 $ 489,030 $ 27,729
</TABLE>
* Fees paid were for the period May 2, 1994 (date operations commenced)
through January 31, 1995.
For the fiscal year ended December 31, 1996, the eleven months ended
December 31, 1995, the fiscal year ended January 31, 1995 and for the period
May 5, 1993 (date operations commenced) through January 31, 1994, AIM waived
management fees for each Fund as follows:
<TABLE>
<CAPTION>
December 31, December 31, January 31, January 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- $ 35,486
AIM V.I. Diversified Income Fund $ -0- $ -0- $ 5,046 $ 28,217
AIM V.I. Global Utilities Fund $ 15,954 $ 32,703 $ 9,264* $ N/A
AIM V.I. Government Securities Fund $ -0- $ -0- $ 18,907 $ 16,775
AIM V.I. Growth Fund $ -0- $ -0- $ -0- $ 48,427
AIM V.I. Growth and Income Fund $ -0- $ 67,802 $ 20,806* $ N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ 5,010 $ 39,537
AIM V.I. Money Market Fund $ -0- $ -0- $ 18,531 $ 19,489
AIM V.I. Value Fund $ -0- $ -0- $ -0- $ 31,977
</TABLE>
* Fees waived were for the period May 2, 1994 (date operations commenced)
through January 31, 1995.
27
<PAGE> 59
In addition to the management fees paid by each Fund for the fiscal
year ended December 31, 1996, the eleven months ended December 31, 1995, the
fiscal year ended January 31, 1995 and for the period May 5, 1993 (date
operations commenced) through January 31, 1994, AIM absorbed other expenses, as
follows:
<TABLE>
<CAPTION>
December 31, December 31, January 31, January 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0- $ 2,000
AIM V.I. Global Utilities Fund $ -0- $ 13,800 $ 12,000* $ N/A
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- $ 10,000
AIM V.I. Growth Fund $ -0- $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0-* $ N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ -0- $ 17,600
AIM V.I. Money Market Fund $ -0- $ -0- $ -0- $ 8,800
AIM V.I. Value Fund $ -0- $ -0- $ -0- $ -0-
</TABLE>
* 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.
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
Board of Directors of the Company approved the continuance of the Agreement
until June 30, 1998. The Administrative Services Agreement was initially
approved by the Company's Board of Directors (including the Non-Interested
Directors) on December 11, 1996 and became effective on February 28, 1997.
The agreement terminates automatically in the event of its assignment.
For the fiscal year ended December 31, 1996, the eleven months ended
December 31, 1995, the fiscal year ended January 31, 1995 and for the period
May 5, 1993 (date operations commenced) through January 31, 1994, AIM received
reimbursement of administrative services costs from each of the Funds pursuant
the Administrative Services Agreement and a prior, substantially identical
administrative services agreement, as follows:
<TABLE>
<CAPTION>
December 31, December 31, January 31, January 31,
1996 1995 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund $46,623 $ 33,560 $ 23,992 $ 12,770
AIM V.I. Diversified Income Fund $49,500 $ 36,406 $ 35,441 $ 12,736
AIM V.I. Global Utilities Fund $47,729 $ 33,582 $ 13,577* $ N/A
AIM V.I. Government Securities Fund $38,695 $ 30,769 $ 23,230 $ 10,458
AIM V.I. Growth Fund $39,552 $ 32,425 $ 23,537 $ 12,766
AIM V.I. Growth and Income Fund $38,784 $ 31,484 $ 13,596* $ N/A
AIM V.I. International Equity Fund $58,644 $ 21,068 $ 12,000 $ 7,000
AIM V.I. Money Market Fund $29,412 $ 22,997 $ 21,019 $ 11,288
AIM V.I. Value Fund $47,116 $ 35,540 $ 21,568 $ 13,572
</TABLE>
* Fees paid were for the period May 2, 1994 (date operations
commenced) through January 31, 1995.
28
<PAGE> 60
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 was initially approved by the Board of Directors
(including the affirmative vote of all the directors who were not parties to
the Distribution Agreement or "interested persons" of any such party) of the
Company on December 11, 1996. A prior distribution agreement, with terms
substantially identical to those of the Distribution Agreement, was in effect
prior to February 28, 1997. 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 until June 30, 1998 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. These rules
require, among other things, that the Fund maintain a dollar-weighted average
portfolio maturity of 90 days or less, purchase only instruments having
remaining maturities of 397 calendar days or less and invest only in securities
determined by the Board of Directors to be "Eligible Securities" and to present
minimal credit risk to the Fund.
Rule 2a-7, promulgated under the 1940 Act, which governs the operation
of money market funds, defines an "Eligible Security" as follows:
29
<PAGE> 61
(i) a security with a remaining maturity of 397 days or less that
is rated (or that has been issued by an issuer that is rated
with respect to a class of short-term debt obligations, or any
security within that class, that is comparable in priority and
security with the security) by the Requisite NRSROs in one of
the two highest rating categories for short-term debt
obligations (within which there may be sub-categories or
gradations indicating relative standing); or
(ii) a security:
(A) that at the time of issuance was a long-term security
but that has a remaining maturity of 397 calendar
days or less; and
(B) whose issuer has received from the Requisite NRSROs a
rating, with respect to a class of short-term debt
obligations (or any security within that class) that
is now comparable in priority and security with the
security, in one of the two highest rating categories
for short-term debt obligations (within which there
may be sub-categories or gradations indicating
relative standing); or
(iii) an unrated security that is of comparable quality to a
security meeting the requirements of paragraphs (a)(5)(i) or
(ii) of this section, as determined by the money market fund's
board of directors; provided, however, that:
(A) the board of directors may base its determination
that a standby commitment is an Eligible Security
upon a finding that the issuer of the commitment
presents a minimal risk of default; and
(B) a security that at the time of issuance was a
long-term security but that has a remaining maturity
of 397 calendar days or less and that is an unrated
security(1) is not an Eligible Security if the
security has a long-term rating from any NRSRO that is
not within the NRSRO's two highest categories (within
which there may be sub-categories or gradations
indicating relative standing).
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.
- --------------------
1 An "unrated security" is a security (i) issued by an issuer that does
not have a current short-term rating from any NRSRO, either as to the
particular security or as to any other short-term obligations of
comparable priority and security; (ii) that was a long-term security
at the time of issuance and whose issuer has not received from any
NRSRO a rating with respect to a class of short-term debt obligations
now comparable in priority and security; or (iii) a security that is
rated but which is the subject of an external credit support agreement
not in effect when the security was assigned its rating, provided that
a security is not an unrated security if any short-term debt
obligation issued by the issuer and comparable in priority and
security is rated by any NRSRO.
30
<PAGE> 62
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 (i) at least 90%
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock,
securities, foreign currencies, or other income derived with respect to its
business of investing in such stock, securities or currencies and (ii) less
than 30% of its gross income from the sale or disposition, generally, of (a)
stocks or securities, (b) options, futures or forward contracts (other than
options, futures or forward contracts on foreign currencies) and (c) foreign
currencies (or options, futures or forward contracts on foreign currencies)
that are not directly related to the Company's business of investing in stock
or securities. 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
31
<PAGE> 63
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).
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
32
<PAGE> 64
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 April 1,
1997, 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 the CG Variable
Annuity Separate Account is Connecticut General Life Insurance Company, 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.
AIM V.I. CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 71.07%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 14.49%
Merrill Lynch Life Insurance Company -0- -0- 11.70%
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 79.46%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 18.26%
</TABLE>
- --------------------------
* 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.
33
<PAGE> 65
AIM V.I. GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 78.59%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 16.46%
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 81.16%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 12.58%
</TABLE>
AIM V.I. GROWTH FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 83.08%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 16.38%
</TABLE>
- ---------------------------
* 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.
34
<PAGE> 66
AIM V.I. GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
IDS Life Insurance Company -0- -0- 41.53%*
CG Variable Annuity -0- -0- 36.38%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 13.37%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 82.07%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 16.97%
</TABLE>
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 80.85%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 18.67%
</TABLE>
- ------------------------
* 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.
35
<PAGE> 67
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ---- --------------
<S> <C> <C> <C>
CG Variable Annuity -0- -0- 79.32%*
Separate Account
Glenbrook Life & Annuity Company -0- -0- 12.02%
</TABLE>
As of April 1, 1997, 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.
36
<PAGE> 68
FINANCIAL STATEMENTS
FS
<PAGE> 69
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, 1996, the related statement of operations for the year then ended,
the statement of changes in net assets for the year then ended and the eleven
month period ended December 31, 1995 and the financial highlights for the year
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, 1996, 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. Capital Appreciation Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. CAPITAL APPRECIATION FUND
FS-1
<PAGE> 70
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 87.73%
ADVERTISING/BROADCASTING - 1.11%
American Radio Systems Corp.(a) 10,000 $ 272,500
- ------------------------------------------------------------------
CanWest Global Communications Corp. (Canada) 59,700 611,925
- ------------------------------------------------------------------
Catalina Marketing Corp.(a) 3,300 181,912
- ------------------------------------------------------------------
Chancellor Corp. - Class A(a) 13,000 308,750
- ------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 44,600 1,611,175
- ------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 752,813
- ------------------------------------------------------------------
Paxson Communications Corp.(a) 20,000 157,500
- ------------------------------------------------------------------
True North Communications, Inc. 9,000 196,875
- ------------------------------------------------------------------
4,093,450
- ------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.10%
Mark IV Industries, Inc. 16,170 365,846
- ------------------------------------------------------------------
BANKING - 0.55%
Bank of Boston Corp. 31,900 2,049,575
- ------------------------------------------------------------------
BIOTECHNOLOGY - 0.43%
AMGEN, Inc.(a) 29,500 1,604,063
- ------------------------------------------------------------------
BUSINESS SERVICES - 0.91%
AccuStaff, Inc.(a) 29,300 618,963
- ------------------------------------------------------------------
APAC Teleservices, Inc.(a) 6,000 230,250
- ------------------------------------------------------------------
Corrections Corp. of America(a) 1,900 58,188
- ------------------------------------------------------------------
CUC International, Inc.(a) 23,700 562,875
- ------------------------------------------------------------------
Equifax, Inc. 14,000 428,750
- ------------------------------------------------------------------
Healthcare COMPARE Corp.(a) 13,700 580,537
- ------------------------------------------------------------------
Paychex, Inc. 9,100 468,081
- ------------------------------------------------------------------
Romac International, Inc.(a) 20,000 440,000
- ------------------------------------------------------------------
3,387,644
- ------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.72%
Agrium, Inc. (Canada) 30,000 412,500
- ------------------------------------------------------------------
Airgas, Inc.(a) 48,500 1,067,000
- ------------------------------------------------------------------
IMC Global, Inc. 30,000 1,173,750
- ------------------------------------------------------------------
2,653,250
- ------------------------------------------------------------------
COMPUTER MINI/PCS - 3.00%
COMPAQ Computer Corp.(a) 39,000 2,895,750
- ------------------------------------------------------------------
Dell Computer Corp.(a) 47,600 2,528,750
- ------------------------------------------------------------------
Hewlett-Packard Co. 14,400 723,600
- ------------------------------------------------------------------
Rational Software Corp.(a) 42,400 1,677,450
- ------------------------------------------------------------------
Sun Microsystems, Inc.(a) 127,800 3,282,863
- ------------------------------------------------------------------
11,108,413
- ------------------------------------------------------------------
COMPUTER NETWORKING - 5.84%
ACT Networks, Inc.(a) 13,600 496,400
- ------------------------------------------------------------------
Ascend Communications, Inc.(a) 54,500 3,385,813
- ------------------------------------------------------------------
Cabletron Systems, Inc.(a) 58,000 1,928,500
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING - (CONTINUED)
Cascade Communications Corp.(a) 63,700 $ 3,511,462
- ------------------------------------------------------------------
Cisco Systems, Inc.(a) 59,100 3,760,237
- ------------------------------------------------------------------
ECI Telecommunications Ltd. Designs (Israel) 22,300 473,875
- ------------------------------------------------------------------
FORE Systems, Inc.(a) 46,800 1,538,550
- ------------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 41,000 1,158,250
- ------------------------------------------------------------------
Shiva Corp.(a) 5,800 202,275
- ------------------------------------------------------------------
Sync Research, Inc.(a) 14,700 202,125
- ------------------------------------------------------------------
3Com Corp.(a) 60,000 4,402,500
- ------------------------------------------------------------------
Xircom, Inc.(a) 25,000 543,750
- ------------------------------------------------------------------
21,603,737
- ------------------------------------------------------------------
COMPUTER PERIPHERALS - 2.32%
Adaptec, Inc.(a) 44,800 1,792,000
- ------------------------------------------------------------------
American Power Conversion Corp.(a) 18,400 501,400
- ------------------------------------------------------------------
EMC Corp.(a) 45,000 1,490,625
- ------------------------------------------------------------------
Microchip Technology, Inc.(a) 41,400 2,106,225
- ------------------------------------------------------------------
U.S. Robotics Corp.(a) 37,700 2,714,400
- ------------------------------------------------------------------
8,604,650
- ------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 11.96%
Affiliated Computer Services, Inc.(a) 22,800 678,300
- ------------------------------------------------------------------
Baan Co., N.V. (Netherlands)(a) 30,300 1,052,925
- ------------------------------------------------------------------
BDM International Inc.(a) 6,000 325,500
- ------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 12,000 444,750
- ------------------------------------------------------------------
BMC Software, Inc.(a) 62,000 2,565,250
- ------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 20,350 808,913
- ------------------------------------------------------------------
CBT Group PLC-ADR (Ireland)(a) 900 48,825
- ------------------------------------------------------------------
Ceridian Corp.(a) 28,000 1,134,000
- ------------------------------------------------------------------
Computer Associates International, Inc. 64,350 3,201,413
- ------------------------------------------------------------------
Computer Sciences Corp.(a) 19,700 1,617,863
- ------------------------------------------------------------------
Compuware Corp.(a) 31,000 1,553,875
- ------------------------------------------------------------------
CSG Systems International, Inc.(a) 15,100 232,162
- ------------------------------------------------------------------
DST Systems, Inc.(a) 27,800 872,225
- ------------------------------------------------------------------
Electronic Arts, Inc.(a) 25,700 769,394
- ------------------------------------------------------------------
First Data Corp. 22,500 821,250
- ------------------------------------------------------------------
HBO & Co. 28,144 1,671,050
- ------------------------------------------------------------------
HPR, Inc.(a) 13,600 187,000
- ------------------------------------------------------------------
IDX Systems Corp.(a) 5,500 157,437
- ------------------------------------------------------------------
Intuit, Inc.(a) 24,400 768,600
- ------------------------------------------------------------------
McAfee Associates, Inc.(a) 46,300 2,037,200
- ------------------------------------------------------------------
Medic Computer Systems, Inc.(a) 8,200 330,562
- ------------------------------------------------------------------
Microsoft Corp.(a) 82,900 6,849,612
- ------------------------------------------------------------------
National Data Corp. 22,500 978,750
- ------------------------------------------------------------------
Network General Corp.(a) 67,000 2,026,750
- ------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-2
<PAGE> 71
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES - (CONTINUED)
Oracle Corp.(a) 60,875 $ 2,541,531
- ----------------------------------------------------------------
Parametric Technology Co.(a) 74,200 3,812,025
- ----------------------------------------------------------------
Physician Computer Network, Inc.(a) 42,500 361,250
- ----------------------------------------------------------------
Pure Atria Corp.(a) 2,300 56,925
- ----------------------------------------------------------------
Sterling Commerce, Inc.(a) 54,955 1,937,164
- ----------------------------------------------------------------
Sterling Software, Inc.(a) 16,800 531,300
- ----------------------------------------------------------------
Structural Dynamics Research Corp.(a) 19,400 388,000
- ----------------------------------------------------------------
SunGard Data Systems, Inc.(a) 17,600 695,200
- ----------------------------------------------------------------
Synopsys, Inc.(a) 44,500 2,058,125
- ----------------------------------------------------------------
Systemsoft Corp.(a) 3,400 50,575
- ----------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 8,600 227,900
- ----------------------------------------------------------------
Transition Systems, Inc.(a) 600 8,475
- ----------------------------------------------------------------
Wind River Systems(a) 10,000 473,750
- ----------------------------------------------------------------
44,275,826
- ----------------------------------------------------------------
CONGLOMERATES - 0.68%
Corning, Inc. 27,300 1,262,625
- ----------------------------------------------------------------
Tyco International Ltd. 13,968 738,558
- ----------------------------------------------------------------
U.S. Industries, Inc.(a) 15,000 515,625
- ----------------------------------------------------------------
2,516,808
- ----------------------------------------------------------------
CONSUMER NON-DURABLES - 0.06%
Central Garden and Pet Co.(a) 10,000 210,625
- ----------------------------------------------------------------
COSMETIC & TOILETRIES - 0.12%
Rexall Sundown, Inc.(a) 16,300 443,156
- ----------------------------------------------------------------
ELECTRONIC COMPONENT/MISCELLANEOUS - 1.11%
AMETEK Inc. 5,000 111,250
- ----------------------------------------------------------------
Berg Electronics Corp.(a) 13,600 399,500
- ----------------------------------------------------------------
BMC Industries, Inc. 13,700 431,550
- ----------------------------------------------------------------
Checkpoint Systems, Inc.(a) 10,000 247,500
- ----------------------------------------------------------------
Methode Electronics, Inc. - Class A 9,150 185,288
- ----------------------------------------------------------------
Molex, Inc. - Class A 3,906 139,151
- ----------------------------------------------------------------
Raychem Corp. 10,400 833,300
- ----------------------------------------------------------------
SCI Systems, Inc.(a) 10,600 473,025
- ----------------------------------------------------------------
Symbol Technologies, Inc.(a) 17,200 761,100
- ----------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 16,100 533,312
- ----------------------------------------------------------------
4,114,976
- ----------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.17%
Imperial Credit Industries, Inc.(a) 30,000 630,000
- ----------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.18%
Aames Financial Corp. 23,500 843,062
- ----------------------------------------------------------------
Beneficial Corp. 10,900 690,787
- ----------------------------------------------------------------
Capital One Financial Corp. 42,200 1,519,200
- ----------------------------------------------------------------
Concord EFS, Inc.(a) 20,000 565,000
- ----------------------------------------------------------------
Credit Acceptance Corp.(a) 29,300 688,550
- ----------------------------------------------------------------
First USA, Inc. 23,200 803,300
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (CONSUMER CREDIT) - (CONTINUED)
Green Tree Financial Corp. 62,800 $ 2,425,650
- ---------------------------------------------------------------
Household International, Inc. 19,600 1,808,100
- ---------------------------------------------------------------
MBNA Corp. 43,750 1,815,625
- ---------------------------------------------------------------
Money Store, Inc. (The) 40,000 1,105,001
- ---------------------------------------------------------------
Olympic Financial Ltd.(a) 42,200 606,625
- ---------------------------------------------------------------
PMT Services, Inc.(a) 29,500 516,250
- ---------------------------------------------------------------
Southern Pacific Funding Corp.(a) 3,000 93,375
- ---------------------------------------------------------------
Student Loan Marketing Association 12,000 1,117,500
- ---------------------------------------------------------------
SunAmerica, Inc. 20,000 887,500
- ---------------------------------------------------------------
15,485,525
- ---------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.18%
Washington Mutual, Inc. 15,200 658,350
- ---------------------------------------------------------------
FOOD/PROCESSING - 0.19%
Richfood Holdings, Inc. 29,450 714,163
- ---------------------------------------------------------------
FUNERAL SERVICES - 1.05%
Service Corp. International 113,900 3,189,200
- ---------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 20,250 688,500
- ---------------------------------------------------------------
3,877,700
- ---------------------------------------------------------------
FURNITURE - 0.25%
Leggett & Platt, Inc. 26,500 917,563
- ---------------------------------------------------------------
GAMING - 0.95%
Circus Circus Enterprises(a) 37,500 1,289,063
- ---------------------------------------------------------------
GTECH Holdings Corp.(a) 21,300 681,600
- ---------------------------------------------------------------
International Game Technology 66,200 1,208,150
- ---------------------------------------------------------------
Trump Hotels & Casino Resorts, Inc.(a) 28,600 343,200
- ---------------------------------------------------------------
3,522,013
- ---------------------------------------------------------------
HOME BUILDING - 0.02%
Oakwood Homes Corp. 4,000 91,500
- ---------------------------------------------------------------
HOTELS/MOTELS - 1.17%
Choice Hotels International, Inc.(a) 45,500 801,937
- ---------------------------------------------------------------
Doubletree Corp.(a) 17,700 796,500
- ---------------------------------------------------------------
HFS, Inc.(a) 28,100 1,678,975
- ---------------------------------------------------------------
Promus Hotel Corp.(a) 18,750 555,469
- ---------------------------------------------------------------
Sun International Hotels Ltd.(a) 13,500 492,750
- ---------------------------------------------------------------
4,325,631
- ---------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.58%
Compdent Corp.(a) 15,900 560,475
- ---------------------------------------------------------------
Conseco Inc. 15,000 956,250
- ---------------------------------------------------------------
United Companies Financial Corp. 24,500 652,312
- ---------------------------------------------------------------
2,169,037
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTIES) - 0.98%
CapMAC Holdings, Inc. 25,900 857,938
- ---------------------------------------------------------------
MGIC Investment Corp. 35,300 2,682,800
- ---------------------------------------------------------------
Progressive Corp. 1,600 107,800
- ---------------------------------------------------------------
3,648,538
- ---------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-3
<PAGE> 72
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE & RECREATION - 0.87%
Callaway Golf Co. 37,000 $ 1,063,750
- ------------------------------------------------------------------------
Harley-Davidson, Inc. 35,700 1,677,900
- ------------------------------------------------------------------------
Mattel, Inc. 9,375 260,156
- ------------------------------------------------------------------------
Speedway Motorsports, Inc.(a) 9,900 207,900
- ------------------------------------------------------------------------
3,209,706
- ------------------------------------------------------------------------
MACHINE TOOLS - 0.23%
Precision Castparts Corp. 17,000 843,625
- ------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.54%
Pentair, Inc. 14,500 467,625
- ------------------------------------------------------------------------
Thermo Electron Corp.(a) 37,300 1,538,625
- ------------------------------------------------------------------------
2,006,250
- ------------------------------------------------------------------------
MEDICAL (DRUGS) - 2.65%
Cardinal Health, Inc. 72,525 4,224,581
- ------------------------------------------------------------------------
Curative Technologies, Inc.(a) 8,500 235,344
- ------------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 25,000 1,193,750
- ------------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 57,700 1,918,525
- ------------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 21,800 782,075
- ------------------------------------------------------------------------
Jones Medical Industries, Inc. 23,600 864,350
- ------------------------------------------------------------------------
Parexel International Corp.(a) 6,200 320,075
- ------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Israel) 5,300 266,325
- ------------------------------------------------------------------------
9,805,025
- ------------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 4.86%
Advanced Technology Laboratories, Inc.(a) 15,000 465,000
- ------------------------------------------------------------------------
Boston Scientific Corp.(a) 33,280 1,996,800
- ------------------------------------------------------------------------
Dentsply International, Inc. 14,800 703,000
- ------------------------------------------------------------------------
Gulf South Medical Supply, Inc.(a) 33,100 848,187
- ------------------------------------------------------------------------
IDEXX Laboratories Inc.(a) 25,300 910,800
- ------------------------------------------------------------------------
Invacare Corp. 27,400 753,500
- ------------------------------------------------------------------------
Medtronic, Inc. 14,000 952,000
- ------------------------------------------------------------------------
Nellcor Puritan Bennet, Inc.(a) 13,100 286,563
- ------------------------------------------------------------------------
Omnicare, Inc. 74,700 2,399,738
- ------------------------------------------------------------------------
Physician Sales & Service, Inc.(a) 20,000 287,500
- ------------------------------------------------------------------------
Quintiles Transnational Corp.(a) 29,900 1,980,875
- ------------------------------------------------------------------------
St. Jude Medical, Inc.(a) 30,000 1,278,750
- ------------------------------------------------------------------------
Steris Corp.(a) 45,000 1,957,500
- ------------------------------------------------------------------------
Sybron International Corp.(a) 61,800 2,039,400
- ------------------------------------------------------------------------
Target Therapeutics, Inc.(a) 6,500 273,000
- ------------------------------------------------------------------------
U.S. Surgical Corp. 21,400 842,625
- ------------------------------------------------------------------------
17,975,238
- ------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 7.71%
American HomePatient, Inc.(a) 22,050 600,862
- ------------------------------------------------------------------------
American Medical Response, Inc.(a) 5,700 185,250
- ------------------------------------------------------------------------
American Oncology Resources, Inc.(a) 7,200 73,800
- ------------------------------------------------------------------------
ClinTrials Research Inc.(a) 25,650 583,537
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
MEDICAL (PATIENT SERVICES) - (CONTINUED)
Columbia/HCA Healthcare Corp. 90,720 $ 3,696,840
- ------------------------------------------------------------------------
FPA Medical Management, Inc.(a) 20,000 447,500
- ------------------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 29,401 915,106
- ------------------------------------------------------------------------
Health Care & Retirement Corp.(a) 66,900 1,915,012
- ------------------------------------------------------------------------
Health Management Associates, Inc. - Class A(a) 87,712 1,973,520
- ------------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 85,900 3,317,887
- ------------------------------------------------------------------------
Lincare Holdings, Inc.(a) 30,000 1,230,000
- ------------------------------------------------------------------------
MedPartners, Inc.(a) 22,500 472,500
- ------------------------------------------------------------------------
Multicare Companies, Inc.(a) 26,200 530,550
- ------------------------------------------------------------------------
OccuSystems, Inc.(a) 11,500 310,500
- ------------------------------------------------------------------------
OrNda HealthCorp(a) 57,900 1,693,575
- ------------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 240,000
- ------------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 45,000 2,635,313
- ------------------------------------------------------------------------
PhyCor, Inc.(a) 28,800 817,200
- ------------------------------------------------------------------------
Physicians Resource Group, Inc.(a) 20,000 355,000
- ------------------------------------------------------------------------
Quorum Health Group, Inc.(a) 33,000 981,750
- ------------------------------------------------------------------------
Tenet Healthcare Corp.(a) 61,500 1,345,313
- ------------------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 28,800 1,044,000
- ------------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 38,300 1,096,338
- ------------------------------------------------------------------------
Vencor, Inc.(a) 64,900 2,052,463
- ------------------------------------------------------------------------
28,513,816
- ------------------------------------------------------------------------
METALS (MISCELLANEOUS) - 0.39%
Potash Corp. of Saskatchewan, Inc. (Canada) 17,000 1,445,000
- ------------------------------------------------------------------------
OFFICE AUTOMATION - 0.56%
Danka Business Systems PLC-ADR (United Kingdom) 58,300 2,062,363
- ------------------------------------------------------------------------
OFFICE PRODUCTS - 0.73%
Avery Dennison Corp. 14,200 502,325
- ------------------------------------------------------------------------
Ingram Micro, Inc.(a) 39,300 903,900
- ------------------------------------------------------------------------
Reynolds & Reynolds Co. - Class A 50,000 1,300,000
- ------------------------------------------------------------------------
2,706,225
- ------------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.29%
Reading & Bates Corp.(a) 40,000 1,060,000
- ------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.47%
Burlington Resources, Inc. 22,000 1,108,250
- ------------------------------------------------------------------------
Transocean Offshore Inc. 10,000 626,250
- ------------------------------------------------------------------------
1,734,500
- ------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.72%
Camco International, Inc. 20,000 922,500
- ------------------------------------------------------------------------
Energy Ventures, Inc.(a) 7,700 391,737
- ------------------------------------------------------------------------
Global Marine, Inc.(a) 65,000 1,340,625
- ------------------------------------------------------------------------
2,654,862
- ------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 2.78%
Baker Hughes, Inc. 28,500 983,250
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-4
<PAGE> 73
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES - (CONTINUED)
BJ Services Co.(a) 14,000 $ 714,000
- -----------------------------------------------------------------------
Cooper Cameron Corp.(a) 12,000 918,000
- -----------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 29,600 1,687,200
- -----------------------------------------------------------------------
ENSCO International, Inc.(a) 20,000 970,000
- -----------------------------------------------------------------------
Marine Drilling Co., Inc.(a) 70,000 1,378,125
- -----------------------------------------------------------------------
Nabors Industries, Inc.(a) 15,000 288,750
- -----------------------------------------------------------------------
Pride Petroleum Services, Inc.(a) 15,500 360,375
- -----------------------------------------------------------------------
Rowan Companies, Inc.(a) 38,500 871,063
- -----------------------------------------------------------------------
Smith International, Inc.(a) 21,900 982,762
- -----------------------------------------------------------------------
Varco International, Inc.(a) 48,900 1,130,812
- -----------------------------------------------------------------------
10,284,337
- -----------------------------------------------------------------------
POLLUTION CONTROL - 0.72%
United Waste Services, Inc.(a) 29,000 996,875
- -----------------------------------------------------------------------
US Filter Corp.(a) 21,100 669,925
- -----------------------------------------------------------------------
USA Waste Services, Inc.(a) 31,300 997,688
- -----------------------------------------------------------------------
2,664,488
- -----------------------------------------------------------------------
PUBLISHING - 0.31%
Gartner Group, Inc.(a) 18,400 716,450
- -----------------------------------------------------------------------
Times Mirror Co. (The) - Class A 9,000 447,750
- -----------------------------------------------------------------------
1,164,200
- -----------------------------------------------------------------------
RESTAURANTS - 1.66%
Apple South, Inc. 30,000 405,000
- -----------------------------------------------------------------------
Applebee's International, Inc. 29,400 808,500
- -----------------------------------------------------------------------
Brinker International, Inc.(a) 35,000 560,000
- -----------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 52,600 1,334,725
- -----------------------------------------------------------------------
Lone Star Steakhouse & Saloon, Inc.(a) 45,600 1,219,800
- -----------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 32,100 858,675
- -----------------------------------------------------------------------
Planet Hollywood International, Inc. - Class A(a) 20,200 398,950
- -----------------------------------------------------------------------
Rainforest Cafe, Inc.(a) 7,500 176,250
- -----------------------------------------------------------------------
Starbucks Corp.(a) 13,200 377,850
- -----------------------------------------------------------------------
6,139,750
- -----------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 2.26%
American Stores Co. 31,000 1,267,125
- -----------------------------------------------------------------------
Eckerd Corp. (The)(a) 6,087 194,784
- -----------------------------------------------------------------------
Kroger Co. (The) (a) 35,300 1,641,450
- -----------------------------------------------------------------------
Revco D.S., Inc.(a) 32,400 1,198,800
- -----------------------------------------------------------------------
Rite Aid Corp. 25,480 1,012,830
- -----------------------------------------------------------------------
Safeway, Inc.(a) 71,000 3,035,250
- -----------------------------------------------------------------------
8,350,239
- -----------------------------------------------------------------------
RETAIL (STORES) - 9.19%
Bed Bath & Beyond, Inc.(a) 39,700 962,725
- -----------------------------------------------------------------------
Boise Cascade Office Products Corp.(a) 7,300 153,300
- -----------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 18,700 1,109,144
- -----------------------------------------------------------------------
CompUSA, Inc.(a) 49,500 1,020,937
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (STORES) - (CONTINUED)
Consolidated Stores Corp.(a) 67,250 $ 2,160,406
- -----------------------------------------------------------------------
Corporate Express, Inc.(a) 28,700 844,856
- -----------------------------------------------------------------------
Dayton Hudson Corp. 51,300 2,013,525
- -----------------------------------------------------------------------
Dollar General Corp. 27,762 888,384
- -----------------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 15,000 573,750
- -----------------------------------------------------------------------
Fila Holding S.p.A.-ADR (Italy) 9,100 528,938
- -----------------------------------------------------------------------
Finish Line, Inc. (The) - Class A(a) 24,200 511,225
- -----------------------------------------------------------------------
Gap, Inc. (The) 14,700 442,838
- -----------------------------------------------------------------------
Global DirectMail Corp.(a) 17,700 772,163
- -----------------------------------------------------------------------
Gymboree Corp.(a) 33,600 768,600
- -----------------------------------------------------------------------
Home Depot, Inc. 3,000 150,375
- -----------------------------------------------------------------------
Jones Apparel Group, Inc.(a) 25,000 934,375
- -----------------------------------------------------------------------
Kohl's Corp.(a) 20,900 820,325
- -----------------------------------------------------------------------
Lowe's Companies, Inc. 28,700 1,018,850
- -----------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 42,250 1,035,125
- -----------------------------------------------------------------------
Meyer (Fred), Inc.(a) 28,300 1,004,650
- -----------------------------------------------------------------------
Micro Warehouse, Inc.(a) 34,400 404,200
- -----------------------------------------------------------------------
Neiman Marcus Group, Inc. (The)(a) 9,000 229,500
- -----------------------------------------------------------------------
Oakley, Inc.(a) 57,800 628,575
- -----------------------------------------------------------------------
Pep Boys - Manny, Moe & Jack 27,400 842,550
- -----------------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 25,600 531,200
- -----------------------------------------------------------------------
PETSMART, Inc.(a) 57,300 1,253,438
- -----------------------------------------------------------------------
Ross Stores, Inc. 12,700 635,000
- -----------------------------------------------------------------------
Saks Holdings, Inc.(a) 8,200 221,400
- -----------------------------------------------------------------------
Sports Authority, Inc. (The)(a) 50,250 1,092,937
- -----------------------------------------------------------------------
Staples, Inc.(a) 129,425 2,337,739
- -----------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 18,200 131,950
- -----------------------------------------------------------------------
Tech Data Corp.(a) 46,500 1,272,938
- -----------------------------------------------------------------------
Tiffany & Co. 21,500 787,437
- -----------------------------------------------------------------------
TJX Companies, Inc. 21,300 1,009,087
- -----------------------------------------------------------------------
Toys "R" Us, Inc.(a) 74,600 2,238,000
- -----------------------------------------------------------------------
Viking Office Products, Inc.(a) 82,700 2,207,056
- -----------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 13,000 472,875
- -----------------------------------------------------------------------
34,010,373
- -----------------------------------------------------------------------
SCIENTIFIC INSTRUMENTS - 0.02%
Input/Output, Inc.(a) 4,500 83,250
- -----------------------------------------------------------------------
SEMICONDUCTORS - 3.15%
Advanced Micro Devices, Inc.(a) 39,800 1,024,850
- -----------------------------------------------------------------------
Altera Corp.(a) 26,300 1,911,681
- -----------------------------------------------------------------------
Applied Materials, Inc.(a) 25,000 898,438
- -----------------------------------------------------------------------
Intel Corp. 38,200 5,001,813
- -----------------------------------------------------------------------
KLA Instruments Corp.(a) 16,600 589,300
- -----------------------------------------------------------------------
National Semiconductor Corp.(a) 35,000 853,125
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-5
<PAGE> 74
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SEMICONDUCTORS - (CONTINUED)
Novellus Systems, Inc.(a) 3,600 $ 195,075
- ------------------------------------------------------------------------------
SGS-Thomson Microelectronics N.V. - New York shares
(France)(a) 4,400 308,000
- ------------------------------------------------------------------------------
Solectron Corp.(a) 8,700 464,362
- ------------------------------------------------------------------------------
Tencor Instruments(a) 8,000 211,000
- ------------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 4,000 182,000
- ------------------------------------------------------------------------------
11,639,644
- ------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 1.08%
Nike, Inc. - Class B 28,000 1,673,000
- ------------------------------------------------------------------------------
Nine West Group, Inc.(a) 43,900 2,035,862
- ------------------------------------------------------------------------------
Wolverine World Wide, Inc. 9,900 287,100
- ------------------------------------------------------------------------------
3,995,962
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 5.45%
ACC Corp. 12,000 363,000
- ------------------------------------------------------------------------------
ADC Telecommunications, Inc.(a) 84,300 2,623,838
- ------------------------------------------------------------------------------
Andrew Corp.(a) 45,862 2,433,552
- ------------------------------------------------------------------------------
Aspect Telecommunications Corp.(a) 18,300 1,162,050
- ------------------------------------------------------------------------------
Billing Information Concepts(a) 14,700 422,625
- ------------------------------------------------------------------------------
Nokia Oy A.B. - Class A (Finland) 4,300 249,587
- ------------------------------------------------------------------------------
Nokia Oy A.B-ADR - Class A (Finland) 33,000 1,901,625
- ------------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 95,800 2,915,913
- ------------------------------------------------------------------------------
PictureTel Corp.(a) 15,000 390,000
- ------------------------------------------------------------------------------
Premisys Communications, Inc.(a) 30,600 1,032,750
- ------------------------------------------------------------------------------
QUALCOMM, Inc.(a) 16,600 661,925
- ------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 90,320 2,726,535
- ------------------------------------------------------------------------------
Tellabs, Inc.(a) 45,200 1,700,650
- ------------------------------------------------------------------------------
U.S. Long Distance Corp.(a) 9,300 74,400
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 26,000 360,750
- ------------------------------------------------------------------------------
WorldCom, Inc.(a) 43,800 1,141,537
- ------------------------------------------------------------------------------
20,160,737
- ------------------------------------------------------------------------------
TELEPHONE - 0.25%
Cincinnati Bell, Inc. 15,000 924,375
- ------------------------------------------------------------------------------
TEXTILES - 1.91%
Designer Holdings Ltd.(a) 7,100 114,488
- ------------------------------------------------------------------------------
Gucci Group N.V.-ADR (Netherlands) 14,800 945,350
- ------------------------------------------------------------------------------
Liz Claiborne, Inc. 35,700 1,378,912
- ------------------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 41,300 1,042,825
- ------------------------------------------------------------------------------
Russel Corp. 26,300 782,425
- ------------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 38,700 1,857,600
- ------------------------------------------------------------------------------
Unifi, Inc. 29,500 947,687
- ------------------------------------------------------------------------------
7,069,287
- ------------------------------------------------------------------------------
TRANSPORTATION - 0.18%
AirNet Systems, Inc.(a) 20,000 295,000
- ------------------------------------------------------------------------------
Rural/Metro Corp.(a) 10,000 360,000
- ------------------------------------------------------------------------------
655,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TRUCKING - 0.12%
U.S. Freightways Corp. 15,900 $ 436,256
- -------------------------------------------------------------------------------
Total Common Stocks 324,666,547
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE BONDS - 0.06%
FINANCE (CONSUMER CREDIT) - 0.06%
Cityscape Financial Corp., Conv. Sub. Deb., 6.00%,
05/01/06 $ 225,000 228,938
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 5.27%
U.S. TREASURY BILLS(b)
5.22%, 01/02/97 5,505,000(c) 5,504,244
- -------------------------------------------------------------------------------
4.64%, 02/06/97 1,250,000 1,244,325
- -------------------------------------------------------------------------------
5.03%, 03/27/97 12,900,000(c) 12,753,714
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 19,502,283
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 7.27%(d)
Daiwa Securities America Inc., 6.25%, 01/02/97(e) 26,887,387 26,887,387
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 100.33% 371,285,155
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.33%) (1,221,990)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $370,063,165
===============================================================================
</TABLE>
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 amount was pledged as collateral for open
futures contracts at 12/31/96. See Note 6 to Financial Statements.
(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 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR - American Depository Receipt
Conv.- Convertible
Deb. - Debentures
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-6
<PAGE> 75
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $295,718,658) $371,285,155
- ----------------------------------------------------------------------
Receivables for:
Investments sold 737,799
- ----------------------------------------------------------------------
Capital stock sold 281,951
- ----------------------------------------------------------------------
Dividends and interest 69,820
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,698
- ----------------------------------------------------------------------
Organizational costs, net 3,857
- ----------------------------------------------------------------------
Other assets 894
- ----------------------------------------------------------------------
Total assets 372,392,174
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,506,462
- ----------------------------------------------------------------------
Capital stock reacquired 178,464
- ----------------------------------------------------------------------
Variation margin 386,900
- ----------------------------------------------------------------------
Deferred compensation plan 12,698
- ----------------------------------------------------------------------
Accrued advisory fees 198,353
- ----------------------------------------------------------------------
Accrued directors' fees 1,785
- ----------------------------------------------------------------------
Accrued administrative services fees 4,631
- ----------------------------------------------------------------------
Accrued operating expenses 39,716
- ----------------------------------------------------------------------
Total liabilities 2,329,009
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $370,063,165
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 19,043,829
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 19.43
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $6,874 foreign withholding tax) $ 617,154
- ------------------------------------------------------------------------
Interest 2,033,202
- ------------------------------------------------------------------------
Total investment income 2,650,356
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,884,838
- ------------------------------------------------------------------------
Custodian fees 112,537
- ------------------------------------------------------------------------
Administrative services fees 46,623
- ------------------------------------------------------------------------
Directors' fees and expenses 7,498
- ------------------------------------------------------------------------
Organizational costs 2,892
- ------------------------------------------------------------------------
Other 74,463
- ------------------------------------------------------------------------
Total expenses 2,128,851
- ------------------------------------------------------------------------
Net investment income 521,505
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
NET REALIZED GAIN FROM:
Investment securities 4,609,186
- ------------------------------------------------------------------------
Futures contracts 2,349,285
- ------------------------------------------------------------------------
6,958,471
- ------------------------------------------------------------------------
UNREALIZED APPRECIATION OF:
Investment securities 36,218,687
- ------------------------------------------------------------------------
Futures contracts 392,348
- ------------------------------------------------------------------------
36,611,035
- ------------------------------------------------------------------------
Net gain on investment securities and futures contracts 43,569,506
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $44,091,011
========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-7
<PAGE> 76
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 521,505 $ 532,603
- ------------------------------------------------------------------------------
Net realized gain from investment securities and
futures contracts 6,958,471 3,521,243
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and futures contracts 36,611,035 33,203,988
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 44,091,011 37,257,834
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (546,109) (45,369)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 114,365,840 86,762,686
- ------------------------------------------------------------------------------
Net increase in net assets 157,910,742 123,975,151
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 212,152,423 88,177,272
- ------------------------------------------------------------------------------
End of period $370,063,165 $212,152,423
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $287,275,923 $172,910,083
- ------------------------------------------------------------------------------
Undistributed net investment income 491,407 516,011
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and futures contracts 6,467,448 (491,023)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 75,828,387 39,217,352
- ------------------------------------------------------------------------------
$370,063,165 $212,152,423
==============================================================================
</TABLE>
See Notes to Financial Statements
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 - Equity securities, including warrants, that are
traded on a national securities exchange or NASDAQ National Market System
are valued at the last reported sales price or, in the case of over-the-
counter securities or if there has been no sale that day, at the mean
between the closing bid and asked prices on that day. Securities traded in
the over-the-counter market, except (i) securities for which representative
exchange prices are available, and (ii) 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.
Debt obligations that are issued or guaranteed by the U.S. Treasury 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. Short-term investments
with remaining maturities of up to and including 60 days are valued at
amortized cost which approximates market value. Short-term securities that
mature in more than 60 days are valued at current market quotations.
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 authority of, the Board of Directors.
AIM V.I. CAPITAL APPRECIATION FUND
FS-8
<PAGE> 77
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. 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 0.65% 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, 1996, AIM was reimbursed $46,623 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, 1996, the Fund incurred legal fees of
$3,382 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 - 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 ,
1996 was $255,239,342 and $151,685,013, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $84,767,082
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (9,348,830)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $75,418,252
==========================================================================
</TABLE>
Cost of investments for tax purposes is $295,866,903.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
----------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 7,080,357 $129,652,839 6,155,688 $96,675,587
- ---------------------------------------------------------------------------
Issued as reinvestment of
distributions 28,864 546,109 2,823 45,369
- ---------------------------------------------------------------------------
Reacquired (887,800) (15,833,108) (654,458) (9,958,270)
- ---------------------------------------------------------------------------
6,221,421 $114,365,840 5,504,053 $86,762,686
===========================================================================
</TABLE>
NOTE 6 - OPEN FUTURES CONTRACTS
On December 31, 1996, $853,000 principal amount of U.S. Treasury bills were
pledged as collateral to cover margin requirements for open futures contracts:
Open futures contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
<S> <C> <C> <C> <C>
S&P 500 Index 53 contracts Mar 97 Buy $261,890
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-9
<PAGE> 78
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 16.55 $ 12.05 $ 12.58 $ 10.00
- -------------------------------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.02 0.04 0.05 --
- -------------------------------- -------- -------- ------- -------
Net gains (losses) on
securities (both realized and
unrealized) 2.89 4.46 (0.54) 2.59
- -------------------------------- -------- -------- ------- -------
Total from investment
operations 2.91 4.50 (0.49) 2.59
- -------------------------------- -------- -------- ------- -------
Less distributions:
Dividends from net investment
income (0.03) -- (0.04) (0.01)
- -------------------------------- -------- -------- ------- -------
Net asset value, end of period $ 19.43 $ 16.55 $ 12.05 $ 12.58
================================ ======== ======== ======= =======
Total return(a) 17.58% 37.38% (3.91)% 25.90%
================================ ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $370,063 $212,152 $88,177 $35,354
================================ ======== ======== ======= =======
Ratio of expenses to average net
assets 0.73%(b) 0.75%(c) 0.84% 1.06%(c)
================================ ======== ======== ======= =======
Ratio of net investment income
to average net assets 0.18%(b) 0.39%(c) 0.46% 0.07%(c)
================================ ======== ======== ======= =======
Portfolio turnover rate 59% 37% 81% 34%
================================ ======== ======== ======= =======
Average broker commission
rate(d) $ 0.0592 N/A N/A N/A
================================ ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $293,306,287.
(c) Annualized.
(d) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. CAPITAL APPRECIATION FUND
FS-10
<PAGE> 79
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, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year 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, 1996, 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, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. DIVERSIFIED INCOME FUND
FS-11
<PAGE> 80
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 45.28%
ADVERTISING/BROADCASTING - 2.87%
Katz Media Corp., Sr. Sub. Notes, 10.50%, 01/15/07
(acquired 12/13/96; cost $60,000)(b) $ 60,000 $ 61,575
- -----------------------------------------------------------------------------
Time Warner, Inc.
Deb., 6.85%, 01/15/26 500,000 491,595
- -----------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 781,950
- -----------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 491,000
- -----------------------------------------------------------------------------
1,826,120
- -----------------------------------------------------------------------------
AIRLINES - 0.66%
Airplanes Pass Through Trust, Sub. Bonds, 10.875%,
03/15/19 300,000 333,189
- -----------------------------------------------------------------------------
Greenwich Air Services, Inc., Sr. Notes, 10.50%,
06/01/06 80,000 86,000
- -----------------------------------------------------------------------------
419,189
- -----------------------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 0.73%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 462,572
- -----------------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.34%
Blue Bird Body Co., Sr. Sub. Notes, 10.75%, 11/15/06
(acquired 11/13/96-11/20/96;
cost $111,964)(b) 110,000 115,225
- -----------------------------------------------------------------------------
CSK Auto Inc., Sr. Sub. Notes, 11.00%, 11/01/06
(acquired 10/23/96; cost $100,000)(b) 100,000 103,875
- -----------------------------------------------------------------------------
219,100
- -----------------------------------------------------------------------------
BANKING - 4.48%
Bankers Trust New York Corp., Gtd. Notes, 7.75%,
12/01/26 (acquired 11/22/96; cost $586,554)(b) 600,000 576,849
- -----------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Notes, 6.70%, 12/13/06 750,000 737,055
- -----------------------------------------------------------------------------
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 843,352
- -----------------------------------------------------------------------------
Mercantile Bank, Sub. Notes, 6.375%, 01/15/04 300,000 289,794
- -----------------------------------------------------------------------------
Sovereign Bancorp, Inc., Sub. Notes, 8.00%, 03/15/03 400,000 408,240
- -----------------------------------------------------------------------------
2,855,290
- -----------------------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 1.53%
Coca-Cola Enterprises, Inc., Putable Notes, 7.24%,
06/20/20(c) 5,000,000 973,350
- -----------------------------------------------------------------------------
CABLE TELEVISION - 2.31%
Fundy Cable Ltd., Sr. Yankee Sec. Second Priority
Notes, 11.00%, 11/15/05 60,000 63,750
- -----------------------------------------------------------------------------
Heartland Wireless Communications Inc., Sr. Notes,
14.00%, 10/15/04 (acquired 12/17/96; cost
$120,000)(b) 120,000 124,800
- -----------------------------------------------------------------------------
Marcus Cable Operating Co., Sr. Disc. Notes, 13.50%,
08/01/04(d) 700,000 575,750
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
CABLE TELEVISION - (CONTINUED)
Rifkin Acquisition Partners L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 $ 100,000 $ 104,000
- -------------------------------------------------------------------------------
TeleWest Communications PLC, Sr. Yankee Disc. Deb.,
11.00%, 10/01/07(d) 170,000 118,363
- -------------------------------------------------------------------------------
United International Holdings, Inc., Sr. Disc. Notes,
12.78%, 11/15/99(c) 400,000 288,500
- -------------------------------------------------------------------------------
Wireless One, Inc., Sr. Notes, 13.00%, 10/15/03 200,000 196,000
- -------------------------------------------------------------------------------
1,471,163
- -------------------------------------------------------------------------------
CHEMICALS - 1.15%
Crain Industries, Inc., Sr. Sub. Notes, 13.50%,
08/15/05 180,000 203,850
- -------------------------------------------------------------------------------
LaRoche Industries, Inc., Sr. Sub. Notes, 13.00%,
08/15/04 100,000 108,000
- -------------------------------------------------------------------------------
PrintPack Inc., Sr. Sub. Notes, 10.625%, 08/15/06
(acquired 08/15/96-09/04/96; cost $160,875)(b) 160,000 166,400
- -------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Sub. Notes, 11.75%,
08/15/06 100,000 106,000
- -------------------------------------------------------------------------------
Tri Polyta Finance B.V., Yankee Sec. Gtd. Notes,
11.375%, 12/01/03 140,000 146,300
- -------------------------------------------------------------------------------
730,550
- -------------------------------------------------------------------------------
CONSUMER NON-DURABLES - 0.23%
Hines Horticulture, Inc., Sr. Sub. Notes, 11.75%,
10/15/05 140,000 149,100
- -------------------------------------------------------------------------------
CONTAINERS - 0.84%
Ivex Packaging Corp., Sr. Sub. Notes, 12.50%, 12/15/02 390,000 425,100
- -------------------------------------------------------------------------------
Owens-Illinois, Inc., Sr. Sub. Notes, 10.50%, 06/15/02 100,000 106,250
- -------------------------------------------------------------------------------
531,350
- -------------------------------------------------------------------------------
ELECTRIC POWER - 0.89%
AES China Generating Co., Sr. Yankee Notes, 10.125%,
12/15/06 40,000 41,700
- -------------------------------------------------------------------------------
El Paso Electric Co., First Mortgage Bonds, 8.90%,
02/01/06 500,000 522,265
- -------------------------------------------------------------------------------
563,965
- -------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 4.16%
Associates Corp. of North America, Deb., 7.95%,
02/15/10 750,000 809,107
- -------------------------------------------------------------------------------
GMAC, Notes, 9.00%, 10/15/02 750,000 825,758
- -------------------------------------------------------------------------------
Household Finance Corp., Notes, 7.125%, 09/01/05 1,000,000 1,011,050
- -------------------------------------------------------------------------------
2,645,915
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-12
<PAGE> 81
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
FINANCE (LEASING COMPANIES) - 0.69%
Sea Containers, Ltd., Series B Sr. Yankee Sub. Deb.,
12.50%, 12/01/04 $ 400,000 $ 442,000
- ------------------------------------------------------------------------------
FOOD/PROCESSING - 0.23%
International Home Foods Inc., Sr. Sub. Notes,
10.375%, 11/01/06 (acquired 10/29/96; cost
$80,000)(b) 80,000 83,600
- ------------------------------------------------------------------------------
Pilgrim's Pride Corp., Sr. Sub. Notes, 10.875%,
08/01/03 60,000 60,075
- ------------------------------------------------------------------------------
143,675
- ------------------------------------------------------------------------------
FOREIGN GOVERNMENT SECURITIES - 1.15%
Province Of Manitoba, Yankee Bonds, 7.75%, 07/17/16 700,000 731,927
- ------------------------------------------------------------------------------
FURNITURE - 0.50%
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 317,250
- ------------------------------------------------------------------------------
GAMING - 0.78%
Coast Hotels & Casinos Inc., Series B Sec. First Mtg.
Gtd. Notes, 13.00%, 12/15/02 180,000 199,350
- ------------------------------------------------------------------------------
Trump Atlantic City Associates, Secured First Mtg.
Gtd. Notes, 11.25%, 05/01/06 300,000 298,500
- ------------------------------------------------------------------------------
497,850
- ------------------------------------------------------------------------------
GAS DISTRIBUTION - 0.84%
Ferrellgas Partners, Sr. Notes, 9.375%, 06/15/06 525,000 536,156
- ------------------------------------------------------------------------------
HOTELS/MOTELS - 2.02%
ITT Corp., Gtd. Deb., 7.375%, 11/15/15 750,000 720,855
- ------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Gtd. First Mtg. Notes,
9.75%, 10/01/05 550,000 562,375
- ------------------------------------------------------------------------------
1,283,230
- ------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.12%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 75,000
- ------------------------------------------------------------------------------
LEISURE & RECREATION - 0.27%
Icon Health & Fitness, Sr. Sub. Notes, 13.00%,
07/15/02 150,000 170,437
- ------------------------------------------------------------------------------
MACHINERY (HEAVY) - 0.47%
Fairfield Manufacturing Co., Inc., Sr. Sub. Notes,
11.375%, 07/01/01 100,000 105,000
- ------------------------------------------------------------------------------
PrimeCo. Inc., Sr. Sub. Notes, 12.75%, 03/01/05 167,000 191,215
- ------------------------------------------------------------------------------
296,215
- ------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 1.02%
AM General Corp., Sr. Notes, 12.875%, 05/01/02 130,000 124,312
- ------------------------------------------------------------------------------
Interlake Corp., Sr. Notes, 12.00%, 11/15/01 200,000 215,250
- ------------------------------------------------------------------------------
MVE Inc., Sr. Notes, 12.50%, 02/15/02 190,000 202,588
- ------------------------------------------------------------------------------
Spinnaker Industries Inc., Sr. Sec. Notes, 10.75%,
10/15/06 (acquired 10/18/96; cost $100,000)(b) 100,000 104,250
- ------------------------------------------------------------------------------
646,400
- ------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.85%
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 80,000 87,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
MEDICAL INSTRUMENTS/PRODUCTS - (CONTINUED)
Dynacare Inc., Yankee Sr. Notes, 10.75%, 01/15/06 $ 170,000 $ 172,550
- -------------------------------------------------------------------------------
Graphic Controls Corp., Series A Sr. Sub. Notes,
12.00%, 09/15/05 150,000 166,875
- -------------------------------------------------------------------------------
IMED Corp., Sr. Sub. Notes, 9.75%, 12/01/06 (acquired
11/19/96; cost $110,000)(b) 110,000 112,338
- -------------------------------------------------------------------------------
538,763
- -------------------------------------------------------------------------------
METALS - 0.56%
Rio Algom Ltd., Yankee Deb., 7.05%, 11/01/05 370,000 359,736
- -------------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.70%
Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 450,000 445,554
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.33%
Abraxas Petroleum Corp., Sr. Notes, 11.50%, 11/01/04
(acquired 11/05/96-12/03/96; cost $160,900)(b) 160,000 171,600
- -------------------------------------------------------------------------------
Mariner Energy Corp., Sr. Sub. Notes, 10.50%, 08/01/06
(acquired 08/12/96-09/04/96: cost $170,538)(b) 170,000 181,050
- -------------------------------------------------------------------------------
Talisman Energy, Inc., Yankee Deb., 7.125%, 06/01/07 500,000 492,460
- -------------------------------------------------------------------------------
845,110
- -------------------------------------------------------------------------------
OIL & GAS (INTEGRATED) - 0.13%
Wainoco Oil Corp., Sr. Notes, 12.00%, 08/01/02 80,000 82,400
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.10%
Falcon Drilling Co., Inc., Series B Sr. Notes, 9.75%,
01/15/01 60,000 63,150
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.20%
RAPP International Finance, Gtd. Yankee Sec. Notes,
11.50%, 12/15/00 150,000 159,375
- -------------------------------------------------------------------------------
Repap New Brunswick, Sr. Yankee Second Priority Sec.
Notes, 10.625%, 04/15/05 170,000 178,500
- -------------------------------------------------------------------------------
Riverwood International Corp., Sr. Gtd. Sub. Notes,
10.875%, 04/01/08 210,000 195,300
- -------------------------------------------------------------------------------
Uniforet Inc., Sr. Yankee Gtd. Notes, 11.125%,
10/15/06 (acquired 10/07/96-12/18/96; cost
$114,550)(b) 115,000 107,525
- -------------------------------------------------------------------------------
United Stationer Supply, Sr. Sub. Notes, 12.75%,
05/01/05 110,000 122,650
- -------------------------------------------------------------------------------
763,350
- -------------------------------------------------------------------------------
POLLUTION CONTROL - 1.38%
WMX Technologies, Inc., Notes, 7.10%, 08/01/26 850,000 878,492
- -------------------------------------------------------------------------------
PUBLISHING - 1.46%
MDC Communications Corp., Sr. Sub. Yankee Notes,
10.50%, 12/01/06 80,000 82,700
- -------------------------------------------------------------------------------
News America Holdings, Inc., Sr. Gtd. Deb., 9.25%,
02/01/13 750,000 843,337
- -------------------------------------------------------------------------------
926,037
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-13
<PAGE> 82
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
RAILROADS - 0.28%
Johnstown America Industries, Inc., Sr. Sub. Notes,
11.75%, 08/15/05 $ 185,000 $ 178,525
- -------------------------------------------------------------------------------
REAL ESTATE - 1.20%
Finova Capital Corp., Notes, 7.40%, 05/06/06 750,000 765,428
- -------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.80%
Great Atlantic & Pacific Tea Co., Inc., Yankee Notes,
7.78%, 11/01/00
(acquired 10/18/95; cost $500,000)(b) 500,000 509,622
- -------------------------------------------------------------------------------
RETAIL (STORES) - 1.06%
Loehmann's Holdings, Inc., Sr. Notes, 11.875%,
05/15/03 200,000 217,500
- -------------------------------------------------------------------------------
Samsonite Corp., Sr. Sub. Notes, 11.125%, 07/15/05 150,000 169,687
- -------------------------------------------------------------------------------
Specialty Retailers Inc., Sr. Sub. Notes, 11.00%,
08/15/03 275,000 290,125
- -------------------------------------------------------------------------------
677,312
- -------------------------------------------------------------------------------
SCHOOLS - 0.27%
Herff Jones Inc., Sr. Sub. Notes, 11.00%, 08/15/05 50,000 54,063
- -------------------------------------------------------------------------------
Scholastic Brands Inc., Sr. Sub. Notes, 11.00%,
01/15/07
(acquired 12/10/96-12/12/96; cost $115,844)(b) 115,000 117,587
- -------------------------------------------------------------------------------
171,650
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 0.29%
Advanced Micro Devices, Inc., Sr. Notes, 11.00%,
08/01/03 170,000 185,300
- -------------------------------------------------------------------------------
STEEL - 0.65%
Gulf States Steel Corp., First Mtg. Notes, 13.50%,
04/15/03 230,000 219,650
- -------------------------------------------------------------------------------
GS Industries, Inc., Sr. Notes, 12.00%, 09/01/04 185,000 193,094
- -------------------------------------------------------------------------------
412,744
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.49%
Arch Communications Group, Inc., Sr. Disc. Notes,
10.875%, 03/15/08(d) 200,000 115,500
- -------------------------------------------------------------------------------
Bell Canada, Yankee Deb., 9.50%, 10/15/10 350,000 422,219
- -------------------------------------------------------------------------------
Clearnet Communications Inc., Sr. Yankee Disc. Notes,
14.75%, 12/15/05(d) 270,000 169,088
- -------------------------------------------------------------------------------
Colt Telecom Group PLC, Sr. Yankee Disc. Notes,
12.00%, 12/15/06(d) 180,000 107,325
- -------------------------------------------------------------------------------
Northern Telecom, Yankee Notes, 6.00%, 09/01/03 100,000 96,090
- -------------------------------------------------------------------------------
Omnipoint Corp., Series A Sr. Notes, 11.625%, 08/15/06
(acquired 11/21/96; cost $208,955)(b) 200,000 209,500
- -------------------------------------------------------------------------------
Paging Network, Inc., Sr. Sub. Notes, 10.00%, 10/15/08
(acquired 10/10/96-10/29/96; cost $99,700)(b) 100,000 101,625
- -------------------------------------------------------------------------------
PriCellular Wireless Corp., Sr. Notes, 10.75%,
11/01/04 (acquired 10/30/96; cost $70,000)(b) 70,000 73,238
- -------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Notes, 11.50%, 10/01/06 90,000 93,375
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS - (CONTINUED)
TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 $ 850,000 $ 833,374
- -------------------------------------------------------------------------------
2,221,334
- -------------------------------------------------------------------------------
TELEPHONE - 0.19%
PhoneTel Technologies, Inc., Sr. Notes, 12.00%,
12/15/06 120,000 124,500
- -------------------------------------------------------------------------------
TRANSPORTATION - 0.58%
Stena A.B., Yankee Sr. Notes, 10.50%, 12/15/05 230,000 249,550
- -------------------------------------------------------------------------------
Transportacion Maritima Mexicana S.A. de CV, Yankee
Sr. Notes, 10.00%, 11/15/06 120,000 121,800
- -------------------------------------------------------------------------------
371,350
- -------------------------------------------------------------------------------
TRUCKING - 0.48%
AmeriTruck Distribution Corp., Sr. Sub. Notes,
12.25%, 11/15/05 300,000 303,000
- -------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non-Convertible
Bonds & Notes 28,811,161
- -------------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES - 1.51%
AIRLINES - 0.88%
Continental Airlines, Inc., Conv. Sub. Notes,
6.75%, 04/15/06 (acquired 02/27/96; cost
$499,825)(b) 500,000 561,065
- -------------------------------------------------------------------------------
TRANSPORTATION - 0.63%
Laidlaw, Inc., Yankee Conv. Deb., 6.00%, 01/15/99
(acquired 08/19/96; cost $397,500)(b) 300,000 400,500
- -------------------------------------------------------------------------------
Total U.S. Dollar Denominated Convertible Bonds &
Notes 961,565
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-
CONVERTIBLE BONDS & NOTES(e) - 12.06%
CANADA - 5.81%
Bank of Montreal (Banking), Sub. Deb., 7.92%,
07/31/02 CAD 850,000 676,313
- -------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Services),
Deb., 11.00%, 10/31/00 450,000 385,160
- -------------------------------------------------------------------------------
NAV Canada (Transportation), Bonds, 7.40%, 06/01/27 1,000,000 724,312
- -------------------------------------------------------------------------------
Rogers Cablesystems (Cable Television), Sr. Sec.
Second Priority Deb., 9.65%, 01/15/14 250,000 175,272
- -------------------------------------------------------------------------------
Teleglobe Canada Inc. (Telecommunications), Deb.,
8.35%, 06/20/03 850,000 685,127
- -------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services)
Notes, 8.55%, 02/01/06 280,000 229,165
- -------------------------------------------------------------------------------
Series Q Deb., 10.625%, 10/20/09 500,000 468,378
- -------------------------------------------------------------------------------
Westcoast Energy Inc. (Electric Power), Deb.,
6.45%, 12/18/06 (acquired 12/03/96; cost
$369,585)(b) 500,000 356,167
- -------------------------------------------------------------------------------
3,699,894
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-14
<PAGE> 83
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
GERMANY - 3.88%
International Bank for Reconstruction &
Development (Supranational Organization),
Unsub. Global Bonds, 7.125%, 04/12/05 DEM 725,000 $ 511,135
- -------------------------------------------------------------------------------
LKB Global (Banking), Gtd. Notes, 6.00%,
01/25/06 3,000,000 1,954,445
- -------------------------------------------------------------------------------
2,465,580
- -------------------------------------------------------------------------------
ITALY - 2.37%
KFW International Finance Inc. (Finance -
Consumer Credit), Gtd. Notes, 11.625%,
11/27/98 ITL 1,800,000,000 1,291,740
- -------------------------------------------------------------------------------
Swedish Export Credit (Finance - Consumer
Credit), Unsub. Deb., 11.70%, 12/04/98 300,000,000 215,804
- -------------------------------------------------------------------------------
1,507,544
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-
Convertible Bonds & Notes 7,673,018
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
CONVERTIBLE BONDS & NOTES(e) - 4.35%
FRANCE - 0.51%
Societe Generale (Banking), Conv. Deb., 3.50%,
01/01/00 FRF 1,419,000 322,717
- -------------------------------------------------------------------------------
JAPAN - 2.58%
JUSCO Co. (Consumer Non-Durables), Conv. Deb.,
1.20%, 02/20/01 JPY 40,000,000 622,571
- -------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd.
(Electronic Components/ Miscellaneous), Conv.
Bonds, 1.30%, 03/29/02 50,000,000 511,614
- -------------------------------------------------------------------------------
Sony Corp. (Electronic
Components/Miscellaneous), Conv. Bonds, 1.40%,
09/30/03 6,000,000 72,533
- -------------------------------------------------------------------------------
Toyota Motor Corp. (Automobile -
Manufacturers), Conv. Bonds, 1.20%, 01/28/98 30,000,000 440,247
- -------------------------------------------------------------------------------
1,646 965
- -------------------------------------------------------------------------------
SWITZERLAND - 0.49%
Aderans Co. Ltd. (Cosmetics & Toiletries),
Conv. Deb., 0.875%, 08/31/98 CHF 400,000 310,049
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.77%
LASMO PLC (Oil Equipment & Supplies), Conv.
Bonds, 7.75%, 10/04/05 GBP 300,000 488,265
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes 2,767,996
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES(e) - 19.88%
AUSTRALIA - 1.94%
Australian Government, Gtd. Deb., 10.00%,
10/15/07 AUD 600,000 566,666
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNTS(a) VALUE
<S> <C> <C>
AUSTRALIA - (CONTINUED)
Treasury Corp. of Victoria, Local Government Gtd.
Deb., 12.00%, 09/22/01 AUD 700,000 $ 665,665
- -------------------------------------------------------------------------------
1,232,331
- -------------------------------------------------------------------------------
CANADA - 2.91%
British Columbia Municipal Finance Authority, Deb.,
7.75%, 12/01/05 CAD 500,000 395,823
- -------------------------------------------------------------------------------
Canada Government, Gtd. Deb., 7.00%, 12/01/06 1,000,000 763,529
- -------------------------------------------------------------------------------
Ontario (Province of), Sr. Notes, 8.00%, 03/11/03 750,000 603,155
- -------------------------------------------------------------------------------
Quebec (Province of), Deb., 9.375%, 01/16/23 100,000 87,746
- -------------------------------------------------------------------------------
1,850,253
- -------------------------------------------------------------------------------
DENMARK - 1.85%
Kingdom of Denmark, Gtd. Deb., 8.00%, 11/15/01 DKK 6,250,000 1,177,684
- -------------------------------------------------------------------------------
GERMANY - 3.81%
Bundesrepublik Deutschland,
Deb., 6.00%, 09/15/03 DEM 1,000,000 675,396
- -------------------------------------------------------------------------------
Deb., 6.75%, 07/15/04 1,500,000 1,046,529
- -------------------------------------------------------------------------------
Deb., 6.875%, 05/12/05 1,000,000 700,221
- -------------------------------------------------------------------------------
2,422,146
- -------------------------------------------------------------------------------
NEW ZEALAND - 1.76%
New Zealand Government,
Gtd. Deb., 10.00%, 07/15/97 NZD 800,000 573,129
- -------------------------------------------------------------------------------
Gtd. Deb., 8.00%, 02/15/01 750,000 547,724
- -------------------------------------------------------------------------------
1,120,853
- -------------------------------------------------------------------------------
SWEDEN - 3.02%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 1,070,030
- -------------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 852,373
- -------------------------------------------------------------------------------
1,922,403
- -------------------------------------------------------------------------------
UNITED KINGDOM - 4.59%
Ontario Province, Sr. Unsub. Deb., 6.875%, 09/15/00 GBP 465,000 771,580
- -------------------------------------------------------------------------------
United Kingdom Treasury Notes,
8.00%, 12/07/00 400,000 704,403
- -------------------------------------------------------------------------------
7.00%, 11/06/01 400,000 678,157
- -------------------------------------------------------------------------------
7.50%, 12/07/06 450,000 770,342
- -------------------------------------------------------------------------------
2,924,482
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Government Bonds
& Notes 12,650,152
- -------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 2.18% SHARES
ADVERTISING/BROADCASTING - 0.00%
Time Warner Inc. - Series M, $102.50 PIK Conv. Pfd. 1 840
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-15
<PAGE> 84
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRIC POWER - 0.75%
Citizens Utilities Co. - $2.50 Conv. Pfd. 10,000 $ 477,500
- -------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.43%
Conseco Inc. - $4.278 Conv. PRIDES 8,000 910,000
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks 1,388,340
- -------------------------------------------------------------------------------
WARRANTS - 0.03%
CABLE TELEVISION - 0.00%
Wireless One, Inc. - expiring 10/19/00(f) 420 420
- -------------------------------------------------------------------------------
GAMING - 0.00%
Boomtown, Inc. - expiring 11/01/98(f) (acquired
11/03/93; cost $150) 150 5
- -------------------------------------------------------------------------------
LEISURE & RECREATION - 0.01%
IHF Capital Inc. - expiring 11/14/99(f) 150 6,000
- -------------------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.01%
MVE Inc. - expiring 02/15/02(f) 190 5,700
- -------------------------------------------------------------------------------
STEEL - 0.00%
Gulf States Steel Inc. - expiring 04/15/03(f) 230 1,150
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.01%
Clearnet Communications Inc. - expiring 09/15/05(f) 891 5,346
- -------------------------------------------------------------------------------
Total Warrants 18,621
- -------------------------------------------------------------------------------
PRINCIPAL
U.S. TREASURY SECURITIES - 9.19% AMOUNTS(a)
Notes, 6.50%, 05/31/01 $5,000,000 5,059,400
- -------------------------------------------------------------------------------
Notes, 7.50%, 02/15/05 500,000 534,500
- -------------------------------------------------------------------------------
Notes, 6.75%, 08/15/26 250,000 252,008
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 5,845,908
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY - 0.96%
Tennessee Valley Authority, Bonds, 5.98%, 04/01/36 600,000 608,130
- -------------------------------------------------------------------------------
Total U.S. Government Agencies 608,130
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT(g) - 2.20%
Daiwa Securities America Inc., 6.25%, 01/02/97(h) 1,400,000 1,400,000
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.64% 62,124,891
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 2.36% 1,498,880
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $63,623,771
===============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (e).
(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 December 31, 1996 was
$4,238,396 which represented 6.77% 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. Interest rate represents coupon rate at which
the bond will accrue at a specified future date.
(e) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(f) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(g) 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.
(h) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
AUD -Australian Dollar Gtd. -Guaranteed
CAD -Canadian Dollar ITL -Italian Lire
CHF -Swiss Franc JPY -Japanese Yen
Conv. -Convertible Mtg. -Mortgage
Deb. -Debentures NZD -New Zealand Dollar
DEM -German Deutschemark PRIDES -Preferred Redemption
Disc. -Discounted Increase Dividend Equity
DKK -Danish Krone Security
FRF -French Franc Sec. -Secured
GBP -British Pound Sterling Sr. -Senior
Sub. -Subordinated Unsub. -Unsubordinated
AIM V.I. DIVERSIFIED INCOME FUND
FS-16
<PAGE> 85
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $60,088,932) $ 62,124,891
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $25,959) 25,922
- ----------------------------------------------------------------------
Cash 127,117
- ----------------------------------------------------------------------
Receivables for:
Forward currency contracts 86,617
- ----------------------------------------------------------------------
Capital stock sold 118,389
- ----------------------------------------------------------------------
Interest 1,187,485
- ----------------------------------------------------------------------
Investment for deferred compensation plan 11,615
- ----------------------------------------------------------------------
Organizational costs, net 3,857
- ----------------------------------------------------------------------
Other assets 6,761
- ----------------------------------------------------------------------
Total assets 63,692,654
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock purchased 54
- ----------------------------------------------------------------------
Deferred compensation plan 11,615
- ----------------------------------------------------------------------
Accrued advisory fees 31,724
- ----------------------------------------------------------------------
Accrued administrative service fees 4,296
- ----------------------------------------------------------------------
Accrued directors' fees 1,969
- ----------------------------------------------------------------------
Accrued operating expenses 19,225
- ----------------------------------------------------------------------
Total liabilities 68,883
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $ 63,623,771
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
======================================================================
Outstanding 6,161,471
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $ 10.33
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31,1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $4,006,506
- ------------------------------------------------------------------------------
Dividends 54,905
- ------------------------------------------------------------------------------
Total investment income 4,061,411
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 306,235
- ------------------------------------------------------------------------------
Custodian fees 34,350
- ------------------------------------------------------------------------------
Administrative services fees 49,500
- ------------------------------------------------------------------------------
Directors' fees and expenses 7,323
- ------------------------------------------------------------------------------
Organizational costs 2,892
- ------------------------------------------------------------------------------
Other 40,919
- ------------------------------------------------------------------------------
Total expenses 441,219
- ------------------------------------------------------------------------------
Net investment income 3,620,192
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS TRANSACTIONS:
Net realized gain from:
Investment securities 538,946
- ------------------------------------------------------------------------------
Foreign currency transactions 140,909
- ------------------------------------------------------------------------------
Forward currency contracts 287,349
- ------------------------------------------------------------------------------
967,204
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 625,984
- ------------------------------------------------------------------------------
Foreign currency transactions (2,338)
- ------------------------------------------------------------------------------
Forward currency contracts 61,572
- ------------------------------------------------------------------------------
685,218
- ------------------------------------------------------------------------------
Net gain on investment securities, foreign currency transactions
and forward currency contracts 1,652,422
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $5,272,614
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-17
<PAGE> 86
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,620,192 $ 2,460,409
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, and forward
currency contracts 967,204 675,894
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currency transactions, and
forward currency contracts 685,218 2,440,780
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 5,272,614 5,577,083
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,857,482) (2,879,611)
- ------------------------------------------------------------------------------
Net equalization credits 905,775 653,844
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 16,672,719 16,007,644
- ------------------------------------------------------------------------------
Net increase in net assets 18,993,626 19,358,960
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 44,630,145 25,271,185
- ------------------------------------------------------------------------------
End of period $63,623,771 $44,630,145
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $59,753,245 $43,080,526
- ------------------------------------------------------------------------------
Undistributed net investment income 1,655,895 987,410
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) on
investment securities, foreign currency
transactions and forward currency contracts 95,809 (871,395)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currency transactions and forward currency
contracts 2,118,822 1,433,604
- ------------------------------------------------------------------------------
$63,623,771 $44,630,145
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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-
AIM V.I. DIVERSIFIED INCOME FUND
FS-18
<PAGE> 87
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. 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. Short-term securities that mature in more than 60 days are valued at
current market quotations. 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. Forward Currency Contracts - A forward 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 forward 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.
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 market
discounts and 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.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $259,399, which expires, if
not previously utilized, through the year 2003. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
F. Equalization - The Fund follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the 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
undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares.
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, 1996, AIM was reimbursed $49,500 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, 1996, the Fund incurred legal fees of
$2,902 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 - 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,
1996 was $53,481,715 and $36,540,620, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,619,937
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (584,916)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,035,021
=========================================================================
</TABLE>
Cost of investments for tax purposes is $60,089,870.
AIM V.I. DIVERSIFIED INCOME FUND
FS-19
<PAGE> 88
NOTE 5 - OPEN FORWARD CURRENCY CONTRACTS
Outstanding contracts at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
SETTLEMENT CONTRACT TO CONTRACT TO APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- -------------- ----------- ----------- --------------
<S> <C> <C> <C> <C>
01/27/97 DEM 2,600,000 $ 1,729,874 $ 1,692,712 $37,162
01/30/97 CHF 285,000 227,545 213,603 13,942
02/03/97 JPY 38,000,000 346,399 328,140 18,259
02/19/97 DEM 2,400,000 1,556,824 1,564,733 (7,909)
03/05/97 JPY 80,000,000 714,286 690,848 23,438
03/10/97 CHF 100,000 77,435 75,238 2,197
03/12/97 NZD 800,000 556,040 566,767 (10,727)
03/17/97 JPY 36,000,000 321,142 310,887 10,255
----------- ----------- -------
$5,529,545 $5,442,928 $86,617
=========== =========== =======
</TABLE>
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during year ended December 31, 1996 and
eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 2,366,508 $ 22,865,918 1,807,566 $17,087,317
- ------------------------- ---------- ------------ --------- -----------
Issued as reinvestment of
distributions 377,444 3,857,482 293,522 2,823,374
- ------------------------- ---------- ------------ --------- -----------
Reacquired (1,044,208) (10,050,681) (409,796) (3,903,047)
- ------------------------- ---------- ------------ --------- -----------
1,699,744 $ 16,672,719 1,691,292 $16,007,644
========== ============ ========= ===========
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -----------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of
period $ 10.00 $ 9.12 $ 10.46 $ 10.00
- --------------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.73 0.69 0.76 0.54
- --------------------------------- ------- ------- ------- -------
Net gains (losses) on
securities (both realized and
unrealized) 0.28 0.94 (1.42) 0.29
- --------------------------------- ------- ------- ------- -------
Total from investment
operations 1.01 1.63 (0.66) 0.83
- --------------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net investment
income (0.68) (0.75) (0.68) (0.35)
- --------------------------------- ------- ------- ------- -------
Distributions from net realized
capital gains -- -- -- (0.02)
- --------------------------------- ------- ------- ------- -------
Total distributions (0.68) (0.75) (0.68) (0.37)
- --------------------------------- ------- ------- ------- -------
Net asset value, end of period $ 10.33 $ 10.00 $ 9.12 $ 10.46
- --------------------------------- ======= ======= ======= =======
Total return(a) 10.19% 18.11% (6.35)% 8.33%
- --------------------------------- ======= ======= ======= =======
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $63,624 $44,630 $25,271 $14,530
- --------------------------------- ======= ======= ======= =======
Ratio of expenses to average net
assets(c) 0.86%(b) 0.88%(e) 0.91% 1.05%(e)
- --------------------------------- ======= ======= ======= =======
Ratio of net investment income to
average net assets(d) 7.09%(b) 7.65%(e) 8.07% 6.78%(e)
- --------------------------------- ======= ======= ======= =======
Portfolio turnover rate 76% 72% 100% 57%
- --------------------------------- ======= ======= ======= =======
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $51,024,610.
(c) After waiver of advisory fee and expense reimbursement. Ratios of expenses
to average net assets prior to waiver of advisory fees and/or expense
reimbursements are 1.03% and 1.69% (annualized) for January 31, 1995 and
1994, respectively.
(d) After waiver of advisory fee and expense reimbursement. Ratios of net
investment income to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 7.95% and 6.14% (annualized) for January
31, 1995 and 1994, respectively.
(e) Annualized.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. DIVERSIFIED INCOME FUND
FS-20
<PAGE> 89
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,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and for the eleven
month period ended December 31, 1995 and the financial highlights for the year
then ended and for 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, 1996, 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. Global Utilities Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended and for 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GLOBAL UTILITIES FUND
FS-21
<PAGE> 90
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 50.61%
ADVERTISING/BROADCASTING - 0.30%
Univision Communications, Inc.(a) 1,100 $ 40,700
- ----------------------------------------------------------------------
COMPUTER MAINFRAMES - 0.20%
ViaSat, Inc.(a) 3,000 27,000
- ----------------------------------------------------------------------
COMPUTER NETWORKING - 0.78%
Ascend Communications, Inc.(a) 1,700 105,613
- ----------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.21%
U.S. Robotics Corp.(a) 400 28,800
- ----------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.38%
Puma Technology, Inc.(a) 1,900 32,775
- ----------------------------------------------------------------------
White Pine Software, Inc.(a) 2,700 19,575
- ----------------------------------------------------------------------
52,350
- ----------------------------------------------------------------------
ELECTRIC POWER - 18.24%
AES Corp.(a) 1,000 46,500
- ----------------------------------------------------------------------
Allegheny Power System, Inc. 7,800 236,925
- ----------------------------------------------------------------------
Carolina Power & Light Co. 3,900 142,350
- ----------------------------------------------------------------------
Destec Energy, Inc.(a) 2,900 45,312
- ----------------------------------------------------------------------
DQE, Inc. 6,200 179,800
- ----------------------------------------------------------------------
Edison International 3,300 65,588
- ----------------------------------------------------------------------
FPL Group, Inc. 5,300 243,800
- ----------------------------------------------------------------------
GPU, Inc. 6,000 201,751
- ----------------------------------------------------------------------
Houston Industries, Inc. 5,300 119,912
- ----------------------------------------------------------------------
Illinova Corp. 4,800 132,000
- ----------------------------------------------------------------------
NIPSCO Industries, Inc. 5,600 221,900
- ----------------------------------------------------------------------
Pinnacle West Capital Corp. 11,200 355,600
- ----------------------------------------------------------------------
Sierra Pacific Resources 2,500 71,875
- ----------------------------------------------------------------------
Southern Co. 10,300 233,038
- ----------------------------------------------------------------------
Texas Utilities Co. 4,400 179,300
- ----------------------------------------------------------------------
2,475,651
- ----------------------------------------------------------------------
ENERGY (ALTERNATE SOURCES) - 1.46%
Calenergy, Inc.(a) 2,100 70,613
- ----------------------------------------------------------------------
Teco Energy, Inc. 5,300 127,863
- ----------------------------------------------------------------------
198,476
- ----------------------------------------------------------------------
GAS DISTRIBUTION - 1.46%
KN Energy, Inc. 1,500 58,875
- ----------------------------------------------------------------------
Public Service Co. of Colorado 3,600 139,950
- ----------------------------------------------------------------------
198,825
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NATURAL GAS PIPELINE - 10.84%
Columbia Gas System, Inc. 1,700 $ 108,163
- ----------------------------------------------------------------------
El Paso Natural Gas Co. 7,800 393,900
- ----------------------------------------------------------------------
Enron Corp. 5,300 228,562
- ----------------------------------------------------------------------
PanEnergy Corp. 4,200 189,000
- ----------------------------------------------------------------------
Sonat, Inc. 4,600 236,900
- ----------------------------------------------------------------------
Williams Companies, Inc. (The) 8,400 315,000
- ----------------------------------------------------------------------
1,471,525
- ----------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.22%
TPC Corp.(a) 3,300 29,700
- ----------------------------------------------------------------------
REAL ESTATE - 0.52%
Cali Realty Corp. 2,300 71,012
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 2.24%
Crescent Real Estate Equities, Inc. 800 42,200
- ----------------------------------------------------------------------
Meditrust Corp. 1,300 52,000
- ----------------------------------------------------------------------
OMEGA Healthcare Investors, Inc. 1,700 56,525
- ----------------------------------------------------------------------
Patriot American Hospitality, Inc. 1,700 73,313
- ----------------------------------------------------------------------
Public Storage, Inc. 1,500 46,500
- ----------------------------------------------------------------------
Starwood Lodging Trust 600 33,075
- ----------------------------------------------------------------------
303,613
- ----------------------------------------------------------------------
TELECOMMUNICATIONS - 4.46%
ADC Telecommunications, Inc.(a) 3,100 96,488
- ----------------------------------------------------------------------
AT&T Corp. 1,500 65,250
- ----------------------------------------------------------------------
CellNet Data Systems Inc.(a) 2,300 33,638
- ----------------------------------------------------------------------
Frontier Corp. 4,000 90,500
- ----------------------------------------------------------------------
Lucent Technologies, Inc. 1,700 78,625
- ----------------------------------------------------------------------
McLeod, Inc. -- Class A(a) 2,100 53,550
- ----------------------------------------------------------------------
MFS Communications Company, Inc.(a) 62 3,379
- ----------------------------------------------------------------------
Superior Telecom Inc.(a) 2,500 50,937
- ----------------------------------------------------------------------
Teleport Communications Group Inc. - Class A(a) 1,300 39,650
- ----------------------------------------------------------------------
360 Communications Co.(a) 1,400 32,375
- ----------------------------------------------------------------------
WorldCom, Inc.(a) 2,338 60,934
- ----------------------------------------------------------------------
605,326
- ----------------------------------------------------------------------
TELEPHONE - 9.30%
Ameritech Corp. 3,900 236,437
- ----------------------------------------------------------------------
BellSouth Corp. 5,300 213,988
- ----------------------------------------------------------------------
Century Telephone Enterprises 3,700 114,238
- ----------------------------------------------------------------------
Cincinnati Bell, Inc. 6,500 400,562
- ----------------------------------------------------------------------
GTE Corp. 2,200 100,100
- ----------------------------------------------------------------------
SBC Communications, Inc. 3,800 196,650
- ----------------------------------------------------------------------
1,261,975
- ----------------------------------------------------------------------
Total Domestic Common Stocks 6,870,566
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-22
<PAGE> 91
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.78%
ADVERTISING/BROADCASTING - 0.43%
Time Warner Inc. - Series M, 10.25% Conv. PIK Pfd. 53 $ 57,516
- -------------------------------------------------------------------------------
ELECTRIC SERVICES - 0.42%
Citizens Utilities Co. - $2.50 Conv. Pfd. 1,200 57,300
- -------------------------------------------------------------------------------
GAS UTILITY - 0.57%
MCN Corp. - $2.01 Conv. Pfd. PRIDES 2,800 77,350
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.44%
Enron Corp. - $1.36 Conv. Pfd. 2,500 60,000
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.74%
MFS Communications Company, Inc. - $2.68 Conv. Pfd. 1,100 100,375
- -------------------------------------------------------------------------------
TELEPHONE - 0.18%
Salomon Inc. - $3.48 Conv. Pfd. 400 24,100
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 376,641
- -------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 22.35%
ARGENTINA - 0.66%
Central Costanera S.A. - Class B (Electric Services) 20,700 63,355
- -------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 1,000 25,875
- -------------------------------------------------------------------------------
89,230
- -------------------------------------------------------------------------------
AUSTRALIA - 0.14%
News Corp. Ltd. - $5.00 Conv. Pfd.(b)
(Advertising/Broadcasting) (Acquired 11/04/96; Cost
$20,000) 200 18,875
- -------------------------------------------------------------------------------
AUSTRIA - 0.15%
Oesterreichische Elektrizitaetswirtschafts A.G. - Class
A (Electric Services) 270 20,209
- -------------------------------------------------------------------------------
BRAZIL - 1.02%
Eletricidade de Sao Paulo S.A.(a) (Electric Services) 210 31,022
- -------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. Telebras - ADR
(Telecommunications) 1,400 107,100
- -------------------------------------------------------------------------------
138,122
- -------------------------------------------------------------------------------
CANADA - 1.30%
Manitoba Telephone System(a) (Telecommunications) 5,000 47,470
- -------------------------------------------------------------------------------
TELUS Corp. (Telecommunications) 4,300 62,492
- -------------------------------------------------------------------------------
Westcoast Energy, Inc. (Natural Gas Pipeline) 4,000 67,000
- -------------------------------------------------------------------------------
176,962
- -------------------------------------------------------------------------------
CHILE - 1.48%
Cia. de Telecomunicaciones de Chile S.A. - ADR
(Telecommunications) 1,000 101,125
- -------------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A. - ADR (Electric
Services) 1,400 21,700
- -------------------------------------------------------------------------------
Enersis S.A. - ADR (Electric Services) 2,800 77,700
- -------------------------------------------------------------------------------
200,525
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY - 0.98%
Deutsche Telekom - ADR(a) (Telephone) 3,500 $ 71,313
- -------------------------------------------------------------------------------
VEBA A.G. (Electric Services) 1,060 61,308
- -------------------------------------------------------------------------------
132,621
- -------------------------------------------------------------------------------
HONG KONG - 0.27%
Asia Satellite Telecommunications Holdings Ltd. - ADR(a)
(Telecommunications) 1,600 37,400
- -------------------------------------------------------------------------------
INDONESIA - 0.26%
PT Indosat - ADR (Telecommunications) 1,300 35,588
- -------------------------------------------------------------------------------
ISRAEL - 0.67%
ECI Telecommunications Ltd. Designs (Computer
Networking) 1,500 31,875
- -------------------------------------------------------------------------------
Tadiran Telecommunications Ltd. (Telecommunications) 1,900 42,513
- -------------------------------------------------------------------------------
TTI Team Telecom International Ltd.(a)
(Telecommunications) 2,600 16,250
- -------------------------------------------------------------------------------
90,638
- -------------------------------------------------------------------------------
ITALY - 0.71%
Telecom Italia Mobile S.p.A. (Telecommunications) 15,325 38,843
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 22,000 57,139
- -------------------------------------------------------------------------------
95,982
- -------------------------------------------------------------------------------
JAPAN - 0.28%
Nippon Telegraph & Telephone (Telecommunications) 5 37,907
- -------------------------------------------------------------------------------
NETHERLANDS - 0.35%
Royal PTT Nederland N.V. (Telephone) 270 10,306
- -------------------------------------------------------------------------------
Royal PTT Nederland N.V. - ADR (Telephone) 995 37,685
- -------------------------------------------------------------------------------
47,991
- -------------------------------------------------------------------------------
NEW ZEALAND - 1.43%
Telecom Corp. of New Zealand Ltd. - ADR
(Telecommunications) 2,400 194,400
- -------------------------------------------------------------------------------
PERU - 0.48%
Luz Del Sur S.A.(a) (Electric Services) 1,700 30,706
- -------------------------------------------------------------------------------
Telefonica del Peru S.A. - ADR(a) (Telecommunications) 1,800 33,975
- -------------------------------------------------------------------------------
64,681
- -------------------------------------------------------------------------------
PORTUGAL - 0.82%
Portugal Telecom S.A. - ADR (Telecommunications) 3,500 98,875
- -------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.(a)
(Telecommunications) 200 12,450
- -------------------------------------------------------------------------------
111,325
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-23
<PAGE> 92
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SOUTH KOREA - 0.36%
Korea Electric Power Corp. - ADR (Electric Services) 2,400 $ 49,200
- ----------------------------------------------------------------------------
SPAIN - 2.86%
Autopistas Concesionaria Espanola S.A. (Engineering &
Construction) 3,900 53,772
- ----------------------------------------------------------------------------
Empresa Nacional de Electricidad S.A. - ADR (Electric
Services) 1,100 77,000
- ----------------------------------------------------------------------------
Iberdrola S.A. (Electric Services) 10,900 154,485
- ----------------------------------------------------------------------------
Telefonica de Espana - ADR (Telecommunications) 1,500 103,875
- ----------------------------------------------------------------------------
389,132
- ----------------------------------------------------------------------------
SWEDEN - 0.49%
Telefonaktiebolaget LM Ericsson - ADR
(Telecommunications) 2,200 66,412
- ----------------------------------------------------------------------------
UNITED KINGDOM - 6.29%
British Sky Broadcasting Group PLC - ADR
(Advertising/Broadcasting) 500 26,250
- ----------------------------------------------------------------------------
Hyder PLC (Water Supply) 2,510 31,972
- ----------------------------------------------------------------------------
London Electricity PLC (Electric Services) 6,400 74,614
- ----------------------------------------------------------------------------
National Grid Group PLC (Electric Services) 4,734 15,856
- ----------------------------------------------------------------------------
National Power PLC (Electric Services) 11,950 100,112
- ----------------------------------------------------------------------------
National Power PLC - ADR (Electric Services) 900 30,487
- ----------------------------------------------------------------------------
Nynex CableComms Group - ADR(a) (Telecommunications) 2,100 38,062
- ----------------------------------------------------------------------------
PowerGen PLC (Electric Services) 9,050 88,996
- ----------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Services) 1,100 43,450
- ----------------------------------------------------------------------------
Scottish Power PLC (Electric Services) 9,750 58,964
- ----------------------------------------------------------------------------
Southern Electric PLC(a) (Electric Services) 3,416 46,584
- ----------------------------------------------------------------------------
United Utilities PLC (Water Supply) 8,925 94,953
- ----------------------------------------------------------------------------
Wessex Water PLC (Water Supply) 5,450 34,732
- ----------------------------------------------------------------------------
Yorkshire Electricity Group PLC (Electric Services) 6,500 89,643
- ----------------------------------------------------------------------------
Yorkshire Water PLC (Water Supply) 6,600 79,716
- ----------------------------------------------------------------------------
854,391
- ----------------------------------------------------------------------------
VENEZUELA - 1.35%
Cia. Anonima Nacional Telefonos de Venezuela(a)
(Telephone) - ADR 6,500 182,813
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 3,034,404
- ----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE BONDS - 0.93%
CABLE TELEVISION - 0.67%
International Cabletel Inc., Conv. Sub. Notes, 7.00%,
06/15/08 $ 100,000 91,750
- ----------------------------------------------------------------------------
SEMICONDUCTORS - 0.26%
Analog Devices, Conv. Sub. Notes, 3.50%, 12/01/00 25,000 34,922
- ----------------------------------------------------------------------------
Total Domestic Convertible Bonds 126,672
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS - 7.92%
ADVERTISING/BROADCASTING - 1.89%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 $ 104,000
- ------------------------------------------------------------------------------
Time Warner, Inc., Deb., 6.85%, 01/15/26 75,000 73,739
- ------------------------------------------------------------------------------
Time Warner, Inc., Notes, 8.18%, 08/15/07 75,000 78,195
- ------------------------------------------------------------------------------
255,934
- ------------------------------------------------------------------------------
ELECTRIC SERVICES - 1.97%
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 75,827
- ------------------------------------------------------------------------------
El Paso Electric Co., First Mortgage Bonds, 8.90%,
02/01/06 75,000 78,340
- ------------------------------------------------------------------------------
Indiana Michigan Power, Deb., 9.82%, 12/07/22 93,435 112,731
- ------------------------------------------------------------------------------
266,898
- ------------------------------------------------------------------------------
ENERGY (ALTERNATE SOURCES) - 1.37%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 80,625
- ------------------------------------------------------------------------------
California Energy Co., Disc. Notes, 10.25%, 01/15/04(c) 100,000 106,000
- ------------------------------------------------------------------------------
186,625
- ------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 0.61%
GMAC, Notes, 9.00%, 10/15/02 75,000 82,576
- ------------------------------------------------------------------------------
GAS DISTRIBUTION - 0.56%
Ferrellgas Partners, Sr. Notes, 9.375%, 06/15/06 75,000 76,594
- ------------------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.35%
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 47,538
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 1.17%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 159,025
- ------------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds 1,075,190
- ------------------------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS - 3.77%
CANADA - 3.77%(d)
Bell Canada (Telecommunications), Deb., 10.875%,
10/11/04 50,000 45,600
- ------------------------------------------------------------------------------
Bell Canada (Telecommunications), Deb.,
Series EW, 8.80%, 08/17/05 50,000 41,682
- ------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Services), Deb.,
11.00%, 10/31/00 100,000 85,591
- ------------------------------------------------------------------------------
Ontario Hydro (Electric Power), Global Bonds, 9.00%,
06/24/02 100,000 83,897
- ------------------------------------------------------------------------------
Teleglobe Canada, Inc. (Telecommunications), Deb.,
8.35%, 06/20/03 100,000 80,603
- ------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services), Series
MTN, 8.55%, 02/01/06 70,000 57,291
- ------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Services), Series Q
Deb., 10.625%, 10/20/09 125,000 117,094
- ------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds 511,758
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-24
<PAGE> 93
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES - 2.19%
U.S. TREASURY BONDS - 1.07%
7.625%, 02/15/25 $ 130,000 $ 144,397
- -------------------------------------------------------------------------
U.S. TREASURY NOTES - 1.12%
6.625%, 06/30/01 150,000 152,507
- -------------------------------------------------------------------------
Total U.S. Treasury Securities 296,904
- -------------------------------------------------------------------------
TOTAL INVESTMENTS (excluding
Repurchase Agreements) 12,292,135
- -------------------------------------------------------------------------
REPURCHASE AGREEMENT - 11.16%(e)
Daiwa Securities America Inc., 6.25%, 01/02/97(f) 1,515,191 1,515,191
- -------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 101.71% 13,807,326
- -------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.71%) (231,753)
- -------------------------------------------------------------------------
NET ASSETS - 100.00% $13,575,573
=========================================================================
</TABLE>
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
aggregate market value of these securities at 12/31/96, was $18,875 which
represented 0.14% of the Fund's net assets.
(c) Discounted bond at purchase. Interest rate shown represents coupon at
which bond will accrue at a specified future date.
(d) Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(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 agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR- American Depository Receipt
Conv.- Convertible
Deb.- Debentures
MTN- Medium Term Notes
Pfd.- Preferred
PIK- Payment in Kind
PRIDES- Preferred Redeemable Increased Dividend Equity Securities
Sr.- Senior
Sub.- Subordinated
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-25
<PAGE> 94
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at value (cost $11,963,690) $13,807,326
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $6,367) 6,395
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 7,484
- ---------------------------------------------------------------------
Investments sold 5,138
- ---------------------------------------------------------------------
Dividends and interest 64,319
- ---------------------------------------------------------------------
Investment for deferred compensation plan 8,768
- ---------------------------------------------------------------------
Other assets 34
- ---------------------------------------------------------------------
Total assets 13,899,464
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 283,820
- ---------------------------------------------------------------------
Capital stock reacquired 3,213
- ---------------------------------------------------------------------
Deferred compensation plan 8,768
- ---------------------------------------------------------------------
Accrued advisory fees 7,189
- ---------------------------------------------------------------------
Accrued directors' fees 1,551
- ---------------------------------------------------------------------
Accrued administrative services fees 4,596
- ---------------------------------------------------------------------
Accrued operating expenses 14,754
- ---------------------------------------------------------------------
Total liabilities 323,891
- ---------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $13,575,573
=====================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,081,455
=====================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $12.55
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $20,547 foreign withholding tax) $ 376,396
- ------------------------------------------------------------------------
Interest 181,549
- ------------------------------------------------------------------------
Total investment income 557,945
- ------------------------------------------------------------------------
EXPENSES:
Advisory fees 73,008
- ------------------------------------------------------------------------
Custodian fees 24,662
- ------------------------------------------------------------------------
Administrative services fees 47,729
- ------------------------------------------------------------------------
Directors' fees and expenses 6,181
- ------------------------------------------------------------------------
Professional fees 16,688
- ------------------------------------------------------------------------
Other 5,378
- ------------------------------------------------------------------------
Total expenses 173,646
- ------------------------------------------------------------------------
Less expenses assumed by advisor (15,954)
- ------------------------------------------------------------------------
Net expenses 157,692
- ------------------------------------------------------------------------
Net investment income 400,253
- ------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain from:
Investment securities 65,722
- ------------------------------------------------------------------------
Foreign currency transactions 2,007
- ------------------------------------------------------------------------
67,729
- ------------------------------------------------------------------------
Unrealized appreciation of:
Investment securities 880,191
- ------------------------------------------------------------------------
Foreign currencies 407
- ------------------------------------------------------------------------
880,598
- ------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 948,327
- ------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,348,580
========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-26
<PAGE> 95
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 400,253 $ 180,945
- -------------------------------------------------------------------------------
Net realized gain from investment securities and
foreign currency transactions 67,729 80,096
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currencies 880,598 929,383
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 1,348,580 1,190,424
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 4,317,451 4,441,375
- -------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (410,247) (186,096)
- -------------------------------------------------------------------------------
Distributions from net realized capital gains (74,178) (9,403)
- -------------------------------------------------------------------------------
Net increase in net assets 5,181,606 5,436,300
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 8,393,967 2,957,667
- -------------------------------------------------------------------------------
End of period $13,575,573 $8,393,967
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $11,740,457 $7,423,006
- -------------------------------------------------------------------------------
Undistributed net investment income (3,023) (769)
- -------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions (5,748) 8,441
- -------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 1,843,887 963,289
- -------------------------------------------------------------------------------
$13,575,573 $8,393,967
===============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. 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.
A. Security Valuations - Equity securities, including warrants, that are
listed on a national securities exchange or part of the NASDAQ National
Market System are valued at the last reported sales price or if there has
been no sale that day, at the mean between the closing bid and asked prices
on that day. 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. Debt
securities are valued on the basis of valuations furnished by a pricing
service, which determines valuations for normal, institutional-size trading
units of such securities using market information, transactions for
comparable securities and various relationships between securities which
are generally recognized by institutional traders. 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. Short-term
investments with remaining maturities of up to and including 60 days are
valued at amortized cost which approximates market value. Short-term
securities that mature in more than 60 days are valued at current market
AIM V.I. GLOBAL UTILITIES FUND
FS-27
<PAGE> 96
quotations. 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 authority of, the Board of Directors. 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. 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, 1996,
undistributed net investment income was increased by $7,740 and
undistributed net realized gains reduced by $7,740 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. 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.
E. Forward Currency Contracts - A forward 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 forward 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.
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. During the year
ended December 31, 1996, AIM waived advisory fees of $15,954.
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, 1996, AIM was reimbursed $47,729 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, 1996, the Fund incurred legal fees of
$2,978 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 - 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,
1996 was $8,584,434 and $4,925,603, respectively.
The amount of unrealized appreciation of investment securities, on a tax
basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $1,932,636
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (95,691)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $1,836,945
=========================================================================
</TABLE>
Cost of investments for tax purposes is $11,970,381.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 578,877 $6,900,184 535,828 $5,682,400
- -------------------------------------------------------------------------
Issued as reinvestment of
distributions 39,804 484,425 17,742 195,499
- -------------------------------------------------------------------------
Reacquired (258,571) (3,067,158) (134,462) (1,436,524)
- -------------------------------------------------------------------------
360,110 $4,317,451 419,108 $4,441,375
=========================================================================
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-28
<PAGE> 97
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a Fund share outstanding during
the year ended December 31,1996, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------
1996 1995 1995
------- ------ -----------
<S> <C> <C> <C>
Net asset value, beginning of period $11.64 $9.69 $10.00
- --------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.40 0.29 0.27
- --------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 0.99 1.98 (0.33)
- --------------------------------------------------------------------------------
Total from investment operations 1.39 2.27 (0.06)
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.41) (0.31) (0.25)
- --------------------------------------------------------------------------------
Distributions from capital gain (0.07) (0.01) --
- --------------------------------------------------------------------------------
Total distributions (0.48) (0.32) (0.25)
- --------------------------------------------------------------------------------
Net asset value, end of period $12.55 $11.64 $ 9.69
================================================================================
Total return(a) 12.07% 23.73% (0.56)%
================================================================================
Ratios/supplemental data:
Net assets, end of period (000s
omitted) $13,576 $8,394 $2,958
================================================================================
Ratio of expenses to average net
assets 1.40%(b)(c) 1.47%(c)(e) 1.31%(f)
================================================================================
Ratio of net investment income to
average net assets 3.56%(b)(d) 3.76%(d)(e) 4.39%(f)
================================================================================
Portfolio turnover rate 47% 58% 69%
================================================================================
Average broker commission rate(g) $0.0477 N/A N/A
================================================================================
</TABLE>
(a) Totals return are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $11,229,919.
(c) Ratios of expenses to average net assets prior to waiver of advisory fees
are 1.55% and 2.44% for 1996 and 1995, respectively.
(d) Ratios of net investment income to average net assets prior to waiver of
advisory fees are 3.42% and 2.79% for 1996 and 1995, respectively.
(e) Annualized.
(f) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and expense reimbursements are
2.80% and 2.90%, respectively.
(g) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GLOBAL UTILITIES FUND
FS-29
<PAGE> 98
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, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year 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, 1996, 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. Government Securities Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and the eleven month period ended December 31, 1995 and the
financial highlights for the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GOVERNMENT SECURITIES FUND
FS-30
<PAGE> 99
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCIES - 78.95%
FEDERAL FARM CREDIT BANK - 0.79%
Medium term note
5.96%, 07/14/03 $ 200,000 $ 193,872
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 7.73%
Debentures
8.375%, 10/25/99 150,000 158,858
- ------------------------------------------------------------------------------
6.00%, 06/27/00 250,000 248,680
- ------------------------------------------------------------------------------
7.31%, 07/06/01 500,000 520,070
- ------------------------------------------------------------------------------
7.57%, 08/19/04 500,000 529,010
- ------------------------------------------------------------------------------
8.17%, 12/16/04 400,000 438,620
- ------------------------------------------------------------------------------
1,895,238
- ------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. - 22.65%
Debentures
6.13%, 08/19/99 150,000 150,324
- ------------------------------------------------------------------------------
8.115%, 01/31/05 500,000 545,180
- ------------------------------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 930,460 898,698
- ------------------------------------------------------------------------------
6.50%, 12/01/08 to 07/01/23 510,500 495,129
- ------------------------------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 2,895,167 2,875,251
- ------------------------------------------------------------------------------
10.50%, 08/01/19 310,433 344,192
- ------------------------------------------------------------------------------
8.50%, 08/01/24 237,042 246,151
- ------------------------------------------------------------------------------
5,554,925
- ------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION - 35.23%
Debentures
7.55%, 04/22/02 400,000 419,744
- ------------------------------------------------------------------------------
8.50%, 02/01/05 500,000 526,270
- ------------------------------------------------------------------------------
Medium term notes
5.33%, 06/02/99 500,000 498,750
- ------------------------------------------------------------------------------
6.59%, 05/24/01 500,000 506,120
- ------------------------------------------------------------------------------
7.375%, 03/28/05 300,000 313,506
- ------------------------------------------------------------------------------
6.625%, 01/31/06 670,000 656,091
- ------------------------------------------------------------------------------
Pass through certificates
7.50%, 11/01/09 to 06/01/25 2,642,962 2,674,666
- ------------------------------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 631,508 616,591
- ------------------------------------------------------------------------------
7.00%, 07/01/11 to 09/01/25 1,439,529 1,429,747
- ------------------------------------------------------------------------------
8.25%, 04/01/22 606,259 626,151
- ------------------------------------------------------------------------------
8.50%, 09/01/24 359,306 372,891
- ------------------------------------------------------------------------------
8,640,527
- ------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - 3.95%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 96,780 104,967
- ------------------------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 239,711 255,594
- ------------------------------------------------------------------------------
11.00%, 10/15/15 51,360 57,395
- ------------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 62,183 69,158
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION - (CONTINUED)
6.50%, 12/15/23 $ 500,623 $ 480,753
- ------------------------------------------------------------------------------
967,867
- ------------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 1.27%
Debentures
7.30%, 01/31/02 300,000 311,034
- ------------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 3.25%
Debentures
5.34%, 02/22/99 500,000 499,445
- ------------------------------------------------------------------------------
5.55%, 12/15/99 150,000 147,860
- ------------------------------------------------------------------------------
6.50%, 08/01/02 150,000 150,327
- ------------------------------------------------------------------------------
797,632
- ------------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 4.08%
Debentures
6.375%, 06/15/05 500,000 494,755
- ------------------------------------------------------------------------------
5.98%, 04/01/36 500,000 506,775
- ------------------------------------------------------------------------------
1,001,530
- ------------------------------------------------------------------------------
Total U.S. Government Agencies 19,362,625
- ------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 15.43%
U.S. TREASURY NOTES & BONDS - 15.20%
6.25%, 05/31/00 to 08/31/00 1,200,000 1,205,958
- ------------------------------------------------------------------------------
6.375%, 08/15/02 1,000,000 1,006,590
- ------------------------------------------------------------------------------
6.50%, 10/15/06 500,000 502,965
- ------------------------------------------------------------------------------
6.875%, 08/15/25 500,000 509,755
- ------------------------------------------------------------------------------
6.75%, 08/15/26 500,000 504,015
- ------------------------------------------------------------------------------
3,729,283
- ------------------------------------------------------------------------------
U.S. TREASURY STRIPS - 0.23%
6.80%(a), 11/15/18 250,000 56,090
- ------------------------------------------------------------------------------
Total U.S. Treasury Securities 3,785,373
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 7.12%(b)
Daiwa Securities America, Inc., 6.25%, 01/02/97(c) 1,746,103 1,746,103
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.50% 24,894,101
- ------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.50%) (367,585)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $24,526,516
==============================================================================
</TABLE>
Notes to Schedule of Investments:
(a) U.S. Treasury 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 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 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-31
<PAGE> 100
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,885,471) $24,894,101
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 60,170
- ---------------------------------------------------------------------
Interest 265,368
- ---------------------------------------------------------------------
Investment for deferred compensation plan 11,447
- ---------------------------------------------------------------------
Organizational costs, net 3,870
- ---------------------------------------------------------------------
Other assets 6,103
- ---------------------------------------------------------------------
Total assets 25,241,059
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 676,507
- ---------------------------------------------------------------------
Deferred compensation 11,447
- ---------------------------------------------------------------------
Accrued advisory fees 10,422
- ---------------------------------------------------------------------
Accrued directors' fees 1,540
- ---------------------------------------------------------------------
Accrued administrative service fees 3,406
- ---------------------------------------------------------------------
Accrued operating expenses 11,221
- ---------------------------------------------------------------------
Total liabilities 714,543
- ---------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $24,526,516
=====================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 2,485,318
=====================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $9.87
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,443,467
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 107,471
- ----------------------------------------------------------------------------
Custodian fees 14,326
- ----------------------------------------------------------------------------
Administrative services fees 38,695
- ----------------------------------------------------------------------------
Directors' fees and expenses 6,373
- ----------------------------------------------------------------------------
Professional fees 17,682
- ----------------------------------------------------------------------------
Organizational costs 2,903
- ----------------------------------------------------------------------------
Other 9,163
- ----------------------------------------------------------------------------
Total expenses 196,613
- ----------------------------------------------------------------------------
Net investment income 1,246,854
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (33,180)
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (626,394)
- ----------------------------------------------------------------------------
Net gain (loss) on investment securities (659,574)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $ 587,280
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-32
<PAGE> 101
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,246,854 $ 821,240
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (33,180) (148,986)
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities (626,394) 1,343,577
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 587,280 2,015,831
- ----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,251,057) (852,380)
- ----------------------------------------------------------------------------
Net equalization credits 247,547 199,339
- ----------------------------------------------------------------------------
Net increase from capital stock transactions 5,397,355 5,295,385
- ----------------------------------------------------------------------------
Net increase in net assets 4,981,125 6,658,175
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period $19,545,391 $12,887,216
- ----------------------------------------------------------------------------
End of period 24,526,516 19,545,391
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $24,348,661 $18,951,306
- ----------------------------------------------------------------------------
Undistributed net investment income 653,121 409,777
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (483,896) (450,716)
- ----------------------------------------------------------------------------
Unrealized appreciation of investment securities 8,630 635,024
- ----------------------------------------------------------------------------
$24,526,516 $19,545,391
============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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.
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 $387,410, 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 follows the accounting practice known as
equalization by which a portion of the proceeds from sales and the costs of
repurchases of fund shares, equivalent on a per share basis to the amount
of undistributed net
AIM V.I. GOVERNMENT SECURITIES FUND
FS-33
<PAGE> 102
investment income, is credited or charged to undistributed net income when
the transaction is recorded so that undistributed net investment income per
share is unaffected by sales or redemptions of fund shares.
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, 1996, AIM was reimbursed $38,695 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, 1996, the Fund incurred legal fees of
$2,168 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,
1996 was $12,203,533 and $6,469,084, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 198,397
- -------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (189,767)
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities $ 8,630
===============================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 872,793 $8,373,957 693,583 $6,660,171
- ------------------------- -------- ---------- -------- ----------
Issued as reinvestment of
distributions 126,754 1,220,637 85,675 852,380
- ------------------------- -------- ---------- -------- ----------
Reacquired (435,586) (4,197,239) (229,935) (2,217,166)
- ------------------------- -------- ---------- -------- ----------
563,961 $5,397,355 549,323 $5,295,385
======== ========== ======== ==========
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 10.17 $ 9.39 $ 10.24 $ 10.00
- ---------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.58 0.54 0.53 0.38
- ---------------------------- ------- ------- ------- -------
Net gains (losses) on
securities (both realized
and unrealized) (0.35) 0.74 (0.88) 0.10
- ---------------------------- ------- ------- ------- -------
Total from investment
operations 0.23 1.28 (0.35) 0.48
- ---------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.53) (0.50) (0.50) (0.24)
- ---------------------------- ------- ------- ------- -------
Total distributions (0.53) (0.50) (0.50) (0.24)
- ---------------------------- ------- ------- ------- -------
Net asset value, end of
period $ 9.87 $ 10.17 $ 9.39 $ 10.24
- ---------------------------- ======= ======= ======= =======
Total return(a) 2.29% 13.84% (3.42)% 4.78%
- ---------------------------- ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $24,527 $19,545 $12,887 $10,643
- ---------------------------- ======= ======= ======= =======
Ratio of expenses to average
net assets 0.91%(b) 1.19%(c) 0.95%(d) 1.00%(c)(d)
- ---------------------------- ======= ======= ======= =======
Ratio of net investment
income to average net
assets 5.80%(b) 5.78%(c) 5.51%(e) 4.74%(c)(e)
- ---------------------------- ======= ======= ======= =======
Portfolio turnover rate 32% 41% 29% 0%
- ---------------------------- ======= ======= ======= =======
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $21,494,183.
(c) Annualized.
(d) Ratios of expenses to average net assets prior to waiver of advisory fees
and/or expense reimbursements are 1.10% and 1.80% (annualized) for
January, 1995 and 1994, respectively.
(e) Ratios of net investment income to average net assets prior to waiver of
advisory fees and/or expense reimbursements are 5.35% and 3.94%
(annualized) for January, 1995 and 1994, respectively.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-34
<PAGE> 103
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, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended and the eleven month period ended
December 31, 1995 and the financial highlights for the year 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, 1996, 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. Growth Fund, as of December 31, 1996, the results of its operations for
the year then ended, the changes in its net assets for the year then ended and
the eleven month period ended December 31, 1995 and the financial highlights
for the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GROWTH FUND
FS-35
<PAGE> 104
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 86.06%
ADVERTISING/BROADCASTING - 0.48%
Interpublic Group of Cos., Inc. 18,000 $ 855,000
- -----------------------------------------------------------------
AEROSPACE/DEFENSE - 0.77%
Gulfstream Aerospace Corp.(a) 27,000 654,750
- -----------------------------------------------------------------
United Technologies Corp. 11,000 726,000
- -----------------------------------------------------------------
1,380,750
- -----------------------------------------------------------------
AUTOMOBILE (MANUFACTURERS) - 0.46%
Chrysler Corp. 25,000 825,000
- -----------------------------------------------------------------
BANKING (MONEY CENTER) - 0.43%
Citicorp 7,500 772,500
- -----------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 0.37%
PepsiCo, Inc. 22,500 658,125
- -----------------------------------------------------------------
BIOTECHNOLOGY - 1.06%
AMGEN Inc.(a) 6,000 326,250
- -----------------------------------------------------------------
Biogen, Inc.(a) 20,000 775,000
- -----------------------------------------------------------------
Guidant Corp. 14,000 798,000
- -----------------------------------------------------------------
1,899,250
- -----------------------------------------------------------------
BUSINESS SERVICES - 2.92%
AccuStaff, Inc.(a) 78,600 1,660,425
- -----------------------------------------------------------------
Cognizant Corp.(a) 45,000 1,485,000
- -----------------------------------------------------------------
CUC International, Inc.(a) 16,500 391,875
- -----------------------------------------------------------------
Diebold, Inc. 11,700 735,638
- -----------------------------------------------------------------
Equifax, Inc. 23,200 710,500
- -----------------------------------------------------------------
Olsten Corp. 15,900 240,488
- -----------------------------------------------------------------
5,223,926
- -----------------------------------------------------------------
CHEMICALS - 0.25%
Monsanto Co. 11,700 454,838
- -----------------------------------------------------------------
COMPUTER MAINFRAMES - 0.85%
International Business Machines Corp. 10,000 1,510,000
- -----------------------------------------------------------------
COMPUTER MINI/PCS - 3.85%
Apple Computer, Inc.(a) 30,000 626,250
- -----------------------------------------------------------------
COMPAQ Computer Corp.(a) 18,000 1,336,500
- -----------------------------------------------------------------
Dell Computer Corp.(a) 24,200 1,285,625
- -----------------------------------------------------------------
Gateway 2000, Inc.(a) 29,700 1,590,806
- -----------------------------------------------------------------
Hewlett-Packard Co. 18,000 904,500
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 44,000 1,130,250
- -----------------------------------------------------------------
6,873,931
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
COMPUTER NETWORKING - 3.10%
Cabletron Systems, Inc.(a) 18,900 $ 628,425
- ------------------------------------------------------------------
Cascade Communications Corp.(a) 25,000 1,378,125
- ------------------------------------------------------------------
Cisco Systems, Inc.(a) 23,000 1,463,375
- ------------------------------------------------------------------
FORE Systems, Inc.(a) 18,000 591,750
- ------------------------------------------------------------------
3Com Corp.(a) 20,000 1,467,500
- ------------------------------------------------------------------
5,529,175
- ------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.90%
EMC Corp.(a) 21,000 695,625
- ------------------------------------------------------------------
Storage Technology Corp.(a) 19,300 919,163
- ------------------------------------------------------------------
1,614,788
- ------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 7.76%
BMC Software, Inc.(a) 31,000 1,282,625
- ------------------------------------------------------------------
Cadence Design Systems, Inc.(a) 27,700 1,101,075
- ------------------------------------------------------------------
Ceridian Corp.(a) 30,540 1,236,870
- ------------------------------------------------------------------
Computer Associates International, Inc. 21,900 1,089,525
- ------------------------------------------------------------------
CompuWare Corp.(a) 21,000 1,052,625
- ------------------------------------------------------------------
Electronic Arts, Inc.(a) 20,000 598,750
- ------------------------------------------------------------------
Electronic Data Systems Corp. 13,000 562,250
- ------------------------------------------------------------------
Fiserv, Inc.(a) 25,000 918,750
- ------------------------------------------------------------------
HBO & Co. 25,000 1,484,375
- ------------------------------------------------------------------
Microsoft Corp.(a) 8,500 702,313
- ------------------------------------------------------------------
Oracle Corp.(a) 12,750 532,312
- ------------------------------------------------------------------
Parametric Technology Co.(a) 8,700 446,963
- ------------------------------------------------------------------
Sterling Commerce, Inc.(a) 25,000 881,250
- ------------------------------------------------------------------
Synopsys, Inc.(a) 10,400 481,000
- ------------------------------------------------------------------
Wallace Computer Services, Inc. 43,000 1,483,500
- ------------------------------------------------------------------
13,854,183
- ------------------------------------------------------------------
CONGLOMERATES - 2.73%
Allied Signal Inc. 10,200 683,400
- ------------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 8,000 755,000
- ------------------------------------------------------------------
Loews Corp. 17,200 1,621,100
- ------------------------------------------------------------------
Tyco International Ltd. 26,800 1,417,050
- ------------------------------------------------------------------
U.S. Industries Inc.(a) 11,900 409,063
- ------------------------------------------------------------------
4,885,613
- ------------------------------------------------------------------
CONTAINERS - 0.28%
Sealed Air Corp.(a) 12,000 499,500
- ------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.84%
Warner-Lambert Co. 20,000 1,500,000
- ------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
FS-36
<PAGE> 105
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS - 1.89%
Checkpoint Systems, Inc.(a) 54,700 $ 1,353,825
- -------------------------------------------------------------------
Symbol Technologies, Inc.(a) 16,000 708,000
- -------------------------------------------------------------------
Thermo Instrument Systems, Inc.(a) 17,900 592,938
- -------------------------------------------------------------------
Waters Corp.(a) 23,500 713,813
- -------------------------------------------------------------------
3,368,576
- -------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 1.16%
Bear Stearns Cos., Inc. 9,900 275,962
- -------------------------------------------------------------------
Franklin Resources, Inc. 8,500 581,187
- -------------------------------------------------------------------
Schwab (Charles) Corp. 16,300 521,600
- -------------------------------------------------------------------
T. Rowe Price Associates 16,100 700,350
- -------------------------------------------------------------------
2,079,099
- -------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.27%
Federal Home Loan Mortgage Corp. 15,600 1,717,950
- -------------------------------------------------------------------
Federal National Mortgage Association 24,000 894,000
- -------------------------------------------------------------------
Finova Group, Inc. 6,500 417,625
- -------------------------------------------------------------------
Green Tree Financial Corp. 19,400 749,325
- -------------------------------------------------------------------
Household International, Inc. 5,500 507,375
- -------------------------------------------------------------------
Money Store, Inc. (The) 10,500 290,062
- -------------------------------------------------------------------
PMI Group, Inc. (The) 21,600 1,196,100
- -------------------------------------------------------------------
Student Loan Marketing Association 34,000 3,166,250
- -------------------------------------------------------------------
SunAmerica, Inc. 10,800 479,250
- -------------------------------------------------------------------
9,417,937
- -------------------------------------------------------------------
FINANCE (SAVINGS & LOAN) - 0.91%
Ahmanson (H.F.) & Co. 25,000 812,500
- -------------------------------------------------------------------
ContiFinancial Corp.(a) 4,800 173,400
- -------------------------------------------------------------------
Great Western Financial Corp. 22,000 638,000
- -------------------------------------------------------------------
1,623,900
- -------------------------------------------------------------------
FOOD/PROCESSING - 0.96%
ConAgra, Inc. 13,500 671,625
- -------------------------------------------------------------------
Dean Foods Co. 24,000 774,000
- -------------------------------------------------------------------
Lancaster Colony Corp. 5,966 274,436
- -------------------------------------------------------------------
1,720,061
- -------------------------------------------------------------------
FUNERAL SERVICES - 0.62%
Service Corp. International 39,800 1,114,400
- -------------------------------------------------------------------
GAMING - 1.02%
International Game Technology 100,000 1,825,000
- -------------------------------------------------------------------
HOME BUILDING - 0.08%
Champion Enterprises, Inc.(a) 7,200 140,400
- -------------------------------------------------------------------
HOTELS/MOTELS - 1.41%
HFS, Inc.(a) 12,500 746,875
- -------------------------------------------------------------------
Hilton Hotels Corp. 22,000 574,750
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HOTELS/MOTELS-(CONTINUED)
Host Marriott Corp.(a) 55,600 $ 889,600
- -------------------------------------------------------------------
Marriott International, Inc. 5,500 303,875
- -------------------------------------------------------------------
2,515,100
- -------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.24%
Conseco Inc. 33,500 2,135,625
- -------------------------------------------------------------------
Provident Companies, Inc. 1,600 77,400
- -------------------------------------------------------------------
2,213,025
- -------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 3.90%
Allstate Corp. 19,900 1,151,713
- -------------------------------------------------------------------
American International Group, Inc. 6,500 703,625
- -------------------------------------------------------------------
Chubb Corp. 9,800 526,750
- -------------------------------------------------------------------
CIGNA Corp. 6,500 888,062
- -------------------------------------------------------------------
Everest Re Holdings, Inc. 24,400 701,500
- -------------------------------------------------------------------
ITT Hartford Group, Inc. 7,000 472,500
- -------------------------------------------------------------------
MGIC Investment Corp. 9,400 714,400
- -------------------------------------------------------------------
Old Republic International Corp. 11,300 302,275
- -------------------------------------------------------------------
Travelers Group, Inc. 33,000 1,497,375
- -------------------------------------------------------------------
6,958,200
- -------------------------------------------------------------------
LEISURE & RECREATION - 0.85%
Carnival Corp. - Class A 22,000 726,000
- -------------------------------------------------------------------
Coleman Co., Inc.(a) 6,200 85,250
- -------------------------------------------------------------------
Harley-Davidson, Inc. 15,000 705,000
- -------------------------------------------------------------------
1,516,250
- -------------------------------------------------------------------
MACHINERY (HEAVY) - 0.42%
Caterpillar Inc. 10,000 752,500
- -------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.88%
Thermo Electron Corp.(a) 38,000 1,567,500
- -------------------------------------------------------------------
MEDICAL (DRUGS) - 5.94%
Abbott Laboratories 16,000 812,000
- -------------------------------------------------------------------
American Home Products Corp. 13,000 762,125
- -------------------------------------------------------------------
AmeriSource Health Corp.(a) 15,000 723,750
- -------------------------------------------------------------------
Bristol-Myers Squibb Co. 9,000 978,750
- -------------------------------------------------------------------
Cardinal Health, Inc. 9,000 524,250
- -------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 1,400 50,225
- -------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 29,000 569,125
- -------------------------------------------------------------------
Johnson & Johnson 23,200 1,154,200
- -------------------------------------------------------------------
Lilly (Eli) & Co. 7,900 576,700
- -------------------------------------------------------------------
Merck & Co., Inc. 12,000 951,000
- -------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 14,000 554,750
- -------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 19,500 1,523,438
- -------------------------------------------------------------------
Schering-Plough Corp. 9,700 628,075
- -------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 17,800 799,888
- -------------------------------------------------------------------
10,608,276
- -------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
FS-37
<PAGE> 106
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
MEDICAL (INSTRUMENTS/PRODUCTS) - 3.53%
Baxter International Inc. 15,700 $ 643,700
- -------------------------------------------------------------------
Becton, Dickinson & Co. 17,000 737,375
- -------------------------------------------------------------------
Boston Scientific Corp.(a) 8,770 526,200
- -------------------------------------------------------------------
Medtronic, Inc. 10,000 680,000
- -------------------------------------------------------------------
St. Jude Medical, Inc.(a) 37,000 1,577,125
- -------------------------------------------------------------------
Stryker Corp.(a) 25,000 746,875
- -------------------------------------------------------------------
Sybron International Corp.(a) 29,000 957,000
- -------------------------------------------------------------------
U.S. Surgical Corp. 11,100 437,062
- -------------------------------------------------------------------
6,305,337
- -------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.70%
Columbia\HCA Healthcare Corp. 27,000 1,100,250
- -------------------------------------------------------------------
Health Care & Retirement Corp.(a) 6,700 191,788
- -------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 35,500 1,371,188
- -------------------------------------------------------------------
MedPartners, Inc.(a) 57,880 1,215,480
- -------------------------------------------------------------------
Oxford Health Plans, Inc.(a) 8,500 497,781
- -------------------------------------------------------------------
Quorum Health Group, Inc.(a) 36,500 1,085,875
- -------------------------------------------------------------------
Tenet Healthcare Corp.(a) 33,000 721,875
- -------------------------------------------------------------------
United Healthcare Corp.(a) 9,400 423,000
- -------------------------------------------------------------------
6,607,237
- -------------------------------------------------------------------
NATURAL GAS PIPELINE - 0.37%
Columbia Gas System, Inc. 10,500 668,063
- -------------------------------------------------------------------
OFFICE AUTOMATION - 0.32%
Xerox Corp. 11,000 578,875
- -------------------------------------------------------------------
OFFICE PRODUCTS - 0.76%
Avery Dennison Corp. 10,000 353,750
- -------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 28,000 644,000
- -------------------------------------------------------------------
Reynolds & Reynolds Co. - Class A 14,000 364,000
- -------------------------------------------------------------------
1,361,750
- -------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.33%
Reading & Bates Corp.(a) 22,000 583,000
- -------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.03%
Transocean Offshore Inc. 900 56,362
- -------------------------------------------------------------------
OIL & GAS (SERVICES) - 0.67%
Halliburton Co. 6,000 361,500
- -------------------------------------------------------------------
Louisiana Land & Exploration Co. 10,100 541,613
- -------------------------------------------------------------------
NorAm Energy Corp. 19,300 296,738
- -------------------------------------------------------------------
1,199,851
- -------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 1.87%
Baker Hughes, Inc. 17,000 586,500
- -------------------------------------------------------------------
BJ Services Co.(a) 5,400 275,400
- -------------------------------------------------------------------
Cooper Cameron Corp.(a) 2,800 214,200
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES-(CONTINUED)
Dresser Industries, Inc. 12,500 $ 387,500
- -------------------------------------------------------------------
Rowan Companies, Inc.(a) 34,000 769,250
- -------------------------------------------------------------------
Schlumberger Ltd. 5,500 549,312
- -------------------------------------------------------------------
Tidewater, Inc. 12,500 565,625
- -------------------------------------------------------------------
3,347,787
- -------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.37%
Kimberly-Clark Corp. 7,000 666,750
- -------------------------------------------------------------------
PUBLISHING - 0.45%
New York Times Co. - Class A 17,000 646,000
- -------------------------------------------------------------------
Times Mirror Co. (The) - Class A 3,000 149,250
- -------------------------------------------------------------------
795,250
- -------------------------------------------------------------------
RESTAURANTS - 0.57%
Applebee's International, Inc. 37,000 1,017,500
- -------------------------------------------------------------------
RETAIL (FOOD & DRUGS) - 1.35%
American Stores Co. 17,000 694,875
- -------------------------------------------------------------------
Kroger Co. (The)(a) 3,700 172,050
- -------------------------------------------------------------------
Safeway, Inc.(a) 36,000 1,539,000
- -------------------------------------------------------------------
2,405,925
- -------------------------------------------------------------------
RETAIL (STORES) - 5.94%
Consolidated Stores Corp.(a) 25,000 803,125
- -------------------------------------------------------------------
Dayton Hudson Corp. 24,500 961,625
- -------------------------------------------------------------------
Gap, Inc. (The) 23,000 692,875
- -------------------------------------------------------------------
Home Depot, Inc. 17,000 852,125
- -------------------------------------------------------------------
Lowe's Companies, Inc. 35,000 1,242,500
- -------------------------------------------------------------------
Micro Warehouse, Inc.(a) 1,100 12,925
- -------------------------------------------------------------------
Pep Boys - Manny, Moe & Jack 72,800 2,238,600
- -------------------------------------------------------------------
Staples, Inc.(a) 52,075 940,605
- -------------------------------------------------------------------
Sysco Corp. 21,000 685,125
- -------------------------------------------------------------------
Tech Data Corp.(a) 1,300 35,587
- -------------------------------------------------------------------
Toys "R" Us, Inc.(a) 42,000 1,260,000
- -------------------------------------------------------------------
U.S. Office Products Co. (a) 25,000 853,125
- -------------------------------------------------------------------
Viking Office Products, Inc.(a) 1,400 37,362
- -------------------------------------------------------------------
10,615,579
- -------------------------------------------------------------------
SEMICONDUCTORS - 3.65%
Advanced Micro Devices, Inc.(a) 7,000 180,250
- -------------------------------------------------------------------
Altera Corp.(a) 12,000 872,250
- -------------------------------------------------------------------
Applied Materials, Inc.(a) 38,000 1,365,625
- -------------------------------------------------------------------
Intel Corp. 11,500 1,505,781
- -------------------------------------------------------------------
KLA Instruments Corp.(a) 20,000 710,000
- -------------------------------------------------------------------
Micron Technology, Inc. 20,000 582,500
- -------------------------------------------------------------------
National Semiconductor Corp.(a) 27,000 658,125
- -------------------------------------------------------------------
Texas Instruments, Inc. 10,000 637,500
- -------------------------------------------------------------------
6,512,031
- -------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
FS-38
<PAGE> 107
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
SHOES & RELATED APPAREL - 0.39%
Nike, Inc. - Class B 11,700 $ 699,075
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 3.81%
ADC Telecommunications, Inc.(a) 30,600 952,425
- -----------------------------------------------------------------------------
Andrew Corp.(a) 12,000 636,750
- -----------------------------------------------------------------------------
Frontier Corp. 12,000 271,500
- -----------------------------------------------------------------------------
Lucent Technologies, Inc. 20,000 925,000
- -----------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 14,000 763,000
- -----------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 16,000 487,000
- -----------------------------------------------------------------------------
Tellabs, Inc.(a) 34,000 1,279,250
- -----------------------------------------------------------------------------
360 Communications Co.(a) 27,500 635,937
- -----------------------------------------------------------------------------
WorldCom, Inc.(a) 33,000 860,062
- -----------------------------------------------------------------------------
6,810,924
- -----------------------------------------------------------------------------
TELEPHONE - 0.38%
Cincinnati Bell, Inc. 11,000 677,875
- -----------------------------------------------------------------------------
TEXTILES - 0.71%
Fruit of The Loom, Inc. - Class A(a) 20,000 757,500
- -----------------------------------------------------------------------------
Liz Claiborne, Inc. 13,000 502,125
- -----------------------------------------------------------------------------
1,259,625
- -----------------------------------------------------------------------------
TOBACCO - 3.26%
Philip Morris Companies, Inc. 18,000 2,027,250
- -----------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 45,000 1,530,000
- -----------------------------------------------------------------------------
Universal Corp. 25,000 803,125
- -----------------------------------------------------------------------------
UST, Inc. 45,000 1,456,875
- -----------------------------------------------------------------------------
5,817,250
- -----------------------------------------------------------------------------
Total Domestic Common Stocks 153,742,849
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE BONDS - 1.74%
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.80%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(b) (Acquired 10/31/96 - 12/06/96; Cost
$1,564,664) $1,223,000 1,428,305
- -----------------------------------------------------------------------------
RESTAURANTS - 0.44%
Boston Chicken, Inc., Conv. Liquid Yield Option
Notes, 8.00%, 06/01/15(c) 2,436,000 774,745
- -----------------------------------------------------------------------------
SEMICONDUCTORS - 0.50%
Cypress Semiconductor Corp., Conv. Sub. Notes,
3.15%, 03/15/01 800,000 899,712
- -----------------------------------------------------------------------------
Total Domestic Convertible Corporate Bonds 3,102,762
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 7.25%
CANADA - 1.06%
Canadian Pacific, Ltd. (Transportation -
Miscellaneous) 21,000 $ 556,500
- ----------------------------------------------------------------------------
Newbridge Networks Corp. (Computer Networking) (a) 21,000 593,250
- ----------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 12,000 742,500
- ----------------------------------------------------------------------------
1,892,250
- ----------------------------------------------------------------------------
FINLAND - 0.74%
Nokia Oy A.B. - Class A (Telecommunications) 7,350 426,620
- ----------------------------------------------------------------------------
Nokia Oy A.B. - Class A - ADR (Telecommunications) 15,650 901,830
- ----------------------------------------------------------------------------
1,328,450
- ----------------------------------------------------------------------------
FRANCE - 0.26%
Roussel-Uclaf (Medical - Drugs) 1,600 470,888
- ----------------------------------------------------------------------------
IRELAND - 0.33%
Elan Corp. PLC-ADR (Medical - Drugs)(a) 17,500 581,875
- ----------------------------------------------------------------------------
ISRAEL - 0.65%
ECI Telecommunications Ltd. Designs (Computer
Networking) 14,100 299,625
- ----------------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd.-ADR (Medical -
Drugs) 17,100 859,275
- ----------------------------------------------------------------------------
1,158,900
- ----------------------------------------------------------------------------
ITALY - 0.32%
Fila Holding S.p.A.-ADR (Retail - Stores) 10,000 581,250
- ----------------------------------------------------------------------------
JAPAN - 1.29%
Canon, Inc. (Office Automation) 29,000 641,050
- ----------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 15,000 428,719
- ----------------------------------------------------------------------------
Sony Corp. (Electronic Components/Miscellaneous) 9,000 589,845
- ----------------------------------------------------------------------------
TDK Corp. (Electronic Components/Miscellaneous) 10,000 651,930
- ----------------------------------------------------------------------------
2,311,544
- ----------------------------------------------------------------------------
NETHERLANDS - 0.72%
Gucci Group N.V.-ADR (Textiles) 8,000 511,000
- ----------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil & Gas - Services) 4,500 768,375
- ----------------------------------------------------------------------------
1,279,375
- ----------------------------------------------------------------------------
SWEDEN - 0.78%
Telefonaktiebolaget LM Ericsson-ADR
(Telecommunications) 46,000 1,388,625
- ----------------------------------------------------------------------------
UNITED KINGDOM - 1.10%
Danka Business Systems PLC-ADR (Office Automation) 17,000 601,375
- ----------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Medical - Drugs) 20,000 1,360,000
- ----------------------------------------------------------------------------
1,961,375
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 12,954,532
- ----------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
FS-39
<PAGE> 108
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT MARKET
VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.33%
SWITZERLAND - 0.33%
Sandoz Capital BVI Ltd., Sr. Conv. Deb., 2.00%,
10/06/02(b) (Acquired 11/04/96 - 11/08/96; Cost
$612,612) $ 550,000 $ 591,250
- --------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 3.51%
U.S. Treasury Bills - 3.51%(d)
4.72%, 02/06/97 250,000 248,865
- --------------------------------------------------------------------------
4.84%, 02/06/97 140,000 139,364
- --------------------------------------------------------------------------
4.945%, 03/27/97(e) 5,941,000 5,873,629
- --------------------------------------------------------------------------
Total U.S. Treasury Securities 6,261,858
- --------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.03%(f)
Daiwa Securities America, Inc., 6.25%, 01/02/97(g) 1,834,472 1,834,472
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.92% 178,487,723
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.08% 150,169
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $178,637,892
==========================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depository Receipt
Conv.- Convertible
Deb. - Debentures
Sr. - Senior
Sub. - Subordinated
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 procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1996 was
$2,019,555 which represented 1.13% of the Fund's net assets.
(c) Zero coupon bond. The interest rate represents the rate of original issue
discount.
(d) 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.
(e) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
(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 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.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
See Notes to Financial Statements.
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $154,626,844) $178,487,723
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 423,787
- ----------------------------------------------------------------------
Investments sold 1,210,059
- ----------------------------------------------------------------------
Dividends and interest 162,853
- ----------------------------------------------------------------------
Organizational costs, net 4,260
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,007
- ----------------------------------------------------------------------
Other assets 195
- ----------------------------------------------------------------------
Total assets 180,300,884
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,079,108
- ----------------------------------------------------------------------
Deferred compensation plan 12,007
- ----------------------------------------------------------------------
Options written 307,025
- ----------------------------------------------------------------------
Variation margin 124,100
- ----------------------------------------------------------------------
Accrued advisory fees 98,239
- ----------------------------------------------------------------------
Accrued directors' fees 1,767
- ----------------------------------------------------------------------
Accrued administrative services fees 3,586
- ----------------------------------------------------------------------
Accrued operating expenses 37,160
- ----------------------------------------------------------------------
Total liabilities 1,662,992
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $178,637,892
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 10,990,000
- ----------------------------------------------------------------------
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $16.25
======================================================================
</TABLE>
AIM V.I. GROWTH FUND
FS-40
<PAGE> 109
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $12,190 foreign withholding tax) $ 1,366,576
- -----------------------------------------------------------------------------
Interest 851,189
- -----------------------------------------------------------------------------
Total investment income 2,217,765
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 916,484
- -----------------------------------------------------------------------------
Custodian fees 84,078
- -----------------------------------------------------------------------------
Administrative services fees 39,552
- -----------------------------------------------------------------------------
Directors' fees and expenses 6,833
- -----------------------------------------------------------------------------
Organizational costs 2,892
- -----------------------------------------------------------------------------
Other 54,154
- -----------------------------------------------------------------------------
Total expenses 1,103,993
- -----------------------------------------------------------------------------
Net investment income 1,113,772
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
NET REALIZED GAIN FROM:
Investment securities 6,639,709
- -----------------------------------------------------------------------------
Foreign currency transactions 10,228
- -----------------------------------------------------------------------------
Futures contracts 1,680,864
- -----------------------------------------------------------------------------
Options contracts 31,908
- -----------------------------------------------------------------------------
8,362,709
- -----------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 13,734,605
- -----------------------------------------------------------------------------
Foreign currencies (4,595)
- -----------------------------------------------------------------------------
Futures contracts (70,532)
- -----------------------------------------------------------------------------
Options contracts 35,948
- -----------------------------------------------------------------------------
13,695,426
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and options contracts 22,058,135
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $23,171,907
=============================================================================
</TABLE>
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,113,772 $ 637,435
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, futures and
options contracts 8,362,709 9,511,105
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 13,695,426 8,357,905
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 23,171,907 18,506,445
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (662,515) (48,608)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (7,442,940) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 60,971,328 38,645,259
- ------------------------------------------------------------------------------
Net increase in net assets 76,037,780 57,103,096
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 102,600,112 45,497,016
- ------------------------------------------------------------------------------
End of period $178,637,892 $102,600,112
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $145,591,115 $ 84,619,787
- ------------------------------------------------------------------------------
Undistributed net investment income 1,090,173 628,628
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currency transactions,
futures and options contracts 7,976,691 7,067,210
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options
contracts 23,979,913 10,284,487
- ------------------------------------------------------------------------------
$178,637,892 $102,600,112
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-41
<PAGE> 110
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. 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.
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. 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 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. If no mean is available, as is the case in
some foreign market, the closing bid will be used absent a last sales
price. Short-term investments with remaining maturities of up to and
including 60 days are valued at amortized cost which approximates market
value. Short-term securities that mature in more than 60 days are valued at
current market quotations. 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.
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. 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, 1996,
undistributed net investment income was increased by $10,288 and
undistributed net realized gains reduced by $10,288 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. 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 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
AIM V.I. GROWTH FUND
FS-42
<PAGE> 111
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. 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 forward 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 forward 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 forward 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.
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, 1996, AIM was reimbursed $39,552 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, 1996, the Fund incurred legal fees of
$3,079 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 - 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,
1996 was $246,780,569 and $180,020,101, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $26,960,222
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,471,926)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $23,488,296
==========================================================================
</TABLE>
Cost of investments for tax purposes is $154,999,427.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold 3,676,649 $57,637,947 3,110,541 $41,750,413
- --------------------------------------------------------------------------
Issued as reinvestment of
distributions 511,063 8,105,455 3,426 48,608
- --------------------------------------------------------------------------
Reacquired (304,826) (4,772,074) (255,480) (3,153,762)
- --------------------------------------------------------------------------
3,882,886 $60,971,328 2,858,487 $38,645,259
==========================================================================
</TABLE>
NOTE 6 - OPEN COVERED CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period -- --
- -------------------------------------------
Written 4,081 $ 1,730,497
- -------------------------------------------
Exercised (380) (105,055)
- -------------------------------------------
Expired (184) (47,712)
- -------------------------------------------
Closed (2,897) (1,234,757)
- -------------------------------------------
End of period 620 $ 342,973
===========================================
</TABLE>
AIM V.I. GROWTH FUND
FS-43
<PAGE> 112
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1996 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- ----------------------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. January 50 52 $ 37,959 $ 53,625 $(15,666)
Cascade Communications
Corp. January 65 110 60,355 7,562 52,793
Cascade Communications
Corp. January 80 140 78,187 1,750 76,437
Federal Home Loan
Mortgage Association January 90 68 54,976 139,400 (84,424)
HBO & Co. February 60 250 111,496 104,688 6,808
--- -------- -------- --------
620 $342,973 $307,025 $35,948
- ---------------------------------------------------------------------------------------
</TABLE>
NOTE 7 - FUTURES CONTRACTS
On December 31, 1996, $255,000 par value U.S. Treasury bills were pledged as
collateral to cover margin requirements for futures contracts.
Futures contracts outstanding at December 31, 1996:
<TABLE>
<CAPTION>
NO. OF UNREALIZED
CONTRACT CONTRACTS MONTH COMMITMENT APPRECIATION
<S> <C> <C> <C> <C>
S&P 500 Index 17 contracts Mar 97 Buy $83,436
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- -----------------
1996 1995 1995 1994
-------- -------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 14.44 $ 10.71 $ 11.59 $ 10.00
- ---------------------------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.07 0.09 0.06 0.02
- ---------------------------- -------- -------- ------- -------
Net gains (losses) on
securities (both realized
and unrealized) 2.52 3.65 (0.88) 1.59
- ---------------------------- -------- -------- ------- -------
Total from investment
operations 2.59 3.74 (0.82) 1.61
- ---------------------------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income (0.06) (0.01) (0.06) (0.02)
- ---------------------------- -------- -------- ------- -------
Distributions from capital
gains (0.72) -- -- --
- ---------------------------- -------- -------- ------- -------
Total distributions (0.78) (0.01) (0.06) (0.02)
- ---------------------------- -------- -------- ------- -------
Net asset value, end of
period $ 16.25 $ 14.44 $ 10.71 $ 11.59
============================ ======== ======== ======= =======
Total return(a) 18.09% 34.89% (7.11)% 16.07%
============================ ======== ======== ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $178,638 $102,600 $45,497 $25,115
============================ ======== ======== ======= =======
Ratio of expenses to average
net assets 0.78%(b) 0.84%(c) 0.95% 0.85%(c)(d)
============================ ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.79%(b) 0.95%(c) 0.71% 0.51%(c)(d)
============================ ======== ======== ======= =======
Portfolio turnover rate 143% 125% 179% 99%
============================ ======== ======== ======= =======
Average broker commission
rate(e) $ 0.0629 N/A N/A N/A
============================ ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $140,923,834.
(c)Annualized.
(d) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 1.50% and (0.14)%,
respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 9 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and INVESCO
plc announced the execution of an agreement and plan of merger pursuant to
which AIM Management will be merged with and into a direct wholly-owned
subsidiary of INVESCO plc. AIM Management is the parent company of the Fund's
advisor. The merger is expected to take place during the first quarter of 1997.
AIM V.I. GROWTH FUND
FS-44
<PAGE> 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. 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,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and for the eleven
month period ended December 31, 1995 and the financial highlights for the year
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, 1996, 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. Growth and Income Fund, as of December 31, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, for 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. GROWTH AND INCOME FUND
FS-45
<PAGE> 114
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 76.90%
ADVERTISING/BROADCASTING - 0.45%
Eagle River Interactive, Inc.(a) 25,000 $ 196,875
- --------------------------------------------------------------------
True North Communications, Inc. 34,000 743,750
- --------------------------------------------------------------------
940,625
- --------------------------------------------------------------------
AEROSPACE/DEFENSE - 0.74%
Rockwell International Corp.(a) 12,500 760,937
- --------------------------------------------------------------------
United Technologies Corp. 12,000 792,000
- --------------------------------------------------------------------
1,552,937
- --------------------------------------------------------------------
APPLIANCES - 0.47%
Sunbeam Corp., Inc. 38,000 978,500
- --------------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.21%
Lear Corp.(a) 13,000 443,625
- --------------------------------------------------------------------
BANKING - 0.50%
Marshall & Ilsley Corp. 30,000 1,038,750
- --------------------------------------------------------------------
BANKING (MONEY CENTER) - 1.20%
BankAmerica Corp. 9,000 897,750
- --------------------------------------------------------------------
Chase Manhattan Corp. 18,000 1,606,500
- --------------------------------------------------------------------
2,504,250
- --------------------------------------------------------------------
BUSINESS SERVICES - 2.75%
AccuStaff, Inc.(a) 33,000 697,125
- --------------------------------------------------------------------
Cognizant Corp.(a) 28,000 924,000
- --------------------------------------------------------------------
CUC International, Inc.(a) 25,000 593,750
- --------------------------------------------------------------------
Diebold, Inc. 28,000 1,760,500
- --------------------------------------------------------------------
Equifax, Inc. 46,000 1,408,750
- --------------------------------------------------------------------
Sensormatic Electronics Corp. 22,000 368,500
- --------------------------------------------------------------------
5,752,625
- --------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.52%
IMC Global, Inc. 28,000 1,095,500
- --------------------------------------------------------------------
COMPUTER MINI/PCS - 2.38%
Gateway 2000, Inc.(a) 13,000 696,313
- --------------------------------------------------------------------
Hewlett-Packard Co. 65,000 3,266,250
- --------------------------------------------------------------------
Sun Microsystems, Inc.(a) 40,000 1,027,500
- --------------------------------------------------------------------
4,990,063
- --------------------------------------------------------------------
COMPUTER NETWORKING - 2.71%
Ascend Communications, Inc.(a) 20,000 1,242,500
- --------------------------------------------------------------------
Cascade Communications Corp.(a) 26,000 1,433,250
- --------------------------------------------------------------------
Cisco Systems, Inc.(a) 24,000 1,527,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTER NETWORKING - (CONTINUED)
Comverse Technology, Inc.(a) 15,000 $ 567,187
- --------------------------------------------------------------------
ECI Telecommunications Ltd. Designs (Israel) 42,000 892,500
- --------------------------------------------------------------------
5,662,437
- --------------------------------------------------------------------
COMPUTER PERIPHERALS - 0.96%
U.S. Robotics Corp.(a) 28,000 2,016,000
- --------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 6.86%
Cadence Design Systems, Inc.(a) 18,000 715,500
- --------------------------------------------------------------------
Ceridian Corp.(a) 54,000 2,187,000
- --------------------------------------------------------------------
Computer Associates International, Inc. 16,900 840,775
- --------------------------------------------------------------------
CompuWare Corp.(a) 23,000 1,152,875
- --------------------------------------------------------------------
Electronic Data Systems Corp. 24,000 1,038,000
- --------------------------------------------------------------------
Farallon Communications(a) 7,500 47,813
- --------------------------------------------------------------------
Fiserv, Inc.(a) 21,000 771,750
- --------------------------------------------------------------------
HBO & Co. 12,000 712,500
- --------------------------------------------------------------------
Learning Company, Inc. (The) (a) 40,000 575,000
- --------------------------------------------------------------------
Microsoft Corp.(a) 12,000 991,500
- --------------------------------------------------------------------
National Data Corp. 12,600 548,100
- --------------------------------------------------------------------
Oracle Corp.(a) 12,000 501,000
- --------------------------------------------------------------------
Sterling Commerce, Inc.(a) 60,000 2,115,000
- --------------------------------------------------------------------
Wallace Computer Services, Inc. 62,500 2,156,250
- --------------------------------------------------------------------
14,353,063
- --------------------------------------------------------------------
CONGLOMERATES - 2.02%
Allied-Signal Inc. 14,000 938,000
- --------------------------------------------------------------------
Du Pont (E.I.) de Nemours & Co. 12,000 1,132,500
- --------------------------------------------------------------------
Loews Corp. 23,000 2,167,750
- --------------------------------------------------------------------
4,238,250
- --------------------------------------------------------------------
COSMETICS & TOILETRIES - 2.03%
Avon Products, Inc. 11,400 651,225
- --------------------------------------------------------------------
Clorox Co. 10,000 1,003,750
- --------------------------------------------------------------------
Gillette Co. (The) 14,000 1,088,500
- --------------------------------------------------------------------
Warner-Lambert Co. 20,000 1,500,000
- --------------------------------------------------------------------
4,243,475
- --------------------------------------------------------------------
ELECTRONIC COMPONENT/MISCELLANEOUS - 1.88%
General Electric Co. 20,000 1,977,500
- --------------------------------------------------------------------
General Signal Corp. 18,000 769,500
- --------------------------------------------------------------------
Honeywell, Inc. 9,000 591,750
- --------------------------------------------------------------------
Imation Corp.(a) 21,000 590,625
- --------------------------------------------------------------------
3,929,375
- --------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-46
<PAGE> 115
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCE (ASSET MANAGEMENT) - 2.02%
Franklin Resources, Inc. 18,500 $ 1,264,938
- -----------------------------------------------------------------------
Merrill Lynch & Co., Inc. 16,000 1,304,000
- -----------------------------------------------------------------------
Morgan Stanley Group, Inc. 12,500 714,062
- -----------------------------------------------------------------------
Schwab (Charles) Corp. 16,000 512,000
- -----------------------------------------------------------------------
United Assets Management Corp. 16,000 426,000
- -----------------------------------------------------------------------
4,221,000
- -----------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 2.53%
American Express Co. 18,000 1,017,000
- -----------------------------------------------------------------------
Federal Home Loan Mortgage Corp. 13,500 1,486,688
- -----------------------------------------------------------------------
Federal National Mortgage Association 75,000 2,793,750
- -----------------------------------------------------------------------
5,297,438
- -----------------------------------------------------------------------
FINANCE (SAVINGS & LOANS) - 0.44%
Washington Mutual, Inc. 21,200 918,225
- -----------------------------------------------------------------------
FOOD/PROCESSING - 0.78%
Hormel Foods Corp. 13,700 369,900
- -----------------------------------------------------------------------
Interstate Bakeries Corp. 15,000 736,875
- -----------------------------------------------------------------------
Nabisco Holdings Corp. - Class A 13,300 517,037
- -----------------------------------------------------------------------
1,623,812
- -----------------------------------------------------------------------
FUNERAL SERVICES - 0.16%
Service Corp. International 12,000 336,000
- -----------------------------------------------------------------------
GAMING - 0.75%
International Game Technology 50,000 912,500
- -----------------------------------------------------------------------
Mirage Resorts, Inc.(a) 30,000 648,750
- -----------------------------------------------------------------------
1,561,250
- -----------------------------------------------------------------------
HOTELS/MOTELS - 0.17%
HFS, Inc.(a) 6,000 358,500
- -----------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.28%
Provident Companies, Inc. 12,000 580,500
- -----------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 4.41%
Allstate Corp. 33,000 1,909,875
- -----------------------------------------------------------------------
Chubb Corp. 9,600 516,000
- -----------------------------------------------------------------------
CIGNA Corp. 19,000 2,595,875
- -----------------------------------------------------------------------
ITT Hartford Group, Inc. 10,000 675,000
- -----------------------------------------------------------------------
MBIA, Inc. 5,000 506,250
- -----------------------------------------------------------------------
Travelers Group, Inc. 30,999 1,406,580
- -----------------------------------------------------------------------
Travelers/Aetna Property Casualty Corp. 25,000 884,375
- -----------------------------------------------------------------------
USF&G Corp. 35,000 730,625
- -----------------------------------------------------------------------
9,224,580
- -----------------------------------------------------------------------
LEISURE & RECREATION - 1.30%
Brunswick Corp. 30,000 720,000
- -----------------------------------------------------------------------
Callaway Golf Co. 35,000 1,006,250
- -----------------------------------------------------------------------
Eastman Kodak Co. 12,500 1,003,125
- -----------------------------------------------------------------------
2,729,375
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MACHINE TOOLS - 0.12%
Stanley Works 9,000 $ 243,000
- -----------------------------------------------------------------------
MACHINERY (HEAVY) - 0.89%
Caterpillar Inc. 13,000 978,250
- -----------------------------------------------------------------------
Deere & Co. 22,000 893,750
- -----------------------------------------------------------------------
1,872,000
- -----------------------------------------------------------------------
MACHINERY (MISCELLANEOUS) - 0.98%
Thermo Electron Corp.(a) 50,000 2,062,500
- -----------------------------------------------------------------------
MEDICAL (DRUGS) - 10.06%
Abbott Laboratories 15,000 761,250
- -----------------------------------------------------------------------
American Home Products Corp. 35,000 2,051,875
- -----------------------------------------------------------------------
Bristol-Myers Squibb Co. 30,000 3,262,500
- -----------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 16,000 764,000
- -----------------------------------------------------------------------
Johnson & Johnson 30,000 1,492,500
- -----------------------------------------------------------------------
Lilly (Eli) & Co. 14,000 1,022,000
- -----------------------------------------------------------------------
Pfizer, Inc. 12,000 994,500
- -----------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 50,000 1,981,250
- -----------------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 30,000 2,343,750
- -----------------------------------------------------------------------
Schering-Plough Corp. 14,000 906,500
- -----------------------------------------------------------------------
SmithKline Beecham PLC-ADR (United Kingdom) 45,000 3,060,000
- -----------------------------------------------------------------------
Teva Pharmaceutical Industries Ltd. - ADR (Israel) 34,000 1,708,500
- -----------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 16,000 719,000
- -----------------------------------------------------------------------
21,067,625
- -----------------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 1.38%
Baxter International Inc. 34,000 1,394,000
- -----------------------------------------------------------------------
Boston Scientific Corp.(a) 17,000 1,020,000
- -----------------------------------------------------------------------
Omnicare, Inc. 15,000 481,875
- -----------------------------------------------------------------------
2,895,875
- -----------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 3.24%
American Medical Response, Inc.(a) 15,000 487,500
- -----------------------------------------------------------------------
Columbia/HCA Healthcare Corp. 40,000 1,630,000
- -----------------------------------------------------------------------
Genesis Health Ventures, Inc.(a) 19,862 618,213
- -----------------------------------------------------------------------
MedPartners, Inc.(a) 60,000 1,260,000
- -----------------------------------------------------------------------
OrNda HealthCorp(a) 20,000 585,000
- -----------------------------------------------------------------------
PhyCor, Inc.(a) 20,000 567,500
- -----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 44,000 962,500
- -----------------------------------------------------------------------
United Healthcare Corp.(a) 15,000 675,000
- -----------------------------------------------------------------------
6,785,713
- -----------------------------------------------------------------------
NATURAL GAS PIPELINE - 1.55%
El Paso Natural Gas Co. 16,300 823,150
- -----------------------------------------------------------------------
Sonat, Inc. 12,000 618,000
- -----------------------------------------------------------------------
Williams Companies, Inc. (The) 48,000 1,800,000
- -----------------------------------------------------------------------
3,241,150
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-47
<PAGE> 116
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OFFICE AUTOMATION - 0.53%
Xerox Corp. 21,000 $ 1,105,125
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING) - 0.25%
Reading & Bates Corp.(a) 20,000 530,000
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.30%
Transocean Offshore Inc. 10,000 626,250
- -------------------------------------------------------------------------------
OIL & GAS (SERVICES) - 1.67%
Halliburton Co. 16,000 964,000
- -------------------------------------------------------------------------------
Mobil Corp. 8,000 978,000
- -------------------------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 13,400 522,600
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Netherlands) 6,000 1,024,500
- -------------------------------------------------------------------------------
3,489,100
- -------------------------------------------------------------------------------
OIL EQUIPMENT & SUPPLIES - 0.43%
BJ Services Co.(a) 4,300 219,300
- -------------------------------------------------------------------------------
Diamond Offshore Drilling, Inc.(a) 12,000 684,000
- -------------------------------------------------------------------------------
903,300
- -------------------------------------------------------------------------------
PUBLISHING - 0.53%
Harcourt General, Inc. 24,000 1,107,000
- -------------------------------------------------------------------------------
RAILROADS - 0.05%
Wisconsin Central Transportation Corp.(a) 2,900 114,913
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.83%
Crescent Real Estate Equities, Inc. 20,000 1,055,000
- -------------------------------------------------------------------------------
FelCor Suite Hotels, Inc. 15,000 530,625
- -------------------------------------------------------------------------------
National Health Investors, Inc. 14,000 530,250
- -------------------------------------------------------------------------------
Patriot American Hospitality, Inc. 22,000 948,750
- -------------------------------------------------------------------------------
Starwood Lodging Trust 14,000 771,750
- -------------------------------------------------------------------------------
3,836,375
- -------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.99%
Food Lion, Inc. - Class A 80,000 782,500
- -------------------------------------------------------------------------------
Safeway, Inc.(a) 30,000 1,282,500
- -------------------------------------------------------------------------------
2,065,000
- -------------------------------------------------------------------------------
RETAIL (STORES) - 0.46%
Blue Square - Israel Ltd. - ADR (Israel)(a) 30,000 427,500
- -------------------------------------------------------------------------------
Corporate Express, Inc.(a) 18,000 529,875
- -------------------------------------------------------------------------------
957,375
- -------------------------------------------------------------------------------
SEMICONDUCTORS - 1.61%
Applied Materials, Inc.(a) 18,000 646,875
- -------------------------------------------------------------------------------
Intel Corp. 12,000 1,571,250
- -------------------------------------------------------------------------------
Texas Instruments, Inc. 18,000 1,147,500
- -------------------------------------------------------------------------------
3,365,625
- -------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.27%
Nike, Inc. - Class B 9,400 561,650
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS - 5.31%
ADC Telecommunications, Inc.(a) 6,200 $ 192,975
- -------------------------------------------------------------------------------
Aerial Communications Inc.(a) 24,000 195,000
- -------------------------------------------------------------------------------
Andrew Corp.(a) 20,000 1,061,250
- -------------------------------------------------------------------------------
LCI International, Inc.(a) 30,000 645,000
- -------------------------------------------------------------------------------
Lucent Technologies, Inc. 25,000 1,156,250
- -------------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 49,384 2,691,428
- -------------------------------------------------------------------------------
Nokia Oy A.B. - Class A - ADR (Finland) 29,000 1,671,125
- -------------------------------------------------------------------------------
PairGain Technologies, Inc.(a) 36,000 1,095,750
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 50,000 1,509,375
- -------------------------------------------------------------------------------
Tellabs, Inc.(a) 10,000 376,250
- -------------------------------------------------------------------------------
WorldCom, Inc.(a) 20,000 521,250
- -------------------------------------------------------------------------------
11,115,653
- -------------------------------------------------------------------------------
TELEPHONE - 2.64%
BellSouth Corp. 26,000 1,049,750
- -------------------------------------------------------------------------------
Cincinnati Bell, Inc. 56,000 3,451,000
- -------------------------------------------------------------------------------
SBC Communications, Inc. 20,000 1,035,000
- -------------------------------------------------------------------------------
5,535,750
- -------------------------------------------------------------------------------
TOBACCO - 3.18%
Philip Morris Companies, Inc. 44,000 4,955,500
- -------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 50,000 1,700,000
- -------------------------------------------------------------------------------
6,655,500
- -------------------------------------------------------------------------------
TRANSPORTATION (MISCELLANEOUS) - 0.11%
Hvide Marine, Inc. - Class A(a) 11,000 239,250
- -------------------------------------------------------------------------------
Total Common Stocks 160,965,884
- -------------------------------------------------------------------------------
PRINCIPAL
CONVERTIBLE CORPORATE BONDS - 8.74% AMOUNT
AUTOMOBILE/TRUCK PARTS & TIRES - 0.52%
Magna International, Inc. (Canada), Conv. Sub. Deb.,
5.00%, 10/15/02 $ 950,000 1,097,525
- -------------------------------------------------------------------------------
BUSINESS SERVICES - 0.24%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02(b)
(Acquired 11/27/95 - 10/07/96; Cost $442,030) 250,000 494,413
- -------------------------------------------------------------------------------
COMPUTER MINI/PCS - 0.48%
Apple Computer, Inc., Conv. Sub. Notes, 6.00%, 06/01/01 1,000,000 1,009,950
- -------------------------------------------------------------------------------
COMPUTER NETWORKING - 0.64%
3Com Corp., Conv. Sub. Notes, 10.25%, 11/01/01(b)
(Acquired 11/14/95 - 09/25/96; Cost $995,305) 600,000 1,335,978
- -------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 1.40%
Baan Co., N.V. (Netherlands), Conv. Sub. Notes, 4.50%,
12/23/01(b)
(Acquired 12/12/96; Cost $1,000,000) 1,000,000 1,004,460
- -------------------------------------------------------------------------------
First Financial Management Corp., Conv. Deb., 5.00%,
12/15/99 500,000 865,285
- -------------------------------------------------------------------------------
Silicon Graphics, Inc., Conv. Sub. Deb., 4.15%,
11/02/13(c) 2,000,000 1,060,000
- -------------------------------------------------------------------------------
2,929,745
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-48
<PAGE> 117
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRONIC COMPONENTS/MISCELLANEOUS - 0.22%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06(b)
(Acquired 10/24/96 - 10/29/96; Cost $500,282) $ 400,000 $ 467,148
- ------------------------------------------------------------------------------
MEDICAL (DRUGS) - 0.12%
ICN Pharmaceuticals, Inc., Conv. Sub. Notes, 8.50%,
11/15/99 225,000 247,219
- ------------------------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 0.89%
FPA Medical Management, Inc., Conv. Sub. Deb., 6.50%,
12/15/01(b)
(Acquired 02/07/96; Cost $750,000) 750,000 753,750
- ------------------------------------------------------------------------------
HEALTHSOUTH Rehabilitation Corp., Conv. Sub. Deb.,
5.00%, 04/01/01 300,000 604,005
- ------------------------------------------------------------------------------
Multicare Companies Inc., Conv. Sub. Deb., 7.00%,
03/15/03(b) (Acquired 11/30/95; Cost $103,500) 100,000 122,500
- ------------------------------------------------------------------------------
Physicians Resource Group, Inc., Conv. Sub. Deb.,
6.00%, 12/01/01(b)
(Acquired 12/06/96; Cost $396,384) 400,000 392,088
- ------------------------------------------------------------------------------
1,872,343
- ------------------------------------------------------------------------------
OFFICE AUTOMATION - 0.39%
Danka Business Systems PLC (United Kingdom), Conv. Sub.
Notes, 6.75%, 04/01/02(b)
(Acquired 11/30/95 - 10/16/96; Cost $798,918) 600,000 812,640
- ------------------------------------------------------------------------------
OFFICE PRODUCTS - 0.31%
U.S. Office Products Co., Conv. Sub. Notes, 5.50%,
02/01/01 500,000 645,395
- ------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.42%
Apache Corp., Conv. Sub. Deb., 6.00%, 01/15/02(b)
(Acquired 06/14/96 - 12/31/96; Cost $833,125) 700,000 878,500
- ------------------------------------------------------------------------------
POLLUTION CONTROL - 0.88%
Sanifill, Inc., Conv. Sub. Deb., 5.00%, 03/01/06 600,000 764,784
- ------------------------------------------------------------------------------
U.S. Filter Corp., Conv. Sub. Notes, 6.00%, 09/15/05 600,000 1,069,500
- ------------------------------------------------------------------------------
1,834,284
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.57%
Federated Department Stores, Inc., Conv. Notes, 5.00%,
10/01/03 500,000 584,375
- ------------------------------------------------------------------------------
Staples, Inc., Conv. Sub. Deb., 4.50%, 10/01/00(b)
(Acquired 09/16/96 - 10/28/96; Cost $664,113) 600,000 617,496
- ------------------------------------------------------------------------------
1,201,871
- ------------------------------------------------------------------------------
SEMICONDUCTORS - 1.38%
Altera Corp., Conv. Sub. Notes, 5.75%, 06/15/02(b)
(Acquired 09/16/96 - 09/26/96; Cost $712,454) 600,000 938,028
- ------------------------------------------------------------------------------
Analog Devices, Conv. Sub. Notes, 3.50% 12/01/00 550,000 768,284
- ------------------------------------------------------------------------------
National Semiconductor Corp., Conv. Deb., 6.50%,
10/01/02 1,200,000 1,191,000
- ------------------------------------------------------------------------------
2,897,312
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TRANSPORTATION - 0.28%
Seacor Holdings Inc., Conv. Sub. Notes, 5.375%,
11/15/06 $ 500,000 $ 582,715
- ------------------------------------------------------------------------------
Total Convertible Corporate Bonds 18,307,038
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 6.52% SHARES
AEROSPACE/DEFENSE - 0.49%
Loral Space & Communications - $3.00 Conv. Pfd. 18,000 1,023,750
- ------------------------------------------------------------------------------
COMPUTER SOFTWARE/SERVICES - 0.31%
Vanstar Financing Trust - $3.375 Conv. Pfd.(b)
(Acquired 09/27/96; Cost $619,250) 12,000 638,892
- ------------------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 0.67%
Penncorp Financial Group, Inc. - $3.375 Conv. Pfd. 5,000 420,000
- ------------------------------------------------------------------------------
SunAmerica, Inc. - Series E $3.10 Dep. Conv. Pfd. 10,000 972,500
- ------------------------------------------------------------------------------
1,392,500
- ------------------------------------------------------------------------------
FUNERAL SERVICES - 1.08%
SCI Financial LLC - Series A, $3.125 Conv. Pfd. 24,000 2,259,000
- ------------------------------------------------------------------------------
HOTELS/MOTELS - 0.36%
Host Marriott Financial Trust - $3.375 Conv. Pfd. 14,000 762,958
- ------------------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.68%
Conseco Inc. - $4.279 Conv. PRIDES 31,000 3,526,250
- ------------------------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 0.23%
Allstate Corp. - $2.30 Conv. Pfd. 10,000 472,500
- ------------------------------------------------------------------------------
MEDICAL INSTRUMENTS/PRODUCTS - 0.27%
U.S. Surgical Corp. - Series A $2.20 Conv. Pfd. 15,000 573,750
- ------------------------------------------------------------------------------
OIL & GAS (REFINING/MARKETING) - 0.15%
Tosco Financing Trust - $2.875 Conv. Pfd.(b)
(Acquired 12/10/96; Cost $300,612) 6,000 312,750
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.50%
TJX Cos., Inc. - Series E $7.00 Conv. Pfd. 4,000 1,047,500
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.78%
MFS Communications Co., Inc. - $2.68 Conv. Pfd. 18,000 1,642,500
- ------------------------------------------------------------------------------
Total Convertible Preferred Stocks 13,652,350
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES - 4.79%
U.S. TREASURY NOTES - 4.79%
5.125%, 02/28/98 $1,000,000 993,880
- ------------------------------------------------------------------------------
6.125%, 03/31/98 1,000,000 1,005,430
- ------------------------------------------------------------------------------
5.875%, 04/30/98 1,000,000 1,002,230
- ------------------------------------------------------------------------------
6.00%, 05/31/98 1,000,000 1,003,550
- ------------------------------------------------------------------------------
6.25%, 06/30/98 1,000,000 1,007,320
- ------------------------------------------------------------------------------
6.25%, 07/31/98 1,000,000 1,007,170
- ------------------------------------------------------------------------------
6.125%, 08/31/98 1,000,000 1,005,040
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-49
<PAGE> 118
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY NOTES - (CONTINUED)
6.00%, 09/30/98 $1,000,000 $ 1,003,150
- ----------------------------------------------------------------------------
5.875%, 10/31/98 1,000,000 1,000,420
- ----------------------------------------------------------------------------
5.625%, 11/30/98 1,000,000 995,820
- ----------------------------------------------------------------------------
Total U.S. Treasury Securities 10,024,010
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.43%(d)
Daiwa Securities America, Inc., 6.25%, 01/02/97(e) 11,372,723 11,372,723
- ----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 102.38% 214,322,005
- ----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (2.38%) (4,990,374)
- ----------------------------------------------------------------------------
NET ASSETS - 100.00% $209,331,631
============================================================================
</TABLE>
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 procedures established by the Board of Directors. The
aggregate market value of these securities at December 31, 1996 was
$8,768,643, which represents 3.74% of the Fund's net assets.
(c) Zero coupon bond. The interest rate shown represents the rate of the
original issue discount.
(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 on 12/31/96 with maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Investment Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depository
Pfd. - Preferred
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-50
<PAGE> 119
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $194,097,782) $214,322,005
- ----------------------------------------------------------------------
Receivables for:
Investments sold 2,321,719
- ----------------------------------------------------------------------
Capital stock sold 662,812
- ----------------------------------------------------------------------
Dividends and interest 515,368
- ----------------------------------------------------------------------
Investment for deferred compensation plan 8,997
- ----------------------------------------------------------------------
Other assets. 163
- ----------------------------------------------------------------------
Total assets 217,831,064
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,321,159
- ----------------------------------------------------------------------
Capital stock reacquired 29,653
- ----------------------------------------------------------------------
Deferred compensation plan 8,997
- ----------------------------------------------------------------------
Accrued advisory fees 108,878
- ----------------------------------------------------------------------
Accrued administrative services fees 3,566
- ----------------------------------------------------------------------
Accrued directors' fees 1,590
- ----------------------------------------------------------------------
Accrued operating expenses 25,590
- ----------------------------------------------------------------------
Total liabilities 8,499,433
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $209,331,631
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 13,923,332
======================================================================
Net asset value, offering and redemption price per share $15.03
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $9,976 foreign withholding tax) $ 1,774,561
- -----------------------------------------------------------------------------
Interest 1,180,750
- -----------------------------------------------------------------------------
Total investment income 2,955,311
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 678,242
- -----------------------------------------------------------------------------
Custodian fees 52,175
- -----------------------------------------------------------------------------
Administrative services fees 38,784
- -----------------------------------------------------------------------------
Directors' fees and expenses 6,522
- -----------------------------------------------------------------------------
Other 38,734
- -----------------------------------------------------------------------------
Total expenses 814,457
- -----------------------------------------------------------------------------
Net investment income 2,140,854
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES, FOREIGN
CURRENCIES, AND FUTURES CONTRACTS:
Net realized gain from:
Investment securities 294,131
- -----------------------------------------------------------------------------
Foreign currency transactions 5,194
- -----------------------------------------------------------------------------
Futures contracts 166,173
- -----------------------------------------------------------------------------
465,498
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities 17,682,951
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, and
futures contracts 18,148,449
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $20,289,303
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-51
<PAGE> 120
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 2,140,854 $ 336,371
- -----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, and futures contracts 465,498 1,441,764
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, and futures
contracts 17,682,951 2,467,076
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 20,289,303 4,245,211
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 152,726,725 28,382,638
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,850,460) (325,888)
- -----------------------------------------------------------------------------
Distributions from net realized gains (401,149) (1,114,895)
- -----------------------------------------------------------------------------
Net increase in net assets 170,764,419 31,187,066
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 38,567,212 7,380,146
- -----------------------------------------------------------------------------
End of period $209,331,631 $38,567,212
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $188,521,678 $35,794,953
- -----------------------------------------------------------------------------
Undistributed net investment income 329,728 10,307
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, and futures
contracts 256,002 220,680
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 20,224,223 2,541,272
- -----------------------------------------------------------------------------
$209,331,631 $38,567,212
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. 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.
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. Securities traded in the over-the-counter market,
except (i) securities for which representative exchange prices are
available, and (ii) 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. 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 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. Short-term investments with remaining maturities of
up to and including 60 days are valued at amortized cost which approximates
market value. Short-term securities that mature in more than 60 days are
valued at current market quotations. Securities
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-52
<PAGE> 121
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 authority
of, the Board of Directors. 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. 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, 1996,
undistributed net investment income was increased by $29,027 and
undistributed net realized gains reduced by $29,027 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 forward 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 forward 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 forward 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.
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, 1996, AIM was reimbursed $38,784 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, 1996, the Fund incurred legal fees of
$2,947 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 - 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,
1996 was $300,305,769 and $151,370,201, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $22,509,165
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,475,760)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $20,033,405
==========================================================================
</TABLE>
Cost of investments for tax purposes is $194,288,600.
AIM V.I. GROWTH AND INCOME FUND
FS-53
<PAGE> 122
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------ ----------------------
Shares Amount Shares Amount
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 10,983,786 $153,919,542 2,208,514 $27,189,904
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions 154,220 2,251,608 115,538 1,440,783
- ----------------------------------------------------------------------------
Reacquired (255,903) (3,444,425) (22,290) (248,049)
- ----------------------------------------------------------------------------
10,882,103 $152,726,725 2,301,762 $28,382,638
============================================================================
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, the eleven months ended December 31,
1995 and the period May 2, 1994 (date operations commenced) through January
31, 1995.
<TABLE>
<CAPTION>
December 31, January 31,
-------------------- -----------
1996 1995 1995
-------- ------- -----------
<S> <C> <C> <C>
Net asset value, beginning of period $ 12.68 $ 9.98 $10.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.16 0.14 0.11
- -------------------------------------------------------------------------------
Net gains (losses) on securities
(both realized and unrealized) 2.36 3.11 (0.02)
- -------------------------------------------------------------------------------
Total from investment operations 2.52 3.25 0.09
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net investment income (0.14) (0.14) (0.11)
- -------------------------------------------------------------------------------
Distributions from capital gains (0.03) (0.41) --
- -------------------------------------------------------------------------------
Total distributions (0.17) (0.55) (0.11)
- -------------------------------------------------------------------------------
Net asset value, end of period $ 15.03 $ 12.68 $ 9.98
- -------------------------------------------------------------------------------
Total return(a) 19.95% 32.65% 0.90%
- -------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s
omitted) $209,332 $38,567 $7,380
- -------------------------------------------------------------------------------
Ratio of expenses to average net
assets 0.78%(b) 0.78%(c) 1.07%(c)(d)
- -------------------------------------------------------------------------------
Ratio of net investment income to
average net assets 2.05%(b) 1.92%(c) 1.95%(c)(d)
- -------------------------------------------------------------------------------
Portfolio turnover rate 148% 145% 96%
- -------------------------------------------------------------------------------
Average broker commission rate(e) $ 0.0644 N/A N/A
- -------------------------------------------------------------------------------
</TABLE>
(a) Total return is not annualized for periods less than one year.
(b) Ratios are based on average net assets of $104,198,711.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.72% and 1.30%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. GROWTH AND INCOME FUND
FS-54
<PAGE> 123
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, 1996, the related statement of operations for the year then
ended, the statement of changes in net assets for the year then ended and for
the eleven month period ended December 31, 1995 and the financial highlights
for the year 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, 1996, 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, 1996, the results of its
operations for the year then ended, the changes in its net assets for the year
then ended and for the eleven month period ended December 31, 1995 and the
financial highlights for the year then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993
through January 31, 1994 (commencement of operations), in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. INTERNATIONAL EQUITY FUND
FS-55
<PAGE> 124
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 92.37%
ARGENTINA - 1.66%
Banco de Galicia y Beunos Aires S.A. de C.V.-ADR
(Banking) 35,574 $ 862,670
- -------------------------------------------------------------------------------
Perez Companc S.A. - Class B (Oil & Gas - Services) 88,000 618,764
- -------------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Oil & Gas - Services) 50,400 1,272,600
- -------------------------------------------------------------------------------
2,754,034
- -------------------------------------------------------------------------------
AUSTRALIA -- 2.63%
National Mutual Holdings Ltd. (Insurance - Multi-Line
Property)(a) 373,000 557,380
- -------------------------------------------------------------------------------
News Corp. Ltd.-ADR (Publishing) 50,100 883,013
- -------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance - Multi-Line
Property) 163,815 863,281
- -------------------------------------------------------------------------------
QNI Ltd. (Metals - Miscellaneous) 523,300 1,052,340
- -------------------------------------------------------------------------------
WMC Ltd. (Metals - Miscellaneous) 158,500 999,050
- -------------------------------------------------------------------------------
4,355,064
- -------------------------------------------------------------------------------
AUSTRIA - 0.87%
OMV A.G. (Oil & Gas - Integrated) 6,500 732,927
- -------------------------------------------------------------------------------
VA Technologie A.G. (Engineering & Construction) 4,550 714,109
- -------------------------------------------------------------------------------
1,447,036
- -------------------------------------------------------------------------------
BELGIUM - 1.78%
Barco Industries (Electronic Components/Miscellaneous)(a) 4,000 690,883
- -------------------------------------------------------------------------------
COLRUYT S.A. (Retail - Food & Drug) 1,500 687,889
- -------------------------------------------------------------------------------
Delhaize-Le Lion, S.A. (Retail - Food & Drug) 12,300 730,770
- -------------------------------------------------------------------------------
UCB S.A. (Medical - Drugs) 320 834,103
- -------------------------------------------------------------------------------
2,943,645
- -------------------------------------------------------------------------------
BRAZIL - 0.67%
Telecomunicacoes Brasileiras S.A. - Telebras-ADR
(Telecommunications) 14,500 1,109,250
- -------------------------------------------------------------------------------
CANADA - 3.34%
Canadian National Railway Co. (Railroads) 17,200 653,600
- -------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas - Exploration
& Production)(a) 33,000 906,157
- -------------------------------------------------------------------------------
Canadian Pacific, Ltd. (Transportation) 30,200 800,300
- -------------------------------------------------------------------------------
Newbridge Networks Corp. (Computer Networking)(a) 19,400 548,050
- -------------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 12,200 754,875
- -------------------------------------------------------------------------------
Suncor, Inc. (Oil & Gas - Exploration & Production) 19,000 786,752
- -------------------------------------------------------------------------------
Teleglobe, Inc. (Telecommunications) 15,000 443,657
- -------------------------------------------------------------------------------
TELUS Corp. (Telecommunications) 44,000 639,451
- -------------------------------------------------------------------------------
5,532,842
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CHILE - 0.37%
Cia. de Telecomunicaciones de Chile S.A.-ADR (Telephone) 6,000 $ 606,750
- -------------------------------------------------------------------------------
DENMARK - 0.77%
Danisco A.S. (Food/Processing) 7,800 474,027
- -------------------------------------------------------------------------------
Novo Nordisk A.S. - Class B (Medical - Drugs) 4,300 810,247
- -------------------------------------------------------------------------------
1,284,274
- -------------------------------------------------------------------------------
FINLAND - 1.00%
Nokia Oy A.B. - Class A (Telecommunications) 28,600 1,660,043
- -------------------------------------------------------------------------------
FRANCE - 8.06%
AXA S.A. (Insurance - Life & Health) 12,000 763,226
- -------------------------------------------------------------------------------
Carrefour Supermarche S.A. (Retail - Food & Drug) 1,870 1,216,753
- -------------------------------------------------------------------------------
Cetelem (Finance - Consumer Credit) 4,600 531,946
- -------------------------------------------------------------------------------
Compagnie Francaise d'Etudes et de Construction Technip
(Engineering & Construction) 5,800 544,396
- -------------------------------------------------------------------------------
Compagnie Generale des Eaux (Water Supply) 6,500 805,532
- -------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil & Gas - Services) 10,700 974,002
- -------------------------------------------------------------------------------
Essilor International (Medical Instruments/Products) 2,275 690,590
- -------------------------------------------------------------------------------
Michelin - Class B (Automobile/Truck Parts & Tires) 13,200 712,599
- -------------------------------------------------------------------------------
Pathe S.A. (Advertising/Broadcasting)(a) 2,550 614,339
- -------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail - Stores) 3,560 1,412,061
- -------------------------------------------------------------------------------
Rexel S.A. (Electronic Component/Miscellaneous) 2,000 607,112
- -------------------------------------------------------------------------------
Rhone-Poulenc - Class A (Chemicals) 13,000 443,230
- -------------------------------------------------------------------------------
Roussel Uclaf (Medical - Drugs) 2,390 703,388
- -------------------------------------------------------------------------------
Societe BIC S.A. (Office Products) 5,150 772,227
- -------------------------------------------------------------------------------
Sodexho S.A. (Business Services) 1,400 779,802
- -------------------------------------------------------------------------------
Total S.A. - Class B (Oil & Gas - Exploration &
Production) 10,300 837,737
- -------------------------------------------------------------------------------
Valeo S.A. (Automobile/Truck Parts & Tires) 15,500 955,960
- -------------------------------------------------------------------------------
13,364,900
- -------------------------------------------------------------------------------
GERMANY - 3.65%
Altana A.G. (Chemicals) 1,350 1,051,014
- -------------------------------------------------------------------------------
Commerzbank A.G. (Banking - Money Center) 29,500 749,578
- -------------------------------------------------------------------------------
Continental A.G. (Automobile/Truck Parts & Tires) 28,000 504,029
- -------------------------------------------------------------------------------
Dresdner Bank A.G. (Banking) 24,000 719,002
- -------------------------------------------------------------------------------
Hoechst A.G. (Chemicals) 27,800 1,313,400
- -------------------------------------------------------------------------------
SGL Carbon A.G. (Metals - Miscellaneous) 5,500 693,397
- -------------------------------------------------------------------------------
VEBA A.G. (Electric Power) 17,500 1,012,152
- -------------------------------------------------------------------------------
6,042,572
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-56
<PAGE> 125
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HONG KONG - 7.73%
Asia Satellite Telecommunications Holdings Ltd.-ADR
(Telecommunications)(a) 17,400 $ 406,725
- -------------------------------------------------------------------------------
Cheung Kong Holdings Ltd. (Real Estate) 180,000 1,599,974
- -------------------------------------------------------------------------------
Citic Pacific Ltd. (Banking) 172,000 998,487
- -------------------------------------------------------------------------------
Cosco Pacific Ltd. (Transportation - Miscellaneous) 1,476,000 1,717,500
- -------------------------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banking) 163,000 781,861
- -------------------------------------------------------------------------------
First Pacific Company Ltd. (Conglomerates) 679,368 882,752
- -------------------------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 82,400 1,001,435
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Electric Power) 596,600 1,153,167
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. - Warrants, expiring
09/30/97 (Electric Power)(a) 37,800 21,015
- -------------------------------------------------------------------------------
HSBC Holdings PLC (Banking) 67,000 1,433,641
- -------------------------------------------------------------------------------
New World Infrastructure Ltd. (Building Materials)(a) 403,000 1,177,555
- -------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate) 111,600 1,367,134
- -------------------------------------------------------------------------------
Varitronix International Ltd. (Electronic
Components/Miscellaneous) 147,000 266,081
- -------------------------------------------------------------------------------
12,807,327
- -------------------------------------------------------------------------------
INDONESIA - 2.05%
PT Bank Internasional Indonesia (Banking) 1,539,809 1,515,688
- -------------------------------------------------------------------------------
PT Hanjaya Mandala Sampoerna (Tobacco) 274,000 1,461,643
- -------------------------------------------------------------------------------
PT Indosat (Telecommunications) 91,000 250,423
- -------------------------------------------------------------------------------
PT Indosat-ADR (Telecommunications) 6,400 175,200
- -------------------------------------------------------------------------------
3,402,954
- -------------------------------------------------------------------------------
IRELAND - 0.32%
Elan Corp. PLC-ADR (Medical - Drugs)(a) 16,000 532,000
- -------------------------------------------------------------------------------
ISRAEL - 0.56%
Teva Pharmaceutical Industries Ltd.-ADR (Medical -
Drugs) 18,500 929,625
- -------------------------------------------------------------------------------
ITALY - 3.35%
Edison S.p.A. (Electric Power) 121,000 762,771
- -------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas -
Exploration & Production)(a) 201,000 1,033,885
- -------------------------------------------------------------------------------
Instituto Mobiliare Italiano S.p.A. (Banking) 54,550 465,311
- -------------------------------------------------------------------------------
Parmalat Finanziaria S.p.A. (Food/Processing) 450,000 688,200
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications) 503,800 1,276,935
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 510,000 1,324,588
- -------------------------------------------------------------------------------
5,551,690
- -------------------------------------------------------------------------------
JAPAN - 14.95%
Alpine Electronics Inc. (Electronics
Components/Miscellaneous) 45,000 718,850
- -------------------------------------------------------------------------------
Bridgestone Corp. (Automobile/Truck Parts & Tires) 69,000 1,310,768
- -------------------------------------------------------------------------------
Canon, Inc. (Office Automation) 68,000 1,503,152
- -------------------------------------------------------------------------------
Daiichi Corp. (Electronic Components/Miscellaneous) 28,700 579,898
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN - (CONTINUED)
DDI Corp. (Telecommunications) 170 $ 1,124,428
- -------------------------------------------------------------------------------
Fuji Photo Film (Electronic Components/Miscellaneous) 21,000 692,686
- -------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 61,000 1,743,459
- -------------------------------------------------------------------------------
Ibiden Co., Ltd. (Building Materials) 71,000 686,642
- -------------------------------------------------------------------------------
JUSCO Co. (Retail - Stores) 35,000 1,187,721
- -------------------------------------------------------------------------------
Komatsu Ltd. (Machinery - Heavy) 131,000 1,074,605
- -------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd. (Electronic
Components/Miscellaneous) 57,000 930,231
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone (Telecommunications) 90 682,324
- -------------------------------------------------------------------------------
Nippon Television Network (Advertising/Broadcasting) 2,690 812,970
- -------------------------------------------------------------------------------
Nomura Securities Co. Ltd. (Finance - Asset Management) 64,000 961,575
- -------------------------------------------------------------------------------
NSK Ltd. (Metals - Miscellaneous) 100,000 606,165
- -------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computer
Software/Services) 450 1,317,244
- -------------------------------------------------------------------------------
Okuma Corp. (Machine Tools)(a) 85,000 678,180
- -------------------------------------------------------------------------------
Ricoh Corp. Ltd. (Office Automation) 108,000 1,240,307
- -------------------------------------------------------------------------------
Shizuoka Bank Ltd. (Banking) 42,000 446,075
- -------------------------------------------------------------------------------
SMC Corp. (Machinery - Miscellaneous) 10,200 686,107
- -------------------------------------------------------------------------------
Sony Corp. (Electronic Components/Miscellaneous) 19,000 1,245,229
- -------------------------------------------------------------------------------
Sumitomo Heavy Industries, Ltd. (Machinery - Heavy)(a) 267,000 811,536
- -------------------------------------------------------------------------------
TDK Corp. (Electronic Components/Miscellaneous) 21,000 1,369,053
- -------------------------------------------------------------------------------
Toyota Motor Corp. (Automobile - Manufacturers) 45,000 1,293,930
- -------------------------------------------------------------------------------
Yamatake-Honeywell Co. (Airlines) 67,000 1,081,858
- -------------------------------------------------------------------------------
24,784,993
- -------------------------------------------------------------------------------
MALAYSIA - 1.74%
Commerce Asset Holding Berhad (Finance - Asset
Management) 110,000 827,559
- -------------------------------------------------------------------------------
Edaran Otomobil Nasional Berhad (Automobile -
Manufacturers) 61,000 609,879
- -------------------------------------------------------------------------------
Malayan Banking Berhad (Banking) 103,000 1,141,952
- -------------------------------------------------------------------------------
YTL Corp. Berhad (Engineering & Construction) 57,000 306,949
- -------------------------------------------------------------------------------
2,886,339
- -------------------------------------------------------------------------------
MEXICO - 1.76%
Grupo Industrial Maseca S.A. de CV - Class B
(Food/Processing) 945,000 1,211,912
- -------------------------------------------------------------------------------
Grupo Televisa S.A. - GDR (Advertising/Broadcasting)(a) 31,000 794,375
- -------------------------------------------------------------------------------
Panamerican Beverages, Inc. - Class A (Beverages - Soft
Drinks) 19,500 914,063
- -------------------------------------------------------------------------------
2,920,350
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-57
<PAGE> 126
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS - 5.05%
Akzo Nobel N.V. (Conglomerates) 4,900 $ 669,794
- -------------------------------------------------------------------------------
Elsevier N.V. (Publishing) 38,000 642,687
- -------------------------------------------------------------------------------
Getronics N.V. (Computer Software/Services) 29,200 793,212
- -------------------------------------------------------------------------------
Gucci Group NV-ADR (Textiles) 9,000 574,875
- -------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail - Food & Drug) 19,000 1,188,532
- -------------------------------------------------------------------------------
Nutricia Verenigde Bedrijven N.V. (Food/Processing) 8,700 1,322,763
- -------------------------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office Automation) 6,300 684,552
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil & Gas - Services) 5,300 929,841
- -------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 32,500 679,554
- -------------------------------------------------------------------------------
Wolters Kluwer N.V. (Publishing) 6,590 875,995
- -------------------------------------------------------------------------------
8,361,805
- -------------------------------------------------------------------------------
NORWAY - 0.27%
Storebrand A.S.A. (Insurance - Multi-Line Property)(a) 77,000 442,178
- -------------------------------------------------------------------------------
PHILIPPINES - 2.50%
C & P Homes, Inc. (Home Building) 1,930,000 990,685
- -------------------------------------------------------------------------------
Filinvest Land Inc. (Real Estate)(a) 2,146,450 669,235
- -------------------------------------------------------------------------------
Metro Pacific Corp. (Conglomerates) 3,568,000 881,825
- -------------------------------------------------------------------------------
Metropolitan Bank & Trust Co. (Banking) 31,300 773,574
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.
(Telecommunications) 8,330 457,675
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.-ADR
(Telecommunications) 1,400 71,400
- -------------------------------------------------------------------------------
Southeast Asia Cement Holdings, Inc. (Building
Materials)(a) 2,628,800 304,861
- -------------------------------------------------------------------------------
4,149,255
- -------------------------------------------------------------------------------
PORTUGAL - 0.32%
Portugal Telecom S.A. (Telecommunications)(a) 18,600 530,229
- -------------------------------------------------------------------------------
SINGAPORE - 2.32%
City Developments Ltd. (Real Estate) 113,000 1,017,509
- -------------------------------------------------------------------------------
DBS Land Ltd. (Real Estate) 280,000 1,030,515
- -------------------------------------------------------------------------------
Overseas Union Bank Ltd. (Banking) 151,000 1,165,440
- -------------------------------------------------------------------------------
Total Access Communication PLC (Telecommunications) 92,000 634,800
- -------------------------------------------------------------------------------
3,848,264
- -------------------------------------------------------------------------------
SOUTH AFRICA - 0.76%
De Beers Centenary A.G. (Gold & Silver Mining) 19,500 558,512
- -------------------------------------------------------------------------------
Sasol Ltd. (Oil & Gas - Exploration & Production) 58,550 694,566
- -------------------------------------------------------------------------------
1,253,078
- -------------------------------------------------------------------------------
SPAIN - 2.75%
Empresa Nacional de Electricidad, S.A. (Electric Power) 16,000 1,138,764
- -------------------------------------------------------------------------------
Gas Natural SDG, S.A. (Gas Distribution) 4,000 930,483
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN - (CONTINUED)
Iberdrola S.A. (Electric Power) 83,800 $ 1,187,691
- -------------------------------------------------------------------------------
Telefonica de Espana (Telecommunications) 56,000 1,300,520
- -------------------------------------------------------------------------------
4,557,458
- -------------------------------------------------------------------------------
SWEDEN - 2.62%
Astra A.B. (Medical - Drugs) 7,300 352,161
- -------------------------------------------------------------------------------
Autoliv A.B. (Automobile/Truck Parts & Tires) 39,200 1,718,618
- -------------------------------------------------------------------------------
Hennes & Mauritz A.B. - B Shares (Retail - Stores) 7,400 1,024,297
- -------------------------------------------------------------------------------
Securitas A.B. - Class B (Security & Safety Services) 27,900 812,057
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Telecommunications) 14,280 431,077
- -------------------------------------------------------------------------------
4,338,210
- -------------------------------------------------------------------------------
SWITZERLAND - 0.75%
Novartis (Medical - Drugs)(a) 1,083 1,240,716
- -------------------------------------------------------------------------------
THAILAND - 0.49%
Bank of Ayudhya Public Co., Ltd. (Banking) 12,600 29,724
- -------------------------------------------------------------------------------
Krung Thai Bank Public Co. Ltd. (Banking) 152,130 293,630
- -------------------------------------------------------------------------------
Siam Commercial Bank PLC (Banking) 37,300 270,522
- -------------------------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 35,000 218,357
- -------------------------------------------------------------------------------
Thai Farmers Bank PLC-Warrants, expiring 09/15/02
(Banking)(a) 7,163 6,773
- -------------------------------------------------------------------------------
819,006
- -------------------------------------------------------------------------------
UNITED KINGDOM - 17.28%
Airtours PLC (Leisure & Recreation) 45,150 630,414
- -------------------------------------------------------------------------------
Argos PLC (Retail - Stores) 63,466 835,594
- -------------------------------------------------------------------------------
Barclays PLC (Finance - Consumer Credit) 49,000 841,151
- -------------------------------------------------------------------------------
Bass PLC (Beverages - Alcoholic) 37,000 520,422
- -------------------------------------------------------------------------------
B.A.T. Industries PLC (Conglomerates) 126,000 1,046,942
- -------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 42,000 921,021
- -------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas - Services) 117,000 1,404,120
- -------------------------------------------------------------------------------
Burton Group PLC (Retail - Stores) 367,200 981,381
- -------------------------------------------------------------------------------
Caradon PLC (Building Materials) 180,000 737,023
- -------------------------------------------------------------------------------
Compass Group PLC (Restaurants) 78,000 828,508
- -------------------------------------------------------------------------------
Dixons Group PLC (Retail - Stores) 118,000 1,097,721
- -------------------------------------------------------------------------------
EMAP PLC (Publishing) 62,500 788,611
- -------------------------------------------------------------------------------
FKI PLC (Conglomerates) 112,000 387,596
- -------------------------------------------------------------------------------
General Electric Co. PLC (Electronic
Components/Miscellaneous) 110,000 721,775
- -------------------------------------------------------------------------------
GKN PLC (Automobile/Truck Parts & Tires) 50,000 857,461
- -------------------------------------------------------------------------------
Granada Group PLC (Leisure & Recreation) 78,000 1,153,229
- -------------------------------------------------------------------------------
Kingfisher PLC (Retail - Stores) 32,400 351,921
- -------------------------------------------------------------------------------
Ladbroke Group PLC (Hotels/Motels) 231,000 914,185
- -------------------------------------------------------------------------------
LucasVarity PLC (Automobile/Truck Parts & Tires)(a) 126,900 483,729
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-58
<PAGE> 127
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - (CONTINUED)
Marks & Spencer PLC (Retail - Stores) 83,000 $ 698,184
- -------------------------------------------------------------------------------
Medeva PLC (Medical - Drugs) 147,000 647,233
- -------------------------------------------------------------------------------
MFI Furniture Group PLC (Retail - Stores) 230,000 732,911
- -------------------------------------------------------------------------------
Next PLC (Retail - Stores) 97,500 947,940
- -------------------------------------------------------------------------------
NFC PLC (Transportation - Miscellaneous) 235,000 742,805
- -------------------------------------------------------------------------------
Peninsular & Oriental Steam Navigation Co.
(Transportation - Miscellaneous) 72,000 727,771
- -------------------------------------------------------------------------------
Provident Financial PLC (Finance - Consumer Credit) 92,800 802,878
- -------------------------------------------------------------------------------
Railtrack Group PLC (Railroads) 145,000 962,609
- -------------------------------------------------------------------------------
Rentokil Initial PLC (Business Services) 94,000 710,194
- -------------------------------------------------------------------------------
Scottish & Newcastle PLC (Beverages - Alcoholic) 73,000 858,566
- -------------------------------------------------------------------------------
Siebe PLC (Electronic Components/Miscellaneous) 38,000 705,705
- -------------------------------------------------------------------------------
Smiths Industries PLC (Electronics/Defense) 53,500 735,087
- -------------------------------------------------------------------------------
Standard Chartered PLC (Finance - Asset Management) 63,100 779,426
- -------------------------------------------------------------------------------
Unilever PLC (Consumer Non-Durables) 52,000 1,261,915
- -------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications) 185,000 782,851
- -------------------------------------------------------------------------------
WPP Group PLC (Advertising/Broadcasting) 240,000 1,040,260
- -------------------------------------------------------------------------------
28,639,139
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 153,095,026
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(b) VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.68%
ITALY - 0.45%
Pirelli S.p.A. (Automobile/Truck Parts &
Tires), Conv. Bonds, 5.00%, 12/31/98 ITL 1,007,349,200 $ 732,105
- -------------------------------------------------------------------------------
JAPAN - 0.23%
Ricoh Co., Ltd. (Office Automation), Conv.
Bonds, 0.35%, 03/31/03 JPY 40,000,000 386,253
- -------------------------------------------------------------------------------
Total Foreign Convertible Bonds 1,118,358
- -------------------------------------------------------------------------------
NON-CONVERTIBLE BONDS - 0.12%
ITALY - 0.12%
Metropolitan Bank & Trust International Finance
Ltd. (Banking - Foreign), Conv. Deb., 2.75%,
09/10/00 155,000 205,375
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 5.72%(c)
Daiwa Securities America Inc., 6.25%,
01/02/97(d) 9,477,779 9,477,779
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.89% 163,896,538
- -------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.11% 1,841,540
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $165,738,078
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Principal in U.S. Dollar unless otherwise indicated.
(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 agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR - American Depository Receipt
Conv. - Convertible
Deb. - Debentures
GDR - Global Depository Receipt
ITL - Italian Lira
JPY - Japanese Yen
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-59
<PAGE> 128
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $135,587,806) $163,896,538
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $1,784,804) 1,779,584
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 220,105
- ----------------------------------------------------------------------
Investments sold 59,428
- ----------------------------------------------------------------------
Dividends and interest 251,370
- ----------------------------------------------------------------------
Organizational costs, net 3,856
- ----------------------------------------------------------------------
Investment for deferred compensation plan 11,965
- ----------------------------------------------------------------------
Other assets 711
- ----------------------------------------------------------------------
Total assets 166,223,557
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 13,019
- ----------------------------------------------------------------------
Investments purchased 295,262
- ----------------------------------------------------------------------
Deferred compensation plan 11,965
- ----------------------------------------------------------------------
Accrued advisory fees 101,585
- ----------------------------------------------------------------------
Accrued directors' fees 1,609
- ----------------------------------------------------------------------
Accrued administrative services fees 5,238
- ----------------------------------------------------------------------
Accrued operating expenses 56,801
- ----------------------------------------------------------------------
Total liabilities 485,479
- ----------------------------------------------------------------------
NET ASSETS APPLICABLE TO SHARES OUTSTANDING $165,738,078
======================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 10,129,698
======================================================================
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE $16.36
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $276,213 foreign withholding tax) $ 1,747,006
- ---------------------------------------------------------------------------
Interest 403,832
- ---------------------------------------------------------------------------
Total investment income 2,150,838
- ---------------------------------------------------------------------------
EXPENSES:
Advisory fees 924,578
- ---------------------------------------------------------------------------
Custodian fees 151,693
- ---------------------------------------------------------------------------
Administrative services fees 58,644
- ---------------------------------------------------------------------------
Directors' fees and expenses 6,770
- ---------------------------------------------------------------------------
Organizational costs 2,892
- ---------------------------------------------------------------------------
Other 43,391
- ---------------------------------------------------------------------------
Total expenses 1,187,968
- ---------------------------------------------------------------------------
Net investment income 962,870
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) from:
Investment securities 4,411,281
- ---------------------------------------------------------------------------
Foreign currency transactions (22,907)
- ---------------------------------------------------------------------------
4,388,374
- ---------------------------------------------------------------------------
UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 17,077,175
- ---------------------------------------------------------------------------
Foreign currencies (5,602)
- ---------------------------------------------------------------------------
17,071,573
- ---------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 21,459,947
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations $22,422,817
===========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-60
<PAGE> 129
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 962,870 $ 457,524
- -----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities and foreign currency transactions 4,388,374 (107,659)
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currencies 17,071,573 13,454,304
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 22,422,817 13,804,169
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (377,734) (123,270)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 61,436,140 13,556,877
- -----------------------------------------------------------------------------
Net increase in net assets 83,481,223 27,237,776
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 82,256,855 55,019,079
- -----------------------------------------------------------------------------
End of period $165,738,078 $82,256,855
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $133,188,811 $71,752,671
- -----------------------------------------------------------------------------
Undistributed net investment income 937,128 374,899
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions 3,305,038 (1,106,243)
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 28,307,101 11,235,528
- -----------------------------------------------------------------------------
$165,738,078 $82,256,855
=============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. 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.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at the last sales price on the exchange on
which the security is traded or, lacking any sales, at the mean between the
closing bid and asked prices on the day of valuation. If a mean is not
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales prices. Securities traded in the over-the-counter
market are valued at the mean between the closing bid and asked prices on
valuation date. 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.
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 yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by
AIM V.I. INTERNATIONAL EQUITY FUND
FS-61
<PAGE> 130
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Investments with
maturities of 60 days or less are valued on the basis of 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 forward 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 forward 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 forward 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, 1996,
undistributed net investment income was reduced by $22,907 and
undistributed net realized gains increased by $22,907 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, 1996, AIM was reimbursed $58,644 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, 1996, the Fund incurred legal fees of
$3,038 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 - 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,
1996 was $126,478,982 and $67,602,207, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $31,818,972
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (3,535,477)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $28,283,495
==========================================================================
</TABLE>
Cost of investments for tax purposes is $135,613,043.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
---------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- --------- -----------
<S> <C> <C> <C> <C>
Sold 4,432,824 $66,189,679 1,612,585 $20,607,902
- --------------------------------------------------------------------------
Issued as reinvestment of
distributions 23,877 377,734 9,199 123,270
- --------------------------------------------------------------------------
Reacquired (347,543) (5,131,273) (591,239) (7,174,295)
- --------------------------------------------------------------------------
4,109,158 $61,436,140 1,030,545 $13,556,877
==========================================================================
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-62
<PAGE> 131
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
-------------------- -------------------
1996 1995 1995 1994
-------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 13.66 $ 11.03 $ 12.49 $ 10.00
- --------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.07 0.07 0.06 --
- --------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.67 2.58 (1.49) 2.49
- --------------------------------------------------------------------------------
Total from investment
operations 2.74 2.65 (1.43) 2.49
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------
Net asset value, end of
period $ 16.36 $ 13.66 $ 11.03 $ 12.49
================================================================================
Total return(a) 20.05% 24.04% (11.48)% 24.90%
================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $165,738 $82,257 $55,019 $23,533
================================================================================
Ratio of expenses to
average net assets 0.96%(b) 1.15%(c) 1.27%(d) 1.98%(c)(e)
================================================================================
Ratio of net investment
income to average net
assets 0.78%(b) 0.75%(c) 0.60%(d) (0.15)%(c)(e)
================================================================================
Portfolio turnover rate 59% 67% 64% 26%
================================================================================
Average broker commission
rate(f) $ 0.0209 N/A N/A N/A
================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $123,199,030.
(c) Annualized.
(d) Ratios of expenses and net investment income to average net assets prior
to waiver of advisory fees are 1.28% and 0.59%, respectively.
(e) Annualized ratios of expenses and net investment income (loss) to average
net assets prior to waiver of advisory fees are 3.06% and (1.23)%,
respectively.
(f) Disclosure requirement beginning with the Fund's fiscal year ended
December 31, 1996.
NOTE 7 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-63
<PAGE> 132
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,
1996, the related statement of operations for the year then ended, the
statement of changes in net assets for the year then ended and the eleven
month period ended December 31, 1995 and the financial highlights for the year
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 amount and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1996, 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, 1996, the results of its operations
for the year then ended, the changes in its net assets for the year then ended
and the eleven month period ended December 31, 1995 and the financial
highlights for the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. MONEY MARKET FUND
FS-64
<PAGE> 133
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
Par (000) VALUE
<S> <C> <C>
COMMERCIAL PAPER - 51.85%(a)
ASSET-BACKED SECURITIES - 24.19%
Asset Securitization Cooperative Corp.,
5.32%, 01/17/97 $3,165 $ 3,157,517
- --------------------------------------------------------------------
Delaware Funding Corp.,
5.34%, 01/31/97 2,292 2,281,801
- --------------------------------------------------------------------
Monte Rosa Capital Corp.
5.50%, 01/22/97 1,000 996,792
- --------------------------------------------------------------------
5.36%, 03/12/97 2,000 1,979,156
- --------------------------------------------------------------------
Preferred Receivables Funding Corp.,
5.37%, 02/05/97 900 895,301
- --------------------------------------------------------------------
Receivables Capital Corp.,
5.43%, 01/16/97 3,069 3,062,056
- --------------------------------------------------------------------
Sheffield Receivables Corp.,
5.32%, 01/09/97 3,000 2,996,453
- --------------------------------------------------------------------
15,369,076
- --------------------------------------------------------------------
AUTOMOBILE - 4.68%
Ford Motor Credit Co.,
5.32%, 02/27/97 3,000 2,974,730
- --------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 4.70%
Merrill Lynch & Co., Inc.,
5.35%, 02/04/97 3,000 2,984,842
- --------------------------------------------------------------------
CHEMICALS - 3.89%
Bayer Corp.,
5.37%, 03/17/97 2,500 2,472,031
- --------------------------------------------------------------------
COMPUTERS & OFFICE EQUIPMENT - 5.00%
Electronic Data Systems Corp.,
5.30%, 02/18/97 3,200 3,177,387
- --------------------------------------------------------------------
ENTERTAINMENT - 1.55%
Walt Disney Co. (The),
5.31%, 03/31/97 1,000 986,872
- --------------------------------------------------------------------
FINANCE (MISCELLANEOUS) - 3.12%
BTR Dunlop Finance Inc.,
5.33%, 03/06/97 1,000 990,524
- --------------------------------------------------------------------
International Lease Finance Corp.,
5.31%, 03/04/97 1,000 990,855
- --------------------------------------------------------------------
1,981,379
- --------------------------------------------------------------------
PUBLISHING - 4.72%
Donnelley (R.R.) & Sons Co.,
5.32%, 01/13/97 3,000 2,994,680
- --------------------------------------------------------------------
Total Commercial Paper 32,940,997
- --------------------------------------------------------------------
MEDIUM-TERM NOTE - 4.72%
FINANCE (BUSINESS CREDIT) - 4.72%
CIT Group Holdings (The), Inc.,
5.61%, 03/19/97(b) 3,000 2,999,574
- --------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 3.94%
Federal National Mortgage Association - 3.15%
5.29%, 06/02/99(c) 2,000 2,000,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Par (000) VALUE
<S> <C> <C>
Student Loan Marketing Association - 0.79%
5.24%, 08/20/98(c) $500 $ 499,944
- -----------------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,944
- -----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 14.17%
Citicorp Securities, Inc.,
7.25%, 01/27/97(d) 3,000 3,000,000
- -----------------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.,
5.563%, 04/07/97(e) 3,000 3,000,000
- -----------------------------------------------------------------------------
Morgan Stanley Group Inc.,
7.10%, 05/28/97(d) 3,000 3,000,000
- -----------------------------------------------------------------------------
Total Master Note Agreements 9,000,000
- -----------------------------------------------------------------------------
PROMISSORY NOTE AGREEMENT - 4.72%
Goldman, Sachs & Co.,
7.13%, 04/23/97 3,000 3,000,000
- -----------------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 50,440,515
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 20.39%(f)
Daiwa Securities America Inc.,
6.25%, 01/02/97(g) 9,121 9,120,800
- -----------------------------------------------------------------------------
Dresdner Securities (USA), Inc.,
7.05%, 01/02/97(h) 3,833 3,833,494
- -----------------------------------------------------------------------------
Total Repurchase Agreements 12,954,294
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.79% 63,394,809(i)
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.21% 134,684
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $63,529,493
=============================================================================
</TABLE>
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) Interest rates are redetermined daily. Rates shown are in effect for
period ending December 31, 1996.
(c) Interest rates are redetermined weekly. Rates shown are in effect for the
period ending December 31, 1996.
(d) The Portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon 3 business days' notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown
is the rate in effect on December 31, 1996.
(e) The Portfolio 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 December 31, 1996.
(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
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.
(g) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
(h) Joint repurchase agreement entered into 12/31/96 with a maturing value of
$100,039,167. Collateralized by $136,515,003 U.S. Treasury obligations, 0%
to 9.00% due 01/01/09 to 08/01/34.
(i) Also represents cost for income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-65
<PAGE> 134
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
ASSETS:
<S> <C>
Investments, excluding repurchase agreements, at value (amortized
cost) $ 50,440,515
- -------------------------------------------------------------------------------
Repurchase agreements 12,954,294
- -------------------------------------------------------------------------------
Receivables for:
Capital stock sold 85,058
- -------------------------------------------------------------------------------
Interest 76,453
- -------------------------------------------------------------------------------
Organizational costs, net 3,856
- -------------------------------------------------------------------------------
Investment for deferred compensation plan 11,716
- -------------------------------------------------------------------------------
Other assets 438
- -------------------------------------------------------------------------------
Total assets 63,572,330
- -------------------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 11,716
- -------------------------------------------------------------------------------
Accrued advisory fees 21,466
- -------------------------------------------------------------------------------
Accrued administrative service fees 3,462
- -------------------------------------------------------------------------------
Accrued directors' fees 1,755
- -------------------------------------------------------------------------------
Accrued operating expenses 4,438
- -------------------------------------------------------------------------------
Total liabilities 42,837
- -------------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 63,529,493
===============================================================================
Capital shares, $.001 par value per share:
Authorized 250,000,000
- -------------------------------------------------------------------------------
Outstanding 63,529,436
===============================================================================
Net asset value, offering and redemption price per share $ 1.00
===============================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,570,828
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 264,855
- -------------------------------------------------------------------------------
Custodian fees 23,908
- -------------------------------------------------------------------------------
Administrative services fees 29,412
- -------------------------------------------------------------------------------
Directors' fees and expenses 7,960
- -------------------------------------------------------------------------------
Organizational costs 2,892
- -------------------------------------------------------------------------------
Other 34,326
- -------------------------------------------------------------------------------
Total expenses 363,353
- -------------------------------------------------------------------------------
Net investment income 3,207,475
- -------------------------------------------------------------------------------
Net realized gain on sales of investment securities 16,294
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,223,769
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-66
<PAGE> 135
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,207,475 $ 2,278,242
- ------------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities 16,294 (17,141)
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,223,769 2,261,101
- ------------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (1,992,555) 34,506,043
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,207,475) (2,278,242)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (1,976,261) 34,488,902
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 65,505,754 31,016,852
- ------------------------------------------------------------------------------
End of period $63,529,493 $65,505,754
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $63,529,436 $65,521,991
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) on sales of
investment securities 57 (16,237)
- ------------------------------------------------------------------------------
$63,529,493 $65,505,754
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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 following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements. 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.
A. Security Valuations - The Fund invests only in securities which have
maturities of 397 days or less from the date of purchase. The 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. 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. 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. 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-67
<PAGE> 136
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, 1996, AIM was reimbursed $29,412 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, 1996, the Fund incurred legal fees of
$2,950 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 - 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 year ended December 31, 1996
and the eleven months ended December 31, 1995 were as follows:
<TABLE>
<CAPTION>
1996 1995
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold 76,145,573 $ 76,145,573 80,119,672 $ 80,119,672
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 3,207,475 3,207,475 2,278,242 2,278,242
- ---------------------- ----------- ------------ ----------- ------------
Reacquired (81,345,603) (81,345,603) (47,891,871) (47,891,871)
- ---------------------- ----------- ------------ ----------- ------------
(1,992,555) $ (1,992,555) 34,506,043 $ 34,506,043
=========== ============ =========== ============
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------- -------------------
1996 1995 1995 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning
of period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.05 0.05 0.04 0.02
- -------------------------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.04) (0.02)
- -------------------------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -------------------------- ======= ======= ======= =======
Total return 4.97% 5.69%(a) 3.98% 2.27%(a)
- -------------------------- ======= ======= ======= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period
(000s omitted) $63,529 $65,506 $31,017 $13,891
- -------------------------- ======= ======= ======= =======
Ratio of expenses to
average net assets 0.55%(b) 0.53%(a) 0.63%(c) 0.95%(a)(d)
- -------------------------- ======= ======= ======= =======
Ratio of net investment
income to average net
assets 4.84%(b) 5.40%(a) 4.14%(c) 2.29%(a)(d)
- -------------------------- ======= ======= ======= =======
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $66,213,747.
(c) Ratios of expenses and net investment income to average net assets prior
to waiver of advisory fees are 0.70% and 4.07%, respectively.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees are 1.53% and 1.70%, respectively.
NOTE 6 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger
pursuant to which AIM Management will be merged with and into a direct wholly-
owned subsidiary of INVESCO plc. AIM Management is the parent company of the
Fund's advisor. The merger is expected to take place during the first quarter
of 1997.
AIM V.I. MONEY MARKET FUND
FS-68
<PAGE> 137
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, 1996, the
related statement of operations for the year then ended, the statement of
changes in net assets for the year then ended and the eleven month period ended
December 31, 1995 and the financial highlights for the year 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, 1996, 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. Value Fund, as of December 31, 1996, the results of its operations for the
year then ended, the changes in its net assets for the year then ended and the
eleven month period ended December 31, 1995 and the financial highlights for
the year 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
January 31, 1997
AIM V.I. VALUE FUND
FS-69
<PAGE> 138
SCHEDULE OF INVESTMENTS
December 31, 1996
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 67.67%
AEROSPACE/DEFENSE - 0.88%
Boeing Co. 22,000 $ 2,340,250
- ---------------------------------------------------------------
United Technologies Corp. 14,000 924,000
- ---------------------------------------------------------------
3,264,250
- ---------------------------------------------------------------
AUTOMOBILE/TRUCK PARTS & TIRES - 0.17%
Borg-Warner Automotive, Inc. 16,000 616,000
- ---------------------------------------------------------------
BEVERAGES (SOFT DRINKS) - 0.29%
PepsiCo, Inc. 37,000 1,082,250
- ---------------------------------------------------------------
BIOTECHNOLOGY - 1.15%
Biogen, Inc.(a) 40,400 1,565,500
- ---------------------------------------------------------------
Guidant Corp. 47,000 2,679,000
- ---------------------------------------------------------------
4,244,500
- ---------------------------------------------------------------
BUSINESS SERVICES - 0.10%
Cognizant Corp. 11,000 363,000
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.82%
IMC Global, Inc. 44,000 1,721,500
- ---------------------------------------------------------------
Praxair, Inc. 28,000 1,291,500
- ---------------------------------------------------------------
3,013,000
- ---------------------------------------------------------------
COMPUTER MAINFRAMES - 0.18%
International Business Machines Corp. 4,500 679,500
- ---------------------------------------------------------------
COMPUTER MINI/PCS - 0.44%
Sun Microsystems, Inc.(a) 22,500 577,969
- ---------------------------------------------------------------
Wang Laboratories, Inc.(a) 52,500 1,063,125
- ---------------------------------------------------------------
1,641,094
- ---------------------------------------------------------------
COMPUTER NETWORKING - 0.51%
Cisco Systems, Inc.(a) 15,000 954,375
- ---------------------------------------------------------------
Comverse Technology, Inc.(a) 24,500 926,407
- ---------------------------------------------------------------
1,880,782
- ---------------------------------------------------------------
COMPUTER PERIPHERALS - 0.75%
Seagate Technology, Inc.(a) 29,000 1,145,500
- ---------------------------------------------------------------
U.S. Robotics Corp.(a) 12,400 892,800
- ---------------------------------------------------------------
Western Digital Corp.(a) 13,000 739,375
- ---------------------------------------------------------------
2,777,675
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
COMPUTER SOFTWARE/SERVICES - 2.09%
American Management Systems, Inc.(a) 51,000 $ 1,249,500
- ------------------------------------------------------------------
Computer Associates International, Inc. 21,000 1,044,750
- ------------------------------------------------------------------
Compuware Corp.(a) 10,100 506,263
- ------------------------------------------------------------------
Informix Corp.(a) 37,000 753,875
- ------------------------------------------------------------------
National Data Corp. 11,000 478,500
- ------------------------------------------------------------------
Network General Corp.(a) 34,000 1,028,500
- ------------------------------------------------------------------
Wallace Computer Services, Inc. 77,500 2,673,750
- ------------------------------------------------------------------
7,735,138
- ------------------------------------------------------------------
CONGLOMERATES - 0.37%
Loews Corp. 12,700 1,196,975
- ------------------------------------------------------------------
U.S. Industries, Inc.(a) 5,000 171,875
- ------------------------------------------------------------------
1,368,850
- ------------------------------------------------------------------
CONTAINERS - 0.28%
First Brands Corp. 37,000 1,049,875
- ------------------------------------------------------------------
COSMETICS & TOILETRIES - 0.22%
Clorox Co. 8,000 803,000
- ------------------------------------------------------------------
ELECTRIC POWER - 4.90%
Allegheny Power System, Inc. 77,000 2,338,875
- ------------------------------------------------------------------
American Electric Power Co. 94,000 3,865,750
- ------------------------------------------------------------------
Baltimore Gas & Electric Co. 29,000 775,750
- ------------------------------------------------------------------
Consolidated Edison Co. of New York, Inc. 51,000 1,491,750
- ------------------------------------------------------------------
DQE, Inc. 21,000 609,000
- ------------------------------------------------------------------
Duke Power Co. 18,000 832,500
- ------------------------------------------------------------------
Edison International 62,600 1,244,175
- ------------------------------------------------------------------
Entergy Corp. 36,000 999,000
- ------------------------------------------------------------------
FPL Group, Inc. 18,000 828,000
- ------------------------------------------------------------------
Illinova Corp. 32,300 888,250
- ------------------------------------------------------------------
Texas Utilities Co. 21,000 855,750
- ------------------------------------------------------------------
Unicom Corp. 121,200 3,287,550
- ------------------------------------------------------------------
18,016,350
- ------------------------------------------------------------------
FINANCE (ASSET MANAGEMENT) - 0.55%
Merrill Lynch & Co., Inc. 25,000 2,037,500
- ------------------------------------------------------------------
FINANCE (CONSUMER CREDIT) - 5.24%
Federal Home Loan Mortgage Corp. 18,000 1,982,250
- ------------------------------------------------------------------
Federal National Mortgage Association 363,000 13,521,750
- ------------------------------------------------------------------
Student Loan Marketing Association 41,900 3,901,938
- ------------------------------------------------------------------
19,405,938
- ------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
FS-70
<PAGE> 139
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
FOOD/PROCESSING - 2.75%
Archer-Daniels-Midland Co. 181,000 $ 3,982,000
- ----------------------------------------------------------------
Flowers Industries, Inc. 50,000 1,075,000
- ----------------------------------------------------------------
Interstate Bakeries Corp. 29,000 1,424,625
- ----------------------------------------------------------------
Nabisco Holdings Corp. - Class A 46,600 1,811,575
- ----------------------------------------------------------------
Ralcorp Holdings, Inc.(a) 38,400 811,200
- ----------------------------------------------------------------
Ralston-Ralston Purina Group 14,600 1,071,275
- ----------------------------------------------------------------
10,175,675
- ----------------------------------------------------------------
FUNERAL SERVICES - 0.86%
Service Corp. International 101,000 2,828,000
- ----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 10,000 340,000
- ----------------------------------------------------------------
3,168,000
- ----------------------------------------------------------------
GAS DISTRIBUTION - 0.11%
KN Energy, Inc. 10,000 392,500
- ----------------------------------------------------------------
HOME BUILDING - 0.20%
Clayton Homes, Inc. 55,000 742,500
- ----------------------------------------------------------------
HOTELS/MOTELS - 0.09%
Choice Hotels International, Inc.(a) 18,000 317,250
- ----------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.99%
Conseco Inc. 14,300 911,625
- ----------------------------------------------------------------
Provident Companies, Inc. 36,000 1,741,500
- ----------------------------------------------------------------
Safeco Corp. 26,000 1,025,375
- ----------------------------------------------------------------
3,678,500
- ----------------------------------------------------------------
INSURANCE (MULTI-LINE PROPERTY) - 6.75%
Allstate Corp. 67,500 3,906,563
- ----------------------------------------------------------------
American International Group, Inc. 36,000 3,897,000
- ----------------------------------------------------------------
Chubb Corp. 13,900 747,124
- ----------------------------------------------------------------
CIGNA Corp. 25,000 3,415,625
- ----------------------------------------------------------------
CNA Financial Corp.(a) 14,000 1,498,000
- ----------------------------------------------------------------
Exel Limited 52,000 1,969,500
- ----------------------------------------------------------------
ITT Hartford Group, Inc. 44,000 2,970,000
- ----------------------------------------------------------------
MBIA, Inc. 18,000 1,822,500
- ----------------------------------------------------------------
Progressive Corp. 10,100 680,488
- ----------------------------------------------------------------
Transatlantic Holdings, Inc. 7,200 579,600
- ----------------------------------------------------------------
Travelers Group, Inc. 77,333 3,508,985
- ----------------------------------------------------------------
24,995,385
- ----------------------------------------------------------------
LEISURE & RECREATION - 0.96%
Callaway Golf Co. 51,000 1,466,250
- ----------------------------------------------------------------
Carnival Corp. - Class A 62,900 2,075,700
- ----------------------------------------------------------------
3,541,950
- ----------------------------------------------------------------
MACHINERY (HEAVY) - 0.16%
Case Corp. 11,000 599,500
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
MACHINERY (MISCELLANEOUS) - 0.38%
Pentair, Inc. 43,500 $ 1,402,875
- ---------------------------------------------------------------
MEDICAL (DRUGS) - 4.70%
American Home Products Corp. 36,000 2,110,500
- ---------------------------------------------------------------
Bristol-Meyers Squibb Co. 80,000 8,700,000
- ---------------------------------------------------------------
ICN Pharmaceuticals, Inc. 51,560 1,011,865
- ---------------------------------------------------------------
R.P. Scherer Corp.(a) 18,400 924,600
- ---------------------------------------------------------------
Rhone-Poulenc Rorer, Inc. 35,200 2,750,000
- ---------------------------------------------------------------
Schering-Plough Corp. 29,000 1,877,750
- ---------------------------------------------------------------
17,374,715
- ---------------------------------------------------------------
MEDICAL (INSTRUMENTS/PRODUCTS) - 4.21%
Baxter International, Inc. 274,200 11,242,200
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 22,000 1,320,000
- ---------------------------------------------------------------
Hillenbrand Industries, Inc. 29,400 1,065,750
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 29,000 1,236,125
- ---------------------------------------------------------------
Sybron International Corp.(a) 22,000 726,000
- ---------------------------------------------------------------
15,590,075
- ---------------------------------------------------------------
MEDICAL (PATIENT SERVICES) - 6.13%
Columbia/HCA Healthcare Corp. 311,000 12,673,250
- ---------------------------------------------------------------
Health Care and Retirement Corp.(a) 43,000 1,230,875
- ---------------------------------------------------------------
Manor Care, Inc. 18,000 486,000
- ---------------------------------------------------------------
MedPartners, Inc.(a) 274,050 5,755,050
- ---------------------------------------------------------------
OrNda HealthCorp(a) 66,000 1,930,500
- ---------------------------------------------------------------
Quorum Health Group, Inc.(a) 21,000 624,750
- ---------------------------------------------------------------
22,700,425
- ---------------------------------------------------------------
NATURAL GAS PIPELINE - 1.33%
Columbia Gas System, Inc. 26,000 1,654,250
- ---------------------------------------------------------------
El Paso Natural Gas Co. 64,300 3,247,150
- ---------------------------------------------------------------
4,901,400
- ---------------------------------------------------------------
OFFICE PRODUCTS - 0.35%
Reynolds & Reynolds Co. - Class A 49,600 1,289,600
- ---------------------------------------------------------------
OIL & GAS (REFINING/MARKETING) - 0.47%
Tosco Corp. 22,160 1,753,410
- ---------------------------------------------------------------
OIL & GAS (SERVICES) - 2.80%
Halliburton Co. 17,200 1,036,300
- ---------------------------------------------------------------
Mobil Corp. 11,000 1,344,750
- ---------------------------------------------------------------
NorAm Energy Corp. 36,000 553,500
- ---------------------------------------------------------------
Oryx Energy Co.(a) 146,000 3,613,500
- ---------------------------------------------------------------
Pennzoil Co. 26,000 1,469,000
- ---------------------------------------------------------------
Unocal Corp. 57,400 2,331,875
- ---------------------------------------------------------------
10,348,925
- ---------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
FS-71
<PAGE> 140
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
OIL EQUIPMENT & SUPPLIES - 1.65%
Baker Hughes, Inc. 74,000 $ 2,553,000
- ------------------------------------------------------------------------------
BJ Services Co.(a) 26,500 1,351,500
- ------------------------------------------------------------------------------
Noble Drilling Corp.(a) 44,000 874,500
- ------------------------------------------------------------------------------
Tidewater, Inc. 29,200 1,321,300
- ------------------------------------------------------------------------------
6,100,300
- ------------------------------------------------------------------------------
PUBLISHING - 0.47%
Gannett Company, Inc. 12,300 920,963
- ------------------------------------------------------------------------------
Knight-Ridder, Inc. 11,000 420,750
- ------------------------------------------------------------------------------
Scripps Co. (E.W.) - Class A 11,000 385,000
- ------------------------------------------------------------------------------
1,726,713
- ------------------------------------------------------------------------------
RETAIL (FOOD & DRUG) - 0.92%
American Stores Co. 33,000 1,348,874
- ------------------------------------------------------------------------------
Safeway, Inc.(a) 48,000 2,052,000
- ------------------------------------------------------------------------------
3,400,874
- ------------------------------------------------------------------------------
RETAIL (STORES) - 0.05%
Meyer (Fred), Inc.(a) 5,400 191,700
- ------------------------------------------------------------------------------
SHOES & RELATED APPAREL - 0.25%
Nike, Inc. - Class B 15,400 920,150
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.56%
Lucent Technologies, Inc. 37,100 1,715,874
- ------------------------------------------------------------------------------
MFS Communications Co., Inc.(a) 176,819 9,636,634
- ------------------------------------------------------------------------------
WorldCom, Inc.(a) 210,700 5,491,369
- ------------------------------------------------------------------------------
16,843,877
- ------------------------------------------------------------------------------
TELEPHONE - 3.33%
Ameritech Corp. 115,900 7,026,437
- ------------------------------------------------------------------------------
BellSouth Corp. 72,000 2,907,000
- ------------------------------------------------------------------------------
Cincinnati Bell, Inc. 14,000 862,750
- ------------------------------------------------------------------------------
SBC Communications, Inc. 29,000 1,500,750
- ------------------------------------------------------------------------------
12,296,937
- ------------------------------------------------------------------------------
TOBACCO - 4.26%
DIMON, Inc. 42,000 971,250
- ------------------------------------------------------------------------------
Philip Morris Companies, Inc. 95,000 10,699,375
- ------------------------------------------------------------------------------
RJR Nabisco Holdings Corp. 120,100 4,083,400
- ------------------------------------------------------------------------------
15,754,025
- ------------------------------------------------------------------------------
Total Domestic Common Stocks 250,185,963
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 18.18%
ARGENTINA - 0.38%
YPF Sociedad Anonima - ADR (Oil & Gas - Exploration &
Production) 55,000 1,388,750
- ------------------------------------------------------------------------------
AUSTRALIA - 0.50%
Westpac Banking Corp., Ltd. (Banking) 322,163 1,833,469
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
BERMUDA - 0.02%
PartnerRe Ltd. (Insurance - Multi-Line Property) 2,000 $ 68,000
- ---------------------------------------------------------------------------
BRAZIL - 0.17%
Telecomunicacoes Brasileiras S.A. Telebras - ADR
(Telecommunications) 8,000 612,000
- ---------------------------------------------------------------------------
CANADA - 2.80%
Canadian National Railway Co. (Railroads) 58,000 2,204,000
- ---------------------------------------------------------------------------
Canadian Pacific, Ltd. (Transportation) 224,000 5,936,000
- ---------------------------------------------------------------------------
CanWest Global Communications Corp.
(Advertising/Broadcasting) 63,000 645,750
- ---------------------------------------------------------------------------
Northern Telecom Ltd. (Telecommunications) 15,000 928,125
- ---------------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc. (Chemicals) 7,300 620,500
- ---------------------------------------------------------------------------
10,334,375
- ---------------------------------------------------------------------------
DENMARK - 0.64%
Danisco A.S. (Food/Processing) 19,000 1,154,682
- ---------------------------------------------------------------------------
Novo Nordisk A.S. - Class B (Medical - Drugs) 6,500 1,224,791
- ---------------------------------------------------------------------------
2,379,473
- ---------------------------------------------------------------------------
FRANCE - 0.18%
Rhone-Poulenc Rorer, Inc. - Class A (Medical - Drugs) 19,100 651,207
- ---------------------------------------------------------------------------
GERMANY - 0.47%
VEBA A.G. (Electric Power) 29,900 1,729,335
- ---------------------------------------------------------------------------
HONG KONG - 1.10%
Cheung Kong Holdings Ltd. (Real Estate) 125,000 1,111,093
- ---------------------------------------------------------------------------
Citic Pacific Ltd. (Banking) 170,000 986,877
- ---------------------------------------------------------------------------
First Pacific Company Ltd. (Conglomerates) 276,000 358,627
- ---------------------------------------------------------------------------
Hang Seng Bank Ltd. (Banking) 45,000 546,900
- ---------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Real Estate) 91,000 1,114,778
- ---------------------------------------------------------------------------
4,118,275
- ---------------------------------------------------------------------------
ITALY - 1.68%
Edison S.p.A. (Electric Power) 110,000 693,428
- ---------------------------------------------------------------------------
Fila Holding S.p.A. - ADR (Retail - Stores) 14,200 825,375
- ---------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banking) 130,300 1,111,458
- ---------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications) 590,000 1,495,419
- ---------------------------------------------------------------------------
Telecom Italia S.p.A. (Telecommunications) 810,000 2,103,757
- ---------------------------------------------------------------------------
6,229,437
- ---------------------------------------------------------------------------
JAPAN - 0.42%
Bank of Tokyo - Mitsubishi Ltd. (Banking) 700 12,996
- ---------------------------------------------------------------------------
Fuji Photo Film (Leisure & Recreation) 31,000 1,022,538
- ---------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobile - Manufacturers) 18,000 514,463
- ---------------------------------------------------------------------------
1,549,997
- ---------------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
FS-72
<PAGE> 141
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
NETHERLANDS - 0.90%
Royal Dutch Petroleum Co. (Oil & Gas - Services) 7,300 $ 1,246,475
- ----------------------------------------------------------------------------
VNU - Verenigde Nederlandse Uitgeversbedrijven
Verenigd Bezit (Publishing) 100,000 2,090,935
- ----------------------------------------------------------------------------
3,337,410
- ----------------------------------------------------------------------------
NORWAY - 0.18%
Storebrand A.S.A. (Insurance - Multi-Line
Property)(a) 114,350 656,664
- ----------------------------------------------------------------------------
PHILIPPINES - 0.28%
C & P Homes, Inc. (Home Building) 402,000 206,350
- ----------------------------------------------------------------------------
Filinvest Land Inc. (Real Estate)(a) 793,500 247,404
- ----------------------------------------------------------------------------
Metro Pacific Corp. (Conglomerates) 2,348,000 580,304
- ----------------------------------------------------------------------------
1,034,058
- ----------------------------------------------------------------------------
SPAIN - 1.60%
Banco Popular Espanol S.A. (Banking) 7,000 1,374,928
- ----------------------------------------------------------------------------
Empresa Nacional de Electricidad, S.A.
(Electric Power) 37,500 2,668,977
- ----------------------------------------------------------------------------
Iberdrola S.A. (Electric Power) 131,500 1,863,740
- ----------------------------------------------------------------------------
5,907,645
- ----------------------------------------------------------------------------
SWEDEN - 1.20%
Hennes & Mauritz A.B. - B Shares (Retail - Stores) 11,000 1,522,603
- ----------------------------------------------------------------------------
Nordbanken A.B. (Banking) 9,150 277,053
- ----------------------------------------------------------------------------
Skandinaviska Enskilda Banken - Class A (Banking) 150,000 1,539,612
- ----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR
(Telecommunications) 36,000 1,086,750
- ----------------------------------------------------------------------------
4,426,018
- ----------------------------------------------------------------------------
SWITZERLAND - 1.82%
Novartis A.G. (Medical - Drugs)(a) 5,866 6,718,743
- ----------------------------------------------------------------------------
THAILAND - 0.18%
Krung Thai Bank PLC (Banking) 215,300 415,556
- ----------------------------------------------------------------------------
Thai Farmers Bank PLC (Banking) 37,900 236,450
- ----------------------------------------------------------------------------
Thai Farmers Bank PLC - Wts., expiring 09/15/02
(Banking)(a) 5,000 4,728
- ----------------------------------------------------------------------------
656,734
- ----------------------------------------------------------------------------
UNITED KINGDOM - 3.66%
Granada Group PLC (Leisure & Recreation) 160,000 2,365,598
- ----------------------------------------------------------------------------
Railtrack Group PLC (Railroads) 125,000 829,836
- ----------------------------------------------------------------------------
SmithKline Beecham PLC - ADR (Medical - Drugs) 110,000 7,480,000
- ----------------------------------------------------------------------------
Standard Chartered PLC (Finance - Asset Management) 160,000 1,976,358
- ----------------------------------------------------------------------------
Unilever PLC (Consumer Non-Durables) 38,000 922,169
- ----------------------------------------------------------------------------
13,573,961
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 67,205,551
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET
VALUE
<S> <C> <C>
PREFERRED STOCKS - 0.37%
INSURANCE (LIFE & HEALTH) - 0.11%
Conseco Inc. - $4.278 Conv. PRIDES 3,600 $ 409,500
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.26%
MFS Communications Company, Inc. -
$2.68 Conv. Pfd. 10,400 949,000
- -----------------------------------------------------------------------------
Total Preferred Stocks 1,358,500
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
CONVERTIBLE CORPORATE BONDS - 0.23%
COMPUTER SOFTWARE/SERVICES - 0.23%
First Financial Management Corp., Conv. Deb., 5.00%,
12/15/99 $ 500,000 865,285
- -----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 4.22%
U.S. TREASURY BILLS(b) - 4.22%
5.22%, 01/02/97 9,175,000 9,173,669
- -----------------------------------------------------------------------------
5.16%, 03/06/97 6,500,000 6,444,815
- -----------------------------------------------------------------------------
Total U.S. Treasury Securities 15,618,484
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS(c) - 9.05%
Daiwa Securities America, Inc.
6.25%, 01/02/97(d) 33,466,561 33,466,561
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.72% 368,700,344
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.28% 1,034,802
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $369,735,146
=============================================================================
</TABLE>
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) 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 agreement entered into 12/31/96 with a maturing value of
$360,125,000. Collateralized by $355,195,000 U.S. Treasury obligations, 0%
to 8.875% due 06/12/97 to 08/15/26.
Abbreviations:
ADR- American Depository Receipt
Conv.- Convertible
Deb.- Debentures
Pfd.- Preferred
PRIDES- Preferred Redemption Increase Dividend Equity Security
Wts.- Warrants
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-73
<PAGE> 142
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1996
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $318,691,166) $368,700,344
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $3,526,022) 3,502,077
- ----------------------------------------------------------------------
Receivables for:
Investments sold 1,301,331
- ----------------------------------------------------------------------
Capital stock sold 188,978
- ----------------------------------------------------------------------
Dividends and interest 675,049
- ----------------------------------------------------------------------
Investment for deferred compensation plan 12,897
- ----------------------------------------------------------------------
Organizational costs, net 3,856
- ----------------------------------------------------------------------
Other assets 1,173
- ----------------------------------------------------------------------
Total assets 374,385,705
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,030,159
- ----------------------------------------------------------------------
Capital stock reacquired 82,384
- ----------------------------------------------------------------------
Options written 1,268,208
- ----------------------------------------------------------------------
Deferred compensation 12,897
- ----------------------------------------------------------------------
Accrued advisory fees 194,159
- ----------------------------------------------------------------------
Accrued directors' fees 1,800
- ----------------------------------------------------------------------
Accrued administrative services fees 4,651
- ----------------------------------------------------------------------
Accrued operating expenses 56,301
- ----------------------------------------------------------------------
Total liabilities 4,650,559
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $369,735,146
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 21,152,339
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $17.48
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1996
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $114,260 foreign withholding tax) $ 5,244,028
- ----------------------------------------------------------------------------
Interest 3,073,729
- ----------------------------------------------------------------------------
Total investment income 8,317,757
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,955,091
- ----------------------------------------------------------------------------
Custodian fees 134,690
- ----------------------------------------------------------------------------
Administrative service fees 47,116
- ----------------------------------------------------------------------------
Directors' fees and expenses 7,749
- ----------------------------------------------------------------------------
Organizational costs 2,892
- ----------------------------------------------------------------------------
Other 77,745
- ----------------------------------------------------------------------------
Total expenses 2,225,283
- ----------------------------------------------------------------------------
Net investment income 6,092,474
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 17,324,865
- ----------------------------------------------------------------------------
Foreign currencies (31,597)
- ----------------------------------------------------------------------------
Futures contracts 363,031
- ----------------------------------------------------------------------------
Option contracts 1,659,582
- ----------------------------------------------------------------------------
19,315,881
- ----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of:
Investment securities 20,887,238
- ----------------------------------------------------------------------------
Foreign currencies (44,227)
- ----------------------------------------------------------------------------
Futures contracts (773,579)
- ----------------------------------------------------------------------------
Option contracts (148,303)
- ----------------------------------------------------------------------------
19,921,129
- ----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and option contracts 39,237,010
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $45,329,484
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-74
<PAGE> 143
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1996 and the eleven months ended December 31,
1995
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,092,474 $ 1,836,245
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies, futures and
option contracts 19,315,881 19,312,304
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities, foreign currencies and
option contracts 19,921,129 25,543,678
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 45,329,484 46,692,227
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,864,217) (124,487)
- ------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (18,073,097) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 87,131,189 101,386,580
- ------------------------------------------------------------------------------
Net increase in net assets 112,523,359 147,954,320
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 257,211,787 109,257,467
- ------------------------------------------------------------------------------
End of period $369,735,146 $257,211,787
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $295,686,862 $208,555,673
- ------------------------------------------------------------------------------
Undistributed net investment income 6,016,241 1,819,581
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 18,215,756 16,941,375
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 49,816,287 29,895,158
- ------------------------------------------------------------------------------
$369,735,146 $257,211,787
==============================================================================
</TABLE>
See Notes to Financial Statements.
NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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. 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 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 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
AIM V.I. VALUE FUND
FS-75
<PAGE> 144
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, 1996,
undistributed net investment income was reduced by $31,597 and
undistributed net realized gains increased by $31,597 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 - 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.
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. Forward Currency Contracts - A forward 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 forward 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 reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1996, AIM was reimbursed $47,116 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.
AIM V.I. VALUE FUND
FS-76
<PAGE> 145
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1996, the Fund incurred legal fees of
$3,429 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 year ended December 31, 1996 was
$439,133,676 and $345,174,079, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1996 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $53,930,337
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,175,590)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $49,754,747
==========================================================================
Cost of investments for tax purposes is $318,945,597.
</TABLE>
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the year ended December 31, 1996
and the eleven months ended December 31, 1995:
<TABLE>
<CAPTION>
1996 1995
----------------------- -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Sold 5,143,694 $86,219,671 6,903,801 $103,653,052
- ------------------------- ---------- ----------- --------- ------------
Issued as reinvestment of
distributions 1,179,025 19,937,315 7,829 124,487
- ------------------------- ---------- ----------- --------- ------------
Reacquired (1,140,219) (19,025,797) (176,240) (2,390,959)
- ------------------------- ---------- ----------- --------- ------------
5,182,500 $87,131,189 6,735,390 $101,386,580
========== =========== ========= ============
</TABLE>
NOTE 6 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1996
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period -- --
Written 8,940 $2,897,960
Closed (1,605) (622,960)
Exercised (2,023) (832,926)
Expired (1,825) (322,169)
------ ----------
End of period 3,487 $1,119,905
====== ==========
</TABLE>
Open call option contracts written at December 31, 1996 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1996 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Boston Scientific Corp. Jan. 50 100 $ 34,699 $ 103,125 $ (68,426)
Case Corp. Jul. 55 110 55,553 47,437 8,116
Clorox Co. Jan. 95 80 44,918 46,000 (1,082)
Comverse Technology,
Inc. Jan. 40 70 31,569 7,875 23,694
Fila Holding S.p.A. -
ADR Jan. 75 120 84,018 1,500 82,518
Informix Corp. Jan. 20 350 55,823 47,031 8,792
Lucent Technologies,
Inc. Jan. 40 200 67,198 130,000 (62,802)
Lucent Technologies,
Inc. Jan. 45 140 52,498 29,750 22,748
MedPartners, Inc. Mar. 22.5 500 134,183 43,750 90,433
Merrill Lynch & Co.,
Inc. Jan. 75 100 43,290 70,001 (26,711)
Mobil Corp. Jan. 115 110 75,138 84,562 (9,424)
Nike Inc. - Class B Jan. 60 140 38,219 26,250 11,969
Northern Telecom Ltd. Jan. 60 70 25,094 22,312 2,782
PepsiCo, Inc. Jan. 30 350 115,817 16,406 99,411
Travelers Group, Inc. Mar. 33.75 267 102,637 333,334 (230,697)
United Technologies
Corp. Jan. 65 40 12,831 7,000 5,831
United Technologies
Corp. Jan. 67.5 40 8,805 2,500 6,305
WorldCom, Inc. Jan. 22.5 700 137,615 249,375 (111,760)
----- ---------- ---------- ---------
3,487 $1,119,905 $1,268,208 $(148,303)
===== ========== ========== =========
</TABLE>
AIM V.I. VALUE FUND
FS-77
<PAGE> 146
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1996, 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.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------- ------------------
1996 1995 1995 1994
-------- -------- -------- -------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.11 $ 11.83 $ 12.17 $ 10.00
- ------------------------- -------- -------- -------- -------
Income from investment
operations:
Net investment income 0.30 0.11 0.10 0.02
- ------------------------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.09 4.18 (0.35) 2.17
- ------------------------- -------- -------- -------- -------
Total from investment
operations 2.39 4.29 (0.25) 2.19
- ------------------------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income (0.10) (0.01) (0.09) (0.02)
- ------------------------- -------- -------- -------- -------
Dividends from realized
capital gains (0.92) -- -- --
- ------------------------- -------- -------- -------- -------
Total distributions (1.02) (0.01) (0.09) (0.02)
- ------------------------- -------- -------- -------- -------
Net asset value, end of
period $ 17.48 $ 16.11 $ 11.83 $ 12.17
- ------------------------- -------- -------- -------- -------
Total return(a) 15.02% 36.25% (2.03)% 21.94%
- ------------------------- -------- -------- -------- -------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $369,735 $257,212 $109,257 $38,255
- ------------------------- -------- -------- -------- -------
Ratio of expenses to
average net assets 0.73%(b) 0.75%(c) 0.82% 1.00%(c)(d)
- ------------------------- -------- -------- -------- -------
Ratio of net investment
income to average net
assets 2.00%(b) 1.11%(c) 1.17% 0.51%(c)(d)
- ------------------------- -------- -------- -------- -------
Portfolio turnover rate 129% 145% 143% 87%
- ------------------------- -------- -------- -------- -------
Average broker commission
rate(e) $ 0.0429 N/A N/A N/A
- ------------------------- -------- -------- -------- -------
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $304,940,393.
(c) Annualized.
(d) Annualized ratios of expenses and net investment income to average net
assets prior to waiver of advisory fees and/or expense reimbursements were
1.35% and 0.16%, respectively.
(e) Disclosure requirement beginning with the Fund's fiscal year ended December
31, 1996.
NOTE 8 - SUBSEQUENT EVENT
On November 4, 1996, A I M Management Group Inc. ("AIM Management") and
INVESCO plc announced the execution of an agreement and plan of merger pursuant
to which AIM Management will be merged with and into a direct wholly-owned
subsidiary of INVESCO plc. AIM Management is the parent company of the Fund's
advisor. The merger is expected to take place during the first quarter of 1997.
AIM V.I. VALUE FUND
FS-78
