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TABLE OF CONTENTS
<TABLE>
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AIM Variable Insurance Funds, Inc.
AIM V.I. Capital Appreciation Fund........................................ 2
AIM V.I. Diversified Income Fund.......................................... 15
AIM V.I. Global Utilities Fund............................................ 28
AIM V.I. Government Securities Fund....................................... 39
AIM V.I. Growth Fund...................................................... 48
AIM V.I. Growth and Income Fund........................................... 61
AIM V.I. International Equity Fund........................................ 74
AIM V.I. Money Market Fund................................................ 85
AIM V.I. Value Fund....................................................... 92
Directors and Officers of the Funds....................................... 104
</TABLE>
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<CAPTION>
The Managers' Overview
FUND CONTENDS WITH MARKET
FAVORING LARGE-COMPANY STOCKS
A roundtable discussion with the Fund management team for AIM V.I. Capital
Appreciation Fund about the fiscal year ended December 31, 1997.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. CAPITAL 10% of the portfolio at fiscal year -----------------------------------------
APPRECIATION FUND PERFORM DURING end. After years in the doldrums, The currency devaluations in Asia
THE FISCAL YEAR COVERED BY THIS energy stocks finally began to
REPORT? perform as technical improvements are shrinking costs, not markets,
A. The Fund's total return for the lowered the costs of exploration
fiscal year was 13.51%, off the pace while world demand remained robust. for many tech manufacturers.
the Fund has set with 18.65% average Even after the Asian shocks of late -----------------------------------------
annual total return since its 1997, when energy prices came under
inception in 1993. For most of the pressure, we continued to hold the year 2000. Portfolio holdings such
year, the Fund, which invests in promising companies in the oilfield as Compuware Corp. and Computer
small- and mid-size companies, was service area. Associates International Inc. are
bucking a market that rewarded Other themes have remained constant poised to profit from this need.
large-company stocks. throughout the fiscal year: In semiconductors, we still lean
technology, retail, and health care. toward makers of high-value,
Q. HOW WOULD YOU DESCRIBE EQUITY noncommodity products, firms like
MARKET CONDITIONS DURING THE Q. WHAT IS ATTRACTIVE ABOUT Altera Corp. and Burr-Brown Corp.,
FISCAL YEAR? TECHNOLOGY FIRMS? which enjoy a competitive edge over
A. For the year as a whole, large- A. We had approximately 31% of makers of commodity products. And
capitalization stocks again holdings in the technology sector at we still hold computer makers like
dominated the markets--another year fiscal year end. Our two largest Dell Computer Corp. and Compaq
in which a few stocks contributed industry groups in the sector were Computer Corp., which continue to
much of the rise in the major computer software/services and increase market share.
market indexes. Nearly half the 1997 semiconductors. Technology stocks took a beating
rise in the S&P 500 index of large- We expect the computer software/ after the Asian financial crisis,
capitalization stocks can be services industry to profit from the but perhaps for
accounted for by just 25 of the so-called "millennium" problem, the
stocks in that index. Such an need to reprogram older computers to
environment is a disadvantage for a recognize
highly diversified mutual fund such
as AIM V.I. Capital Appreciation PORTFOLIO COMPOSITION
Fund.
For a while during the summer and As of 12/31/97, based on total net
early fall, investors began to look assets
beyond these stocks; smaller-
capitalization stocks did very well TOP 10 COMMON STOCK HOLDINGS TOP 10 INDUSTRIES
during the third quarter of 1997.
But after the Asian financial crisis, 1. HEALTHSOUTH Corp. 1.06% 1. Oil & Gas (Drilling & Equipment) 8.60%
markets turned to more familiar, 2. MGIC Investment Corp. 0.99 2. Computer Software & Services 8.42
more liquid blue chips. During the 3. Health Management 3. Electronics (Semiconductors) 5.72
last quarter of 1997, the S&P 500 Associates, Inc. - Class A 0.97 4. Retail (Specialty) 3.95
stocks rose almost 3% in value, 4. Household International, Inc. 0.97 5. Consumer Finance 3.35
while NASDAQ small-company stocks 5. Compuware Corp. 0.96 6. Communications Equipment 3.01
declined almost 7%. 6. Safeway, Inc. 0.95 7. Health Care (Hospital
7. Tenet Healthcare Corp. 0.94 Management) 2.92
Q. DID YOU MAKE MAJOR CHANGES TO 8. ADC Telecommunications, Inc. 0.93 8. Electrical Equipment 2.84
THE PORTFOLIO DURING THE YEAR? 9. Service Corp. International 0.91 9. Computers (Hardware) 2.55
A. We raised our holdings in the 10. Maxim Integrated Products, Inc. 0.91 10. Health Care (Medical Products
energy sector. Energy stocks & Supplies) 2.54
constituted about
Please keep in mind that the Fund's portfolio composition is subject to change and
there is no assurance the Fund will continue to hold any particular security.
</TABLE>
2 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
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<CAPTION>
<S> <C> <C>
the wrong reasons. The currency think that eventually we will gravitate company stocks, especially since earnings
devaluations in Asia are shrinking toward this norm. growth for midcaps is expected to be
costs, not markets, for many tech Continuing problems in Asia could higher than for large caps.
manufacturers. slow economic growth worldwide, reducing Second, tax changes enacted during
corporate profits and stock returns. 1997 favored capital growth over income.
Q: WHY DOES THE FUND HAVE A LARGE We still haven't sorted out the true It seems intuitive to assume that
STAKE IN RETAILING? magnitude of Asia's troubles and of investors will gravitate toward growth-
A: Discount stores selling brand- their impact on the rest of the world. oriented investments such as mid-
name merchandise at reduced prices capitalization stocks, and that should
are doing well. Discounters in the Q. WHAT IS YOUR OUTLOOK FOR THE boost their performance.
portfolio include Ross Stores Inc., MIDCAP MARKET SECTOR THE NEXT FEW Third, because recent turmoil in foreign
which is expecting record earnings MONTHS? markets is a potential negative for
per share this year. Other A. We continue to be optimistic for multinational firms, investors may want to
retailers doing well include those a number of reasons: put their assets in smaller, more
emphasizing computers and First, the relative valuations of domestically oriented companies.
electronic equipment--for example, midcap stocks are attractive
CompUSA, Inc. compared to large-
As with computer manufacturers,
the currency devaluations in Asia GROWTH OF A $10,000 INVESTMENT
are lowering the cost of goods for
many U.S. retailers. From 5/5/93 - 12/31/97
Q. WHAT IS ATTRACTIVE ABOUT AIM V.I. Capital S&P 500 Lipper Capital
HEALTH-CARE STOCKS? Appreciation Fund Stock Index Appreciation Fund Index
A. Our health-care holdings (In thousands)
constituted about 13% of the 5/5/93 $10,000 $10,000 $10,000
portfolio at the close of the 7/31/93 10,390 10,155 10,542
fiscal year. 10/31/93 11,440 10,675 11,449
One factor contributing to 1/31/94 12,590 11,062 11,866
strength in the health-care sector 4/30/94 11,939 10,430 11,100
is the FDA's move toward faster 7/31/94 11,379 10,681 10,929 AVERAGE ANNUAL TOTAL RETURNS
approval of drugs and devices, a 10/31/94 12,620 11,088 11,547 As of 12/31/97
boon for companies like Arterial 1/31/95 12,097 11,123 11,312
Vascular Engineering Inc., a 4/30/95 13,623 12,247 12,242 1 Year 13.51%
maker of sophisticated devices such 7/31/95 16,534 13,462 13,937 Inception (5/5/93) 18.65
as stents used by bypass surgery. 10/31/95 16,886 14,011 14,175
We also have found good 1/31/96 16,769 15,412 15,086
opportunities in the assisted 4/30/96 18,727 15,937 16,281
living industry, operators of 7/31/96 17,000 15,678 15,114
residences where the frail or 10/31/96 19,028 17,376 16,491
elderly can live in a homelike 1/31/97 20,395 19,468 17,717
setting while receiving help with 4/30/97 18,685 19,939 16,568
everyday tasks. 7/31/97 23,341 23,848 20,106
As we have reiterated on a number 10/31/97 22,637 22,955 20,069
of occasions, demographic trends in 12/31/97 22,179 24,455 20,398
the U.S. argue for continued growth
in the health-care sector for some Past performance cannot guarantee comparable future results.
time to come.
Q. WHAT DO YOU FORESEE IN THE The performance figures shown represent the AIM V.I. Capital Appreciation Fund and are
ECONOMY AND MARKETS THE NEXT not intended to reflect actual annuity values, and do not reflect charges at the separate
FEW MONTHS? account level which, if applied, would lower the performance results. The Fund's
A. In the U.S., the economic performance figures are historical and reflect reinvestment of all distributions and
fundamentals are sound: inflation changes in the net asset value. The Fund's investment return and principal value will
is low, corporate profits are fluctuate so that Fund shares, when redeemed, may be worth more or less than their
strong, and the economy is growing original cost. Source: Towers Data Systems HYPO--Registered Trademark--.
at a healthy pace: a near-perfect The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged
environment for stocks. However, we securities widely regarded by investors to be representative of the stock market in
have had three years of unprecedented general. The unmanaged Lipper Capital Appreciation Fund Index represents an average
20%-plus returns on equity of the performance of the 30 largest capital appreciation mutual funds.
investments. History shows that over The NASDAQ (National Association of Securities Dealers Automated Quotation system)
the long term, average annual total Composite Index is a group of more than 4,500 unmanaged over-the-counter securities
return for stocks is about 10% to widely regarded by investors to be representative of the small- and medium-sized
12%. It is reasonable to company stock universe.
An investment cannot be made in the indexes listed. Index results include reinvested
dividends.
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND 3
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 94.71%
AEROSPACE/DEFENSE - 0.34%
BE Aerospace, Inc.(a) 27,500 $ 735,625
- ---------------------------------------------------------------------
Precision Castparts Corp. 17,000 1,025,313
- ---------------------------------------------------------------------
1,760,938
- ---------------------------------------------------------------------
AIR FREIGHT - 0.35%
AirNet Systems, Inc.(a) 20,000 430,000
- ---------------------------------------------------------------------
CNF Transportation Inc. 36,700 1,408,363
- ---------------------------------------------------------------------
1,838,363
- ---------------------------------------------------------------------
AIRLINES - 0.12%
Southwest Airlines Co. 24,900 613,163
- ---------------------------------------------------------------------
BANKS (REGIONAL) - 0.64%
AmSouth Bancorporation 25,000 1,357,812
- ---------------------------------------------------------------------
North Fork Bancorporation, Inc. 18,100 607,479
- ---------------------------------------------------------------------
TCF Financial Corp. 40,000 1,357,500
- ---------------------------------------------------------------------
3,322,791
- ---------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.08%
Coca-Cola Enterprises Inc. 11,800 419,637
- ---------------------------------------------------------------------
BIOTECHNOLOGY - 0.07%
Curative Technologies, Inc.(a) 12,600 382,725
- ---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.22%
CanWest Global Communications Corp. (Canada) 77,700 1,398,600
- ---------------------------------------------------------------------
Chancellor Media Corp.(a) 3,636 271,337
- ---------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 27,600 2,192,475
- ---------------------------------------------------------------------
Heftel Broadcasting Corp.(a) 22,100 1,033,175
- ---------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 1,460,937
- ---------------------------------------------------------------------
6,356,524
- ---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.01%
ADC Telecommunications, Inc.(a) 116,700 4,872,225
- ---------------------------------------------------------------------
Brightpoint, Inc.(a) 67,200 932,400
- ---------------------------------------------------------------------
DSC Communications Corp.(a) 107,300 2,575,200
- ---------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 35,000 892,500
- ---------------------------------------------------------------------
PairGain Technologies, Inc.(a) 63,100 1,222,562
- ---------------------------------------------------------------------
REMEC, Inc.(a) 7,500 168,750
- ---------------------------------------------------------------------
Scientific-Atlanta, Inc. 49,000 820,750
- ---------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 21,420 799,234
- ---------------------------------------------------------------------
Tellabs, Inc.(a) 64,800 3,426,300
- ---------------------------------------------------------------------
15,709,921
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE) - 2.55%
Citrix Systems, Inc.(a) 10,000 $ 760,000
- -----------------------------------------------------------------
Comdisco, Inc. 68,500 2,290,468
- -----------------------------------------------------------------
Compaq Computer Corp. 41,500 2,342,156
- -----------------------------------------------------------------
Concord EFS, Inc.(a) 118,200 2,940,225
- -----------------------------------------------------------------
Dell Computer Corp.(a) 34,000 2,856,000
- -----------------------------------------------------------------
IDX Systems Corp.(a) 19,600 725,200
- -----------------------------------------------------------------
Micron Electronics, Inc.(a) 29,800 271,925
- -----------------------------------------------------------------
Sun Microsystems, Inc.(a) 28,300 1,128,463
- -----------------------------------------------------------------
13,314,437
- -----------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.34%
Bay Networks, Inc.(a) 120,800 3,087,950
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 34,950 1,948,463
- -----------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 56,000 1,953,000
- -----------------------------------------------------------------
6,989,413
- -----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.11%
Adaptec, Inc.(a) 77,700 2,884,612
- -----------------------------------------------------------------
EMC Corp.(a) 129,200 3,544,925
- -----------------------------------------------------------------
Iomega Corp.(a) 114,000 1,417,875
- -----------------------------------------------------------------
Lexmark International Group, Inc.(a) 19,200 729,600
- -----------------------------------------------------------------
MicroTouch Systems, Inc.(a) 5,400 85,050
- -----------------------------------------------------------------
SMART Modular Technologies, Inc.(a) 15,000 345,000
- -----------------------------------------------------------------
Storage Technology Corp.(a) 32,600 2,019,164
- -----------------------------------------------------------------
11,026,226
- -----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 8.42%
America Online, Inc.(a) 7,700 686,744
- -----------------------------------------------------------------
Applied Voice Technology, Inc.(a) 10,000 282,500
- -----------------------------------------------------------------
Aspect Development, Inc.(a) 12,500 650,000
- -----------------------------------------------------------------
Autodesk, Inc. 38,500 1,424,500
- -----------------------------------------------------------------
Avant! Corp.(a) 28,600 479,050
- -----------------------------------------------------------------
BMC Software, Inc.(a) 66,700 4,377,188
- -----------------------------------------------------------------
Broderbund Software, Inc.(a) 35,000 896,875
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 135,900 3,329,550
- -----------------------------------------------------------------
CBT Group PLC-ADR (Ireland)(a) 900 73,913
- -----------------------------------------------------------------
Computer Associates International, Inc. 56,250 2,974,219
- -----------------------------------------------------------------
Compuware Corp.(a) 156,600 5,011,200
- -----------------------------------------------------------------
Electronic Arts, Inc.(a) 45,000 1,701,563
- -----------------------------------------------------------------
Electronics for Imaging, Inc.(a) 4,600 76,475
- -----------------------------------------------------------------
HBO & Co. 94,688 4,545,024
- -----------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
4
<PAGE>
<TABLE>
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MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - (CONTINUED)
Microsoft Corp.(a) 18,300 $ 2,365,275
- -----------------------------------------------------------------------
Network Associates, Inc.(a) 7,900 417,713
- -----------------------------------------------------------------------
Oracle Corp.(a) 30,662 684,146
- -----------------------------------------------------------------------
Parametric Technology Co.(a) 59,800 2,833,025
- -----------------------------------------------------------------------
Platinum Technology, Inc.(a) 66,800 1,887,100
- -----------------------------------------------------------------------
Security Dynamics Technologies, Inc.(a) 34,400 1,229,800
- -----------------------------------------------------------------------
Sterling Commerce, Inc.(a) 75,055 2,884,927
- -----------------------------------------------------------------------
Sterling Software, Inc.(a) 16,800 688,800
- -----------------------------------------------------------------------
Symantec Corp.(a) 38,000 833,625
- -----------------------------------------------------------------------
Synopsys, Inc.(a) 69,000 2,466,750
- -----------------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 18,600 627,750
- -----------------------------------------------------------------------
Wind River Systems(a) 15,000 595,313
- -----------------------------------------------------------------------
44,023,025
- -----------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.29%
Action Performance Companies, Inc.(a) 16,000 606,000
- -----------------------------------------------------------------------
Blyth Industries, Inc.(a) 30,400 910,100
- -----------------------------------------------------------------------
1,516,100
- -----------------------------------------------------------------------
CONSUMER FINANCE - 3.35%
Aames Financial Corp. 30,150 390,066
- -----------------------------------------------------------------------
Capital One Financial Corp. 39,100 2,118,731
- -----------------------------------------------------------------------
ContiFinancial Corp.(a) 15,000 377,813
- -----------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 48,000 1,842,000
- -----------------------------------------------------------------------
Household International, Inc. 39,600 5,051,475
- -----------------------------------------------------------------------
IMC Mortgage Co.(a) 62,000 736,250
- -----------------------------------------------------------------------
MBNA Corp. 103,988 2,840,159
- -----------------------------------------------------------------------
Money Store, Inc. (The) 40,000 840,000
- -----------------------------------------------------------------------
Providian Financial Corp. 20,000 903,750
- -----------------------------------------------------------------------
SLM Holding Corp. 17,500 2,434,688
- -----------------------------------------------------------------------
17,534,932
- -----------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.94%
Cardinal Health, Inc. 43,025 3,232,253
- -----------------------------------------------------------------------
McKesson Corp. 15,600 1,687,725
- -----------------------------------------------------------------------
4,919,978
- -----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.84%
American Power Conversion Corp.(a) 49,800 1,176,525
- -----------------------------------------------------------------------
Avid Technology, Inc.(a) 18,700 500,225
- -----------------------------------------------------------------------
AVX Corp. 39,300 724,594
- -----------------------------------------------------------------------
Berg Electronics Corp.(a) 27,200 618,800
- -----------------------------------------------------------------------
Black Box Corp.(a) 19,400 686,275
- -----------------------------------------------------------------------
HADCO Corp.(a) 17,500 791,875
- -----------------------------------------------------------------------
Kemet Corp.(a) 39,000 755,625
- -----------------------------------------------------------------------
Molex, Inc. 4,300 138,138
- -----------------------------------------------------------------------
Molex, Inc.-Class A 13,133 377,552
- -----------------------------------------------------------------------
Sanmina Corp.(a) 25,000 1,693,750
- -----------------------------------------------------------------------
Sawtek Inc.(a) 14,900 392,988
- -----------------------------------------------------------------------
SCI Systems, Inc.(a) 92,400 4,025,175
- -----------------------------------------------------------------------
Solectron Corp.(a) 39,200 1,629,250
- -----------------------------------------------------------------------
Symbol Technologies, Inc. 35,000 1,321,250
- -----------------------------------------------------------------------
14,832,022
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.82%
Arrow Electronics, Inc.(a) 50,400 $ 1,634,850
- ------------------------------------------------------------------------
Avnet, Inc. 28,100 1,854,600
- ------------------------------------------------------------------------
Kent Electronics Corp.(a) 31,600 793,950
- ------------------------------------------------------------------------
4,283,400
- ------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.79%
Methode Electronics, Inc.-Class A 39,450 641,063
- ------------------------------------------------------------------------
Perkin-Elmer Corp. 36,200 2,572,463
- ------------------------------------------------------------------------
Tektronix, Inc. 23,100 916,781
- ------------------------------------------------------------------------
4,130,307
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 5.72%
Altera Corp.(a) 69,000 2,285,625
- ------------------------------------------------------------------------
ANADIGICS, Inc.(a) 25,000 753,125
- ------------------------------------------------------------------------
Analog Devices, Inc.(a) 64,700 1,791,381
- ------------------------------------------------------------------------
ASM Lithography Holding N.V. (Netherlands)(a) 11,600 783,000
- ------------------------------------------------------------------------
Atmel Corp.(a) 74,400 1,381,050
- ------------------------------------------------------------------------
Burr-Brown Corp.(a) 27,700 889,863
- ------------------------------------------------------------------------
Dallas Semiconductor Corp. 38,400 1,564,800
- ------------------------------------------------------------------------
Intel Corp. 18,800 1,320,700
- ------------------------------------------------------------------------
Lattice Semiconductor Corp.(a) 32,400 1,534,950
- ------------------------------------------------------------------------
Linear Technology Corp. 45,100 2,598,888
- ------------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 137,800 4,754,100
- ------------------------------------------------------------------------
Microchip Technology, Inc.(a) 107,500 3,225,000
- ------------------------------------------------------------------------
National Semiconductor Corp.(a) 103,000 2,671,563
- ------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 25,000 775,000
- ------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR
(Taiwan)(a) 19,000 345,563
- ------------------------------------------------------------------------
Texas Instruments, Inc. 20,000 900,000
- ------------------------------------------------------------------------
Unitrode Corp.(a) 14,000 301,000
- ------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 18,000 679,500
- ------------------------------------------------------------------------
Xilinx, Inc.(a) 38,000 1,332,375
- ------------------------------------------------------------------------
29,887,483
- ------------------------------------------------------------------------
ENTERTAINMENT - 0.20%
Regal Cinemas, Inc.(a) 37,500 1,045,313
- ------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 1.41%
Applied Materials, Inc.(a) 35,700 1,075,463
- ------------------------------------------------------------------------
BMC Industries, Inc. 5,000 80,625
- ------------------------------------------------------------------------
Etec Systems, Inc.(a) 10,000 465,000
- ------------------------------------------------------------------------
KLA-Tencor Corp.(a) 47,600 1,838,550
- ------------------------------------------------------------------------
Lam Research Corp.(a) 52,700 1,541,475
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 41,000 1,324,813
- ------------------------------------------------------------------------
Teradyne, Inc.(a) 33,000 1,056,000
- ------------------------------------------------------------------------
7,381,926
- ------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.36%
MGIC Investment Corp. 78,000 5,187,000
- ------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Canada) 9,900 330,413
- ------------------------------------------------------------------------
SunAmerica, Inc. 37,500 1,603,125
- ------------------------------------------------------------------------
7,120,538
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
5
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOOTWEAR - 0.26%
Adidas A.G. (Germany) 4,000 $ 526,070
- ----------------------------------------------------------------------
Wolverine World Wide, Inc. 37,900 857,488
- ----------------------------------------------------------------------
1,383,558
- ----------------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES - 0.20%
International Game Technology 26,700 674,175
- ----------------------------------------------------------------------
MGM Grand, Inc.(a) 10,000 360,625
- ----------------------------------------------------------------------
1,034,800
- ----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.29%
Alpharma, Inc. 12,750 277,313
- ----------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 10,000 390,625
- ----------------------------------------------------------------------
Columbia Laboratories, Inc.(a) 20,000 317,500
- ----------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 32,300 1,481,763
- ----------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 64,200 3,286,238
- ----------------------------------------------------------------------
Forest Laboratories, Inc.(a) 21,200 1,045,425
- ----------------------------------------------------------------------
Jones Medical Industries, Inc. 47,500 1,816,875
- ----------------------------------------------------------------------
Mylan Laboratories, Inc. 60,300 1,262,531
- ----------------------------------------------------------------------
Parexel International Corp.(a) 13,300 492,100
- ----------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 50,000 1,621,875
- ----------------------------------------------------------------------
11,992,245
- ----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.92%
Health Management Associates, Inc.-Class A(a) 201,768 5,094,642
- ----------------------------------------------------------------------
Quorum Health Group, Inc.(a) 69,500 1,815,688
- ----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 148,465 4,917,903
- ----------------------------------------------------------------------
Universal Health Services, Inc.-Class B(a) 68,400 3,445,650
- ----------------------------------------------------------------------
15,273,883
- ----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.82%
Beverly Enterprises, Inc.(a) 90,000 1,170,000
- ----------------------------------------------------------------------
Health Care and Retirement Corp.(a) 70,000 2,817,500
- ----------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 199,500 5,536,125
- ----------------------------------------------------------------------
9,523,625
- ----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.20%
American Oncology Resources, Inc.(a) 10,000 160,000
- ----------------------------------------------------------------------
Concentra Managed Care, Inc.(a) 41,500 1,400,625
- ----------------------------------------------------------------------
Express Scripts, Inc.-Class A(a) 21,800 1,308,000
- ----------------------------------------------------------------------
HealthCare COMPARE Corp.(a) 24,100 1,232,113
- ----------------------------------------------------------------------
PhyCor, Inc.(a) 81,300 2,195,100
- ----------------------------------------------------------------------
6,295,838
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.54%
Arterial Vascular Engineering, Inc.(a) 15,200 $ 988,000
- --------------------------------------------------------------
Biomet, Inc. 37,200 953,250
- --------------------------------------------------------------
Dentsply International, Inc. 32,000 976,000
- --------------------------------------------------------------
Guidant Corp. 21,600 1,344,600
- --------------------------------------------------------------
Henry Schein, Inc.(a) 28,485 996,975
- --------------------------------------------------------------
Medtronic, Inc. 33,500 1,752,469
- --------------------------------------------------------------
Physician Sales & Service, Inc.(a) 33,000 709,500
- --------------------------------------------------------------
Quintiles Transnational Corp.(a) 35,600 1,361,700
- --------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 12,000 780,750
- --------------------------------------------------------------
Stryker Corp. 14,200 528,950
- --------------------------------------------------------------
Sybron International Corp.(a) 61,800 2,900,738
- --------------------------------------------------------------
13,292,932
- --------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.21%
American HomePatient, Inc.(a) 22,050 518,175
- --------------------------------------------------------------
Covance, Inc.(a) 82,525 1,640,184
- --------------------------------------------------------------
FPA Medical Management, Inc.(a) 56,600 1,054,175
- --------------------------------------------------------------
Lincare Holdings, Inc.(a) 40,500 2,308,500
- --------------------------------------------------------------
Omnicare, Inc. 143,900 4,460,900
- --------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 249,375
- --------------------------------------------------------------
PharMerica, Inc.(a) 40,959 424,950
- --------------------------------------------------------------
Total Renal Care Holdings, Inc.(a) 31,333 861,658
- --------------------------------------------------------------
Transition Systems, Inc.(a) 600 13,275
- --------------------------------------------------------------
11,531,192
- --------------------------------------------------------------
HOMEBUILDING - 0.29%
Clayton Homes, Inc. 65,000 1,170,000
- --------------------------------------------------------------
Oakwood Homes Corp. 10,100 335,194
- --------------------------------------------------------------
1,505,194
- --------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.28%
Leggett & Platt, Inc. 35,000 1,465,625
- --------------------------------------------------------------
HOUSEWARES - 0.05%
Central Garden and Pet Co.(a) 10,000 262,500
- --------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.64%
Everest Reinsurance Holdings, Inc. 35,000 1,443,750
- --------------------------------------------------------------
Executive Risk Inc. 4,400 307,175
- --------------------------------------------------------------
HCC Insurance Holdings, Inc. 9,200 195,500
- --------------------------------------------------------------
Mercury General Corp. 25,000 1,381,250
- --------------------------------------------------------------
3,327,675
- --------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.20%
Paine Webber Group Inc. 30,000 1,036,875
- --------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
6
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.54%
Franklin Resources, Inc. 11,500 $ 999,779
- -----------------------------------------------------------------
T. Rowe Price Associates, Inc. 29,000 1,823,375
- -----------------------------------------------------------------
2,823,154
- -----------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.64%
Callaway Golf Co. 16,900 482,706
- -----------------------------------------------------------------
GTECH Holdings Corp.(a) 21,300 680,269
- -----------------------------------------------------------------
Harley-Davidson, Inc. 53,600 1,467,300
- -----------------------------------------------------------------
North Face, Inc. (The)(a) 12,500 275,000
- -----------------------------------------------------------------
Speedway Motorsports, Inc.(a) 17,900 444,144
- -----------------------------------------------------------------
3,349,419
- -----------------------------------------------------------------
LODGING (HOTELS) - 0.47%
Choice Hotels International, Inc.(a) 36,000 576,000
- -----------------------------------------------------------------
Promus Hotel Corp.(a) 42,544 1,786,838
- -----------------------------------------------------------------
Sunburst Hospitality Corp.(a) 12,000 118,500
- -----------------------------------------------------------------
2,481,338
- -----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.02%
AMETEK, Inc. 9,000 243,000
- -----------------------------------------------------------------
Hillenbrand Industries, Inc. 26,200 1,341,113
- -----------------------------------------------------------------
Pentair, Inc. 14,500 521,094
- -----------------------------------------------------------------
Thermo Electron Corp.(a) 44,300 1,971,350
- -----------------------------------------------------------------
Tyco International Ltd. (Bermuda) 27,936 1,258,866
- -----------------------------------------------------------------
5,335,423
- -----------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.74%
Cognex Corp.(a) 42,500 1,158,125
- -----------------------------------------------------------------
Diebold, Inc. 32,100 1,625,063
- -----------------------------------------------------------------
US Filter Corp.(a) 36,100 1,080,740
- -----------------------------------------------------------------
3,863,928
- -----------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.20%
Herman Miller, Inc. 14,000 763,875
- -----------------------------------------------------------------
HON INDUSTRIES, Inc. 4,900 289,100
- -----------------------------------------------------------------
1,052,975
- -----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 8.60%
Baker Hughes, Inc. 38,500 1,679,563
- -----------------------------------------------------------------
BJ Services Co.(a) 43,000 3,093,313
- -----------------------------------------------------------------
Camco International, Inc. 41,500 2,643,031
- -----------------------------------------------------------------
Cooper Cameron Corp.(a) 44,000 2,684,000
- -----------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 30,200 545,488
- -----------------------------------------------------------------
Diamond Offshore Drilling, Inc. 37,500 1,804,688
- -----------------------------------------------------------------
ENSCO International, Inc. 42,500 1,423,750
- -----------------------------------------------------------------
EVI, Inc.(a) 35,600 1,842,300
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT) - (CONTINUED)
Falcon Drilling Co., Inc.(a) 59,000 $2,068,688
- ----------------------------------------------------------------
Global Industries Ltd.(a) 85,000 1,445,000
- ----------------------------------------------------------------
Global Marine, Inc.(a) 27,000 661,500
- ----------------------------------------------------------------
Halliburton Co. 19,200 997,200
- ----------------------------------------------------------------
Input/Output, Inc.(a) 58,500 1,736,719
- ----------------------------------------------------------------
Lone Star Technologies, Inc.(a) 27,000 766,125
- ----------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 64,800 1,344,600
- ----------------------------------------------------------------
Nabors Industries, Inc.(a) 57,400 1,804,513
- ----------------------------------------------------------------
National-Oilwell, Inc.(a) 36,600 1,251,263
- ----------------------------------------------------------------
Noble Drilling Corp.(a) 45,000 1,378,125
- ----------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 15,000 971,250
- ----------------------------------------------------------------
Precision Drilling Corp. (Canada)(a) 60,000 1,462,500
- ----------------------------------------------------------------
Pride International, Inc.(a) 79,500 2,007,375
- ----------------------------------------------------------------
Rowan Companies, Inc.(a) 41,000 1,250,500
- ----------------------------------------------------------------
Santa Fe International Corp. 14,100 573,694
- ----------------------------------------------------------------
Smith International, Inc.(a) 35,300 2,166,538
- ----------------------------------------------------------------
Transocean Offshore Inc. 49,000 2,361,188
- ----------------------------------------------------------------
Varco International, Inc.(a) 116,600 2,499,613
- ----------------------------------------------------------------
Veritas DGC, Inc.(a) 35,800 1,414,100
- ----------------------------------------------------------------
Weatherford Enterra, Inc.(a) 25,000 1,093,750
- ----------------------------------------------------------------
44,970,374
- ----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.08%
Apache Corp. 30,000 1,051,875
- ----------------------------------------------------------------
Burlington Resources, Inc. 29,100 1,304,044
- ----------------------------------------------------------------
Ocean Energy, Inc.(a) 26,000 1,282,125
- ----------------------------------------------------------------
Pioneer Natural Resources Co. 13,000 376,188
- ----------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 80,000 900,000
- ----------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 15,000 750,000
- ----------------------------------------------------------------
5,664,232
- ----------------------------------------------------------------
PERSONAL CARE - 0.54%
Perrigo Co.(a) 75,000 1,003,125
- ----------------------------------------------------------------
Rexall Sundown, Inc.(a) 60,200 1,817,288
- ----------------------------------------------------------------
2,820,413
- ----------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.28%
Xerox Corp. 19,600 1,446,725
- ----------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.36%
AES Corp.(a) 40,000 1,865,000
- ----------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
7
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RESTAURANTS - 1.39%
Apple South, Inc. 77,800 $ 1,021,125
- -----------------------------------------------------------------
Applebee's International, Inc. 53,600 968,150
- -----------------------------------------------------------------
Brinker International, Inc.(a) 36,600 585,600
- -----------------------------------------------------------------
CKE Restaurants, Inc. 35,900 1,512,288
- -----------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 40,000 1,335,000
- -----------------------------------------------------------------
Foodmaker, Inc.(a) 10,000 150,625
- -----------------------------------------------------------------
Outback Steakhouse, Inc.(a) 21,000 603,750
- -----------------------------------------------------------------
Starbucks Corp.(a) 28,200 1,082,175
- -----------------------------------------------------------------
7,258,713
- -----------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.60%
Eagle Hardware & Garden, Inc.(a) 37,500 726,563
- -----------------------------------------------------------------
Fastenal Co. 14,500 554,625
- -----------------------------------------------------------------
Home Depot, Inc. 10,950 644,681
- -----------------------------------------------------------------
Lowe's Companies, Inc. 25,000 1,192,188
- -----------------------------------------------------------------
3,118,057
- -----------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 2.09%
Best Buy Co., Inc.(a) 36,800 1,357,000
- -----------------------------------------------------------------
CHS Electronics, Inc.(a) 75,000 1,284,375
- -----------------------------------------------------------------
CompUSA, Inc.(a) 116,700 3,617,700
- -----------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 40,700 1,185,388
- -----------------------------------------------------------------
Tech Data Corp.(a) 89,900 3,494,863
- -----------------------------------------------------------------
10,939,326
- -----------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.67%
Kohl's Corp.(a) 18,400 1,253,500
- -----------------------------------------------------------------
Nordstrom, Inc. 28,100 1,696,538
- -----------------------------------------------------------------
Proffitt's, Inc.(a) 20,200 574,438
- -----------------------------------------------------------------
3,524,476
- -----------------------------------------------------------------
RETAIL (DISCOUNTERS) - 1.81%
Consolidated Stores Corp.(a) 95,162 4,181,180
- -----------------------------------------------------------------
Dollar General Corp. 24,002 870,073
- -----------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 37,650 1,557,769
- -----------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 55,750 1,937,313
- -----------------------------------------------------------------
Ross Stores, Inc. 24,600 894,825
- -----------------------------------------------------------------
9,441,160
- -----------------------------------------------------------------
RETAIL (DRUG STORES) - 0.68%
CVS Corp. 7,773 497,958
- -----------------------------------------------------------------
Rite Aid Corp. 52,280 3,068,183
- -----------------------------------------------------------------
3,566,141
- -----------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.92%
American Stores Co. 11,100 228,244
- -----------------------------------------------------------------
Kroger Co.(a) 103,500 3,823,031
- -----------------------------------------------------------------
Quality Food Centers, Inc.(a) 14,800 991,600
- -----------------------------------------------------------------
Safeway, Inc.(a) 78,700 4,977,775
- -----------------------------------------------------------------
10,020,650
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE) - 0.88%
Costco Companies, Inc.(a) 17,400 $ 776,475
- -----------------------------------------------------------------
Dayton Hudson Corp. 28,800 1,944,000
- -----------------------------------------------------------------
Fred Meyer, Inc.(a) 51,600 1,876,950
- -----------------------------------------------------------------
4,597,425
- -----------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.78%
CDW Computer Centers, Inc.(a) 58,500 3,049,313
- -----------------------------------------------------------------
Micro Warehouse, Inc.(a) 72,900 1,016,044
- -----------------------------------------------------------------
4,065,357
- -----------------------------------------------------------------
RETAIL (SPECIALTY) - 3.95%
AutoZone, Inc.(a) 20,000 580,000
- -----------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 45,500 1,751,750
- -----------------------------------------------------------------
Finish Line, Inc. (The)-Class A(a) 19,100 250,688
- -----------------------------------------------------------------
General Nutrition Companies, Inc.(a) 39,200 1,332,800
- -----------------------------------------------------------------
Hollywood Entertainment Corp.(a) 67,800 720,375
- -----------------------------------------------------------------
Inacom Corp.(a) 20,600 578,088
- -----------------------------------------------------------------
Michaels Stores, Inc.(a) 57,500 1,681,875
- -----------------------------------------------------------------
Office Depot, Inc.(a) 84,400 2,020,325
- -----------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 25,600 614,400
- -----------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 30,100 731,806
- -----------------------------------------------------------------
Staples, Inc.(a) 135,925 3,771,919
- -----------------------------------------------------------------
Tiffany & Co. 41,100 1,482,169
- -----------------------------------------------------------------
Toys "R" Us, Inc.(a) 28,400 892,825
- -----------------------------------------------------------------
Viking Office Products, Inc.(a) 117,300 2,558,606
- -----------------------------------------------------------------
Williams-Sonoma, Inc.(a) 39,600 1,658,250
- -----------------------------------------------------------------
20,625,876
- -----------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.67%
Gap, Inc. 49,050 1,738,209
- -----------------------------------------------------------------
The TJX Companies, Inc. 51,500 1,770,313
- -----------------------------------------------------------------
3,508,522
- -----------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.16%
Dime Bancorp, Inc. 27,300 825,825
- -----------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.31%
Omnicom Group, Inc. 38,800 1,644,150
- -----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.27%
Avis Rent A Car, Inc.(a) 30,000 958,125
- -----------------------------------------------------------------
Cendant Corp.(a) 42,535 1,462,136
- -----------------------------------------------------------------
Cerner Corp.(a) 74,200 1,567,475
- -----------------------------------------------------------------
Cintas Corp. 8,000 312,000
- -----------------------------------------------------------------
Equity Corp. International(a) 13,800 319,125
- -----------------------------------------------------------------
Service Corp. International 129,000 4,764,931
- -----------------------------------------------------------------
Stewart Enterprises, Inc.- Class A 53,750 2,506,094
- -----------------------------------------------------------------
11,889,886
- -----------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
8
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS) - 1.29%
Cambridge Technology Partners, Inc.(a) 17,800 $ 740,925
- -------------------------------------------------------------------
Gartner Group, Inc.(a) 70,500 2,626,125
- -------------------------------------------------------------------
Shared Medical Systems Corp. 25,600 1,689,600
- -------------------------------------------------------------------
SunGard Data Systems Inc.(a) 55,200 1,711,200
- -------------------------------------------------------------------
6,767,850
- -------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.47%
Affiliated Computer Services, Inc.(a) 30,500 802,531
- -------------------------------------------------------------------
The BISYS Group, Inc.(a) 12,000 399,000
- -------------------------------------------------------------------
Ceridian Corp.(a) 25,700 1,177,381
- -------------------------------------------------------------------
CSG Systems International, Inc.(a) 27,400 1,096,000
- -------------------------------------------------------------------
DST Systems, Inc.(a) 34,800 1,485,525
- -------------------------------------------------------------------
Equifax, Inc. 14,000 496,125
- -------------------------------------------------------------------
Fiserv, Inc.(a) 51,900 2,549,588
- -------------------------------------------------------------------
National Data Corp. 22,500 812,813
- -------------------------------------------------------------------
Paychex, Inc. 67,350 3,409,594
- -------------------------------------------------------------------
PMT Services, Inc.(a) 50,500 700,688
- -------------------------------------------------------------------
12,929,245
- -------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.13%
AccuStaff, Inc.(a) 29,300 673,900
- -------------------------------------------------------------------
SPECIALTY PRINTING - 0.25%
Valassis Communications, Inc.(a) 35,000 1,295,000
- -------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.32%
Nokia Oyj A.B.-Class A (Finland) 4,300 300,553
- -------------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR (Finland) 19,600 1,372,000
- -------------------------------------------------------------------
1,672,553
- -------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.44%
Billing Information Concepts(a) 31,000 1,488,000
- -------------------------------------------------------------------
CIENA Corp.(a) 39,100 2,389,988
- -------------------------------------------------------------------
LCI International, Inc.(a) 118,600 3,646,950
- -------------------------------------------------------------------
7,524,938
- -------------------------------------------------------------------
TELEPHONE - 0.27%
Cincinnati Bell, Inc. 46,300 1,435,300
- -------------------------------------------------------------------
TEXTILES (APPAREL) - 1.52%
Jones Apparel Group, Inc.(a) 44,900 1,930,700
- -------------------------------------------------------------------
Liz Claiborne, Inc. 41,500 1,735,210
- -------------------------------------------------------------------
Nautica Enterprises, Inc.(a) 51,600 1,199,700
- -------------------------------------------------------------------
St. John Knits, Inc. 26,700 1,068,000
- -------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 57,100 2,005,630
- -------------------------------------------------------------------
7,939,240
- -------------------------------------------------------------------
TEXTILES (SPECIALTY) - 0.39%
Unifi, Inc. 49,500 2,014,031
- -------------------------------------------------------------------
TRUCKS & PARTS - 0.05%
Wabash National Corp. 10,000 284,375
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT - 1.06%
Thermo Instrument Systems, Inc.(a) 42,125 $ 1,450,680
- ----------------------------------------------------------------
USA Waste Services, Inc.(a) 104,675 4,108,497
- ----------------------------------------------------------------
5,559,177
- ----------------------------------------------------------------
Total Common Stocks 495,129,258
- ----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.07%
FINANCIAL (DIVERSIFIED) - 0.07%
MGIC Investment Corp.-$3.12 Conv. Pfd. 3,500 388,500
- ----------------------------------------------------------------
RIGHTS - 0.07%
FINANCIAL (DIVERSIFIED) - 0.07%
Newcourt Credit Group, Inc. (Canada) 11,400 374,775
- ----------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 0.14%
COMPUTERS (PERIPHERALS) - 0.14%
EMC Corp., Conv. Sub. Notes, 3.25%,
03/15/02 $ 550,000 742,363
- ----------------------------------------------------------------
REPURCHASE AGREEMENTS - 3.67%(b)
Goldman Sachs & Co., 6.53%,
01/02/98(c) 509,896 509,896
- ----------------------------------------------------------------
Smith Barney, Inc., 6.75%,
01/02/98(d) 18,650,989 18,650,989
- ----------------------------------------------------------------
Total Repurchase Agreements 19,160,885
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 98.66% 515,795,781
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.34% 6,984,297
- ----------------------------------------------------------------
NET ASSETS - 100.00% $522,780,078
================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations,
0% to 14% due 01/08/98 to 05/15/21 with a market value at 12/31/97 of
$918,902,583.
(d) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with a market value at 12/31/97 of
$408,000,323.
Abbreviations:
ADR- American Depositary Receipt
Conv.- Convertible
Pfd.- Preferred
Sub.- Subordinated
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
9
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $404,013,691) $515,795,781
- ----------------------------------------------------------------------
Receivables for:
Investments sold 9,116,531
- ----------------------------------------------------------------------
Capital stock sold 344,734
- ----------------------------------------------------------------------
Dividends and interest 129,747
- ----------------------------------------------------------------------
Investment for deferred compensation plan 19,105
- ----------------------------------------------------------------------
Organizational costs, net 965
- ----------------------------------------------------------------------
Other assets 970
- ----------------------------------------------------------------------
Total assets 525,407,833
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,977,594
- ----------------------------------------------------------------------
Capital stock reacquired 301,121
- ----------------------------------------------------------------------
Deferred compensation plan 19,105
- ----------------------------------------------------------------------
Accrued advisory fees 287,049
- ----------------------------------------------------------------------
Accrued directors' fees 2,657
- ----------------------------------------------------------------------
Accrued administrative service fees 3,404
- ----------------------------------------------------------------------
Accrued operating expenses 36,825
- ----------------------------------------------------------------------
Total liabilities 2,627,755
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $522,780,078
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 24,031,390
======================================================================
Net asset value, offering and redemption price per share $ 21.75
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $19,940 foreign withholding tax) $ 1,141,020
- ---------------------------------------------------------------------------
Interest 3,099,764
- ---------------------------------------------------------------------------
Total investment income 4,240,784
- ---------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,083,708
- ---------------------------------------------------------------------------
Administrative service fees 43,588
- ---------------------------------------------------------------------------
Custodian fees 85,219
- ---------------------------------------------------------------------------
Directors' fees and expenses 10,814
- ---------------------------------------------------------------------------
Organizational costs 2,892
- ---------------------------------------------------------------------------
Other 105,711
- ---------------------------------------------------------------------------
Total expenses 3,331,932
- ---------------------------------------------------------------------------
Less: Expenses paid indirectly (5,157)
- ---------------------------------------------------------------------------
Net expenses 3,326,775
- ---------------------------------------------------------------------------
Net investment income 914,009
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FUTURES CONTRACTS:
Net realized gain (loss) on sales of:
Investment securities 11,600,242
- ---------------------------------------------------------------------------
Foreign currencies (1,983)
- ---------------------------------------------------------------------------
Futures contracts 4,557,682
- ---------------------------------------------------------------------------
16,155,941
- ---------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 36,215,593
- ---------------------------------------------------------------------------
Futures contracts (261,890)
- ---------------------------------------------------------------------------
35,953,703
- ---------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
futures contracts 52,109,644
- ---------------------------------------------------------------------------
Net increase in net assets resulting from operations $53,023,653
===========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
10
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 914,009 $ 521,505
- ------------------------------------------------------------------------------
Net realized gain on sales of investment
securities, foreign currencies and futures
contracts 16,155,941 6,958,471
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and futures contracts 35,953,703 36,611,035
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 53,023,653 44,091,011
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (536,874) (546,109)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (6,902,664) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 107,132,798 114,365,840
- ------------------------------------------------------------------------------
Net increase in net assets 152,716,913 157,910,742
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 370,063,165 212,152,423
- ------------------------------------------------------------------------------
End of year $522,780,078 $370,063,165
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $394,408,721 $287,275,923
- ------------------------------------------------------------------------------
Undistributed net investment income 876,543 491,407
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and futures
contracts 15,712,724 6,467,448
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 111,782,090 75,828,387
- ------------------------------------------------------------------------------
$522,780,078 $370,063,165
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Appreciation Fund (the "Fund"). The Fund's investment
objective is to seek capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York
Stock Exchange. Occasionally, events affecting the values of such
securities and such exchange rates may occur between the times at which
they are
AIM V.I. CAPITAL APPRECIATION FUND
11
<PAGE>
determined and the close of the New York Stock Exchange which will not be
reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997,
undistributed net investment income was increased by $8,001 and
undistributed net realized gains decreased by $8,001 in order to comply
with the requirements of the American Institute of Certified Public
Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contract at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contracts are closed, the Fund recognizes a realized gain or loss equal to
the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
AIM, with respect to the Fund, the Company has agreed to reimburse certain
costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $43,588 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$5,296 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion
of the Fund's expenses related to pricing services used by the Fund which
reduced the Fund's expenses by $1,946 during the year ended December 31, 1997.
The Fund also received reductions in custodian fees of $3,211 under an expense
offset arrangement. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $5,157 during the year ended
December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$405,928,809 and $281,447,431, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $131,285,959
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (20,124,306)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $111,161,653
===========================================================================
</TABLE>
Cost of investments for tax purposes is $404,634,128.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- ------------
<S> <C> <C> <C> <C>
Sold 9,656,144 $202,278,514 7,080,357 $129,652,839
- -----------------------------------------------------------------------------
Issued as reinvestment of
distributions 357,327 7,439,538 28,864 546,109
- -----------------------------------------------------------------------------
Reacquired (5,025,910) (102,585,254) (887,800) (15,833,108)
- -----------------------------------------------------------------------------
4,987,561 $107,132,798 6,221,421 $114,365,840
=============================================================================
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
12
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
---------------------------------- -----------------
1997 1996 1995 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 19.43 $ 16.55 $ 12.05 $ 12.58 $ 10.00
- ----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.03 0.02 0.04 0.05 --
- ----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.58 2.89 4.46 (0.54) 2.59
- ----------------------------------------------------------------------------------
Total from investment
operations 2.61 2.91 4.50 (0.49) 2.59
- ----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.02) (0.03) -- (0.04) (0.01)
- ----------------------------------------------------------------------------------
Dividends from net
realized gains (0.27) -- -- -- --
- ----------------------------------------------------------------------------------
Total distributions (0.29) (0.03) -- (0.04) (0.01)
- ----------------------------------------------------------------------------------
Net asset value, end of
period $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
==================================================================================
Total return(a) 13.51% 17.58% 37.38% (3.91)% 25.90%
==================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $522,642 $370,063 $212,152 $88,177 $35,354
==================================================================================
Ratio of expenses to
average net assets 0.68%(b)(c) 0.73% 0.75%(d) 0.84% 1.06%(d)
==================================================================================
Ratio of net investment
income to average net
assets 0.18%(b) 0.18% 0.39%(d) 0.46% 0.07%(d)
==================================================================================
Portfolio turnover rate 65% 59% 37% 81% 34%
==================================================================================
Average brokerage
commission rate(e) $ 0.0577 $ 0.0592 N/A N/A N/A
==================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $493,118,049.
(c) Ratio includes indirectly paid expenses. Excluding indirectly paid
expenses, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
AIM V.I. CAPITAL APPRECIATION FUND
13
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital Appreciation Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the two years in
the period then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Capital Appreciation Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the two years in the period then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993
(commencement of operations), through January 31, 1994 in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. CAPITAL APPRECIATION FUND
14
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND POSTS SOLID RETURNS
A roundtable discussion with the Fund management team for AIM V.I. Diversified
Income Fund about the fiscal year ended December 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. IT WAS GENERALLY A GOOD YEAR FOR Domestic investment-grade bonds were PERFORMANCE?
BONDS. HOW DID THE FUND PERFORM? also given a boost by the agreement in the A. The main factor was the strength of
A. Your Fund's diversified investment summer to balance the federal budget and the U.S. dollar relative to other major
strategy enabled it to post solid returns. by the turmoil that hit work stock mar- currencies, which diminished returns
For the year ended December 31, 1997, kets in October. Investors shifted more for U.S. investors in foreign bonds. The
the Fund's total return was 9.39%. That assets into bonds after global stock mar- Fund mitigated the effect of a strong dol-
bested the 9.02% total return for the kets plunged. lar by selectively hedging some of its
Lipper General Bond Fund Index. currency exposure.
Q. HOW DID HEALTHY ECONOMIC Still, there were some bright spots for
Q. HOW DID YOU MANAGE THE FUND? GROWTH AFFECT HIGH-YIELD BONDS? foreign bond investors. Markets we found
A. We continued to invest in the three A. High-yield bonds were the top-per- particularly attractive included the
major sectors of the bond market: domes- forming segment of the portfolio primarily United Kingdom (UK), Canada, and Sweden.
tic investment-grade bonds, high-yield because of the robust economy in 1997. In the UK, for example, the bond market
securities, and foreign bonds. These three While healthy economic growth can lead benefited from a healthy domestic economy
types of bonds tend to react differently to to inflation, which is usually detrimental and the relative strength of the pound.
economic and market trends. Diversifying to most types of bonds, inflation was
the portfolio in this manner can reduce minimal last year. Moreover, when busi- Q. HOW DID THE CURRENCY DEVALUA-
the risk associated with investing in one ness conditions and cash flows are favor- TIONS IN SOUTHEAST ASIA AND THE
class of bonds. Moreover, it can also able, as they were in 1997, corporate SUBSEQUENT STOCK MARKET TUMBLE
enhance total return as it allows the Fund issuers of high-yield bonds can generally OF OCTOBER 1997 AFFECT BONDS?
to take advantage of a rally in more than experience credit quality improvement A. When global stock markets plunged on
one segment of the bond market. with upgrade potential. October 27, domestic investment-grade
At the end of the year, the Fund's assets bonds, particularly U.S. Treasury securi-
included the following: domestic invest- Q. IT WAS A DIFFICULT YEAR FOR ties, were among the chief beneficiaries.
ment-grade bonds, 28.69%; high-yield FOREIGN BONDS. WHAT WERE SOME The yield on the benchmark 30-year U.S.
bonds, 27.64%; and foreign bonds, OF THE FACTORS AFFECTING THEIR Treasury bond, which was as high as
37.04%.
Q. WHAT WAS BEHIND THE STRONG
PERFORMANCE OF DOMESTIC INVEST- TOP FIVE BOND HOLDINGS
MENT-GRADE BONDS? As of 12/31/97, based on total net assets
A. The low-inflation, falling-interest-rate COUPON MATURITY % OF TOTAL NET ASSETS
environment in the U.S. in 1997 provided 1. LKB Global 6.00% 01/2006 1.94%
nearly an ideal climate for domestic in-
vestment-grade bonds. For the 12-month 2. United Kingdom Treasury 7.25 03/1998 1.84
period ended December 31, consumer
prices rose just 1.7%, the smallest in- 3. Union Carbide Corp. 6.79 06/2025 1.73
crease in 11 years. After raising interest
rates in March, the Federal Reserve Board 4. ConAgra, Inc. 7.125 10/2026 1.55
(the Fed) left monetary policy unchanged
for the remainder of 1997. Borrowing 5. New Zealand Government 10.00 03/2002 1.28
costs actually declined as the year pro-
gressed as it became increasingly evident Please keep in mind that the Fund's portfolio is subject to change and there is no
that inflation was not a serious threat. assurance the Fund will continue to hold any particular security.
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
7.17% in April, ended the year at 5.92% than transitory fluctuations in the markets.
as the prices of government issues appre-
ciated in the wake of worldwide stock- AVERAGE ANNUAL TOTAL RETURNS
market volatility. Domestic investment-grade As of 12/31/97
corporate and high-yield bonds initially 1 Year 9.39%
experienced some weakness when world Inception (5/5/93) 8.22
stock markets plunged, but rebounded as
confidence recovered.
Among foreign bonds, the most ad-
versely affected class was emerging mar- GROWTH OF A $10,000 INVESTMENT
ket debt. This was of little consequence
for the Fund because it invests primarily From 5/5/93 - 12/31/97
in developed markets and had little expo-
sure in Asia at the end of the year. AIM V.I. DIVERSIFIED LEHMAN BROTHERS
INCOME FUND AGGREGATE BOND INDEX
Q. HOW WAS THE FUND STRUCTURED 5/5/93 $10,000 $10,000
AT THE END OF THE YEAR? 7/31/93 10,240 10,252
A. The weighted average maturity of the 10/31/93 10,622 10,499
portfolio was 11.34 years and its duration 1/31/94 10,833 10,607
was 6.50 years. The Fund had an average 4/30/94 10,165 10,084
portfolio quality rating of A as measured 7/31/94 10,176 10,261
by Standard & Poor's Corporation (S&P) 10/31/94 10,230 10,113
and Moody's Investor Service (Moody's), 1/31/95 10,146 10,361
two widely known credit rating agencies. 4/30/95 10,794 10,822
These ratings are historical and are based 7/31/95 11,281 11,298
on analysis of the credit quality of the 10/31/95 11,733 11,696
individual securities in the Fund's portfolio. 1/31/96 12,054 12,117
4/30/96 12,006 11,756
Q. WHAT IS YOUR MARKET OUTLOOK? 7/31/96 12,258 11,922
A. We continue to be optimistic about 10/31/96 12,881 12,378
domestic investment-grade and high-yield 1/31/97 13,127 12,511
bonds. In the U.S., the economy is grow- 4/30/97 13,166 12,589
ing at a healthy pace but without signifi- 7/31/97 13,945 13,207
cant inflation. If such conditions persist, 10/31/97 14,239 13,480
the Fed will be less likely to raise interest 12/31/97 14,444 13,679
rates. Moreover, the continuing problems Past performance cannot guarantee comparable future results.
in Asia could slow economic growth and
add fuel to the strong rally in the domestic
investment-grade bond market.
Foreign bonds should benefit from the
low inflation environment, the corporate
restructurings, and the government cost-
cutting measures taking place in most of
the developed countries where we invest. The performance figures shown represent the AIM V.I. Diversified Income Fund and
The strength of the U.S. dollar relative to are not intended to reflect actual annuity values, and do not reflect charges at
other major currencies, however, could the separate account level which, if applied, would lower the performance
continue to affect returns for U.S. inves- results. The Fund's performance figures are historical and reflect reinvestment
tors in foreign bonds. of all distributions and changes in net asset value. The Fund's investment return
1997 was one of the more volatile years and principal value will fluctuate so that Fund shares, when redeemed, may be worth
in recent history in the financial markets, more or less than their original cost. Source: Towers Data Systems
and that trend could persist over the HYPO--Registered Trademark--.
coming months. In such an environment, The Lehman Brothers Aggregate Bond Index is an unmanaged index generally
investors would be well advised to focus considered representative of treasury, agency, corporate, and mortgage-backed debt
on their long-term financial goals rather securities. Results shown are for the period 4/30/93 through 12/31/97.
Source: Lehman Brothers.
The unmanaged Lipper General Bond Index represents an average of the performance
of all general bond funds charted by Lipper Analytical Services, Inc., an
independent mutual funds performance monitor.
An investment cannot be made in any index listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
16
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 65.11%
AGRICULTURAL PRODUCTS - 0.17%
Hines Horticulture, Inc., Series B Sr. Gtd. Sub.
Notes, 11.75%, 10/15/05 $ 140,000 $ 154,700
- -------------------------------------------------------------------------------
AIRLINES - 3.05%
Airplanes Pass Through Trust, Sub. Bonds, 10.875%,
03/15/19 300,000 337,689
- -------------------------------------------------------------------------------
America West Airlines, Pass Through Certificates,
6.86%, 07/02/04 882,000 888,632
- -------------------------------------------------------------------------------
Delta Air Lines, Inc., Deb., 9.00%,
05/15/16 825,000 975,488
- -------------------------------------------------------------------------------
United Air Lines, Inc., Pass Through Certificates,
9.56%, 10/19/18 425,000 522,640
- -------------------------------------------------------------------------------
2,724,449
- -------------------------------------------------------------------------------
AUTOMOBILES - 0.55%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 491,084
- -------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 1.02%
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 913,944
- -------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 1.55%
Bankers Trust New York Corp., Gtd. Notes, 7.875%,
02/25/27 600,000 618,579
- -------------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 766,283
- -------------------------------------------------------------------------------
1,384,862
- -------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.51%
Mercantile Bank,
Sub. Notes, 6.375%, 01/15/04 300,000 299,106
- -------------------------------------------------------------------------------
Unsec. Sub. Notes, 7.30%, 06/15/07 1,000,000 1,052,930
- -------------------------------------------------------------------------------
1,352,036
- -------------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.27%
Coca-Cola Enterprises, Inc., Putable Notes, 6.72%,
06/20/20(b) 5,000,000 1,132,650
- -------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 5.18%
Cablevision Systems Corp., Sr. Notes, 7.875%, 12/15/07 500,000 513,125
- -------------------------------------------------------------------------------
Capstar Broadcasting Partners, Sr. Disc. Notes,
12.75%, 02/01/09(c) 490,000 355,250
- -------------------------------------------------------------------------------
Comcast Cable Communications, Notes, 8.50%, 05/01/27 500,000 583,750
- -------------------------------------------------------------------------------
Diamond Cable Communications PLC (United Kingdom), Sr.
Yankee Disc. Notes, 10.75%, 02/15/07(c) 1,160,000 794,600
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - (CONTINUED)
EchoStar DBS Corp., Sr. Sec. Gtd. Notes, 12.50%,
07/01/02 $ 430,000 $ 468,700
- -------------------------------------------------------------------------------
Knology Holdings Inc., Units, 11.875%, 10/15/07
(acquired 11/14/97; cost $310,500)(c)(d)(e) 600,000 327,000
- -------------------------------------------------------------------------------
Rifkin Acquisition Partners L.L.P., Sr. Sub. Notes,
11.125%, 01/15/06 100,000 111,000
- -------------------------------------------------------------------------------
TCI Communications Inc., Sr. Notes, 8.00%, 08/01/05 850,000 911,081
- -------------------------------------------------------------------------------
TeleWest Communications PLC (United Kingdom), Sr.
Yankee Disc. Deb., 11.00%, 10/01/07(c) 300,000 234,750
- -------------------------------------------------------------------------------
United International Holdings, Inc., Sr. Sec. Disc.
Notes, 10.53%, 11/15/99(b) 400,000 330,000
- -------------------------------------------------------------------------------
4,629,256
- -------------------------------------------------------------------------------
CHEMICALS - 3.70%
Nova Chemicals Ltd. (Canada), Yankee Deb., 7.00%,
08/15/26 750,000 770,925
- -------------------------------------------------------------------------------
Solutia Inc., Bonds, 6.72%, 10/15/37 750,000 763,148
- -------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Unsec. Sub. Notes,
11.75%, 08/15/06 220,000 225,500
- -------------------------------------------------------------------------------
Union Carbide Corp., Putable Deb., 6.79%, 06/01/25 1,500,000 1,540,800
- -------------------------------------------------------------------------------
3,300,373
- -------------------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.23%
Foamex International, Inc., Sr. Sub. Notes, 13.50%,
08/15/05 180,000 206,100
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.11%
Northern Telecom (Canada), Notes, 6.00%, 09/01/03 100,000 99,069
- -------------------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.34%
Commemorative Brands, Sr. Sub. Notes, 11.00%, 01/15/07 300,000 302,250
- -------------------------------------------------------------------------------
CONSUMER FINANCE - 2.10%
GMAC, Notes, 9.00%, 10/15/02 750,000 834,510
- -------------------------------------------------------------------------------
Household Finance Corp., Notes, 7.125%, 09/01/05 1,000,000 1,038,960
- -------------------------------------------------------------------------------
1,873,470
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 0.58%
MVE Inc., Sr. Sec. Notes, 12.50%, 02/15/02 190,000 190,475
- -------------------------------------------------------------------------------
Tekni-Plex Inc., Sr. Sub. Notes, 11.25%, 04/01/07 300,000 324,750
- -------------------------------------------------------------------------------
515,225
- -------------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.38%
AmeriServ Food Co., Gtd. Sr. Sub. Notes, 10.125%,
07/15/07 320,000 337,600
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
17
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ELECTRIC COMPANIES - 0.81%
El Paso Electric Co.,
Series D Sec. First Mortgage Bonds, 8.90%, 02/01/06 $ 500,000 $ 553,575
- ------------------------------------------------------------------------------
Series E Sec. First Mortgage Bonds, 9.40%, 05/01/11 150,000 169,620
- ------------------------------------------------------------------------------
723,195
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.44%
Electronic Retailing Systems International, Inc., Sr.
Disc. Notes, 13.25%, 02/01/04(c) 590,000 395,300
- ------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.20%
Advanced Micro Devices, Inc., Sr. Sec. Notes, 11.00%,
08/01/03 170,000 182,538
- ------------------------------------------------------------------------------
ENTERTAINMENT - 3.13%
Ascent Entertainment Group, Sr. Discount Notes,
11.875%, 12/15/04 (acquired 12/17/97-12/18/97; cost
$339,390)(c)(d) 600,000 351,000
- ------------------------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 500,000 597,270
- ------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 823,665
- ------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 500,000 506,925
- ------------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 513,855
- ------------------------------------------------------------------------------
2,792,715
- ------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.69%
Associates Corp. of North America, Series B Sr. Deb.,
7.95%, 02/15/10 750,000 839,175
- ------------------------------------------------------------------------------
Finova Capital Corp., Unsec. Notes, 7.40%, 05/06/06 750,000 790,493
- ------------------------------------------------------------------------------
U.S. West Capital Funding Inc., Gtd. Notes, 6.95%,
01/15/37 750,000 775,403
- ------------------------------------------------------------------------------
2,405,071
- ------------------------------------------------------------------------------
FOODS - 2.03%
ConAgra Inc., Sr. Unsec. Notes, 7.125%, 10/01/26 1,300,000 1,385,332
- ------------------------------------------------------------------------------
Del Monte Corp./Foods Co., Sr. Unsec. Sub. Notes,
12.25%, 04/15/07 380,000 431,300
- ------------------------------------------------------------------------------
1,816,632
- ------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.68%
Coast Hotels & Casinos Inc., Series B Sec. First
Mortgage Gtd. Notes, 13.00%, 12/15/02 180,000 204,300
- ------------------------------------------------------------------------------
Venetian Casino Resort LLC, Mortgage Notes, 12.25%,
11/15/04 (acquired 11/06/97; cost $400,000)(d) 400,000 402,500
- ------------------------------------------------------------------------------
606,800
- ------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.86%
Tenet Healthcare Corp., Sr. Notes, 8.00%, 01/15/05 750,000 765,000
- ------------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.21%
Paragon Health Network, Inc., Sr. Sub Notes, 10.50%,
11/01/07 (acquired 10/30/97; cost $416,899)(c)(d) 700,000 435,750
- ------------------------------------------------------------------------------
Sun Healthcare Group, Inc., Sr. Sub. Notes, 9.50%,
07/01/07 (acquired 07/01/97; cost $617,500)(d) 620,000 641,700
- ------------------------------------------------------------------------------
1,077,450
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.45%
Alaris Medical Systems, Sr. Unsec. Gtd. Sub. Deb.,
9.75%, 12/01/06 $ 300,000 $ 316,500
- -------------------------------------------------------------------------------
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 80,000 88,800
- -------------------------------------------------------------------------------
405,300
- -------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.36%
Dynacare Inc. (Canada), Sr. Yankee Notes, 10.75%,
01/15/06 300,000 317,250
- -------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.46%
Zeta Consumer Products, Sr. Notes, 11.25%, 11/30/07
(acquired 11/20/97; cost $400,000)(d) 400,000 409,000
- -------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.99%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 77,063
- -------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.875%, 05/15/23 750,000 808,005
- -------------------------------------------------------------------------------
885,068
- -------------------------------------------------------------------------------
IRON & STEEL - 0.69%
GS Industries, Inc., Sr. Gtd. Notes, 12.00%, 09/01/04 350,000 384,563
- -------------------------------------------------------------------------------
Gulf States Steel Corp., First Mortgage Notes, 13.50%,
04/15/03 230,000 233,450
- -------------------------------------------------------------------------------
618,013
- -------------------------------------------------------------------------------
LODGING - HOTELS - 1.95%
Booth Creek Ski Holdings, Sr. Notes, 12.50%, 03/15/07 390,000 384,150
- -------------------------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb., 7.375%, 11/15/15 750,000 770,663
- -------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec. First Mortgage
Notes, 9.75%, 10/01/05 550,000 585,750
- -------------------------------------------------------------------------------
1,740,563
- -------------------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.49%
Elgin National Industries, Sr. Notes, 11.00%, 11/01/07
(acquired 11/03/97; cost $320,000)(d) 320,000 333,600
- -------------------------------------------------------------------------------
Fairfield Manufacturing Co., Inc., Sr. Sub. Notes,
11.375%, 07/01/01 100,000 106,000
- -------------------------------------------------------------------------------
439,600
- -------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.82%
MMI Products Inc., Sr. Unsec. Sub. Notes, 11.25%,
04/15/07 380,000 416,100
- -------------------------------------------------------------------------------
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 318,750
- -------------------------------------------------------------------------------
734,850
- -------------------------------------------------------------------------------
METALS MINING - 0.42%
Rio Algom Ltd. (Canada), Yankee Unsec. Deb., 7.05%,
11/01/05 370,000 377,337
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
18
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NATURAL GAS - 1.98%
Enron Corp.,
Notes, 6.75%, 08/01/09 $ 750,000 $ 759,052
- -------------------------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 450,000 453,577
- -------------------------------------------------------------------------------
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 525,000 559,125
- -------------------------------------------------------------------------------
1,771,754
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.35%
United Stationer Supply, Sr. Sub. Notes, 12.75%,
05/01/05 275,000 314,187
- -------------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.98%
Gulf Canada Resources, Ltd. (Canada), Sr. Yankee
Unsec. Notes, 8.35%, 08/01/06 800,000 871,856
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.07%
Falcon Drilling Co., Inc., Series B Sr. Notes, 9.75%,
01/15/01 60,000 63,150
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.89%
Abraxas Petroleum Corp., Series B Sr. Notes, 11.50%,
11/01/04 125,000 137,500
- -------------------------------------------------------------------------------
Centaur Mining & Exploration, Ltd., Co. (Australia),
Sr. Gtd. Notes, 11.00%, 12/01/07 (acquired 11/24/97;
cost $550,000)(d) 550,000 555,500
- -------------------------------------------------------------------------------
Southwest Royalties, Inc., Sr. Gtd. Notes, 10.50%,
10/15/04 (acquired 10/08/97; cost $482,066)(d) 480,000 477,600
- -------------------------------------------------------------------------------
Talisman Energy, Inc. (Canada), Yankee Deb., 7.125%,
06/01/07 500,000 516,380
- -------------------------------------------------------------------------------
1,686,980
- -------------------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 1.06%
Indah Kiat Fin Mauritius (Indonesia), Sr. Gtd. Unsec.
Notes, 10.00%, 07/01/07 (acquired 06/26/97; cost
$635,821)(d) 640,000 534,400
- -------------------------------------------------------------------------------
Pindo Deli Pulp & Paper, Gtd. Notes, 10.75%, 10/01/07
(acquired 10/14/97-10/16/97; cost $473,250)(d) 470,000 406,550
- -------------------------------------------------------------------------------
940,950
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.32%
Panda Global Energy Co. (China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 310,000 283,650
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.59%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 750,000 892,282
- -------------------------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 524,135
- -------------------------------------------------------------------------------
1,416,417
- -------------------------------------------------------------------------------
RAILROAD - 0.77%
Norfolk Southern Corp., Putable Bonds, 7.05%, 05/01/37 650,000 689,006
- -------------------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.23%
Loehmann's Holdings, Inc., Sr. Unsec. Notes, 11.875%,
05/15/03 200,000 208,500
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS) - 0.96%
Great Atlantic & Pacific Tea Co., Inc. (Canada),
Yankee Gtd. Notes, 7.78%, 11/01/00 (acquired
10/18/95; cost $500,000)(d) $ 500,000 $ 516,452
- -------------------------------------------------------------------------------
Jitney-Jungle Stores of America Inc., Sr. Gtd. Notes,
12.00%, 03/01/06 300,000 341,250
- -------------------------------------------------------------------------------
857,702
- -------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.56%
Big 5 Corp., Sr. Notes, 10.875%, 11/15/07 (acquired
11/07/97-11/24/97; cost $497,484)(d) 500,000 500,000
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.80%
CSK Auto Inc., Sr. Gtd. Sub. Deb., 11.00%, 11/01/06 100,000 110,500
- -------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes,
13.00%, 07/15/02 150,000 168,375
- -------------------------------------------------------------------------------
United Auto Group, Inc., Sr. Sub. Notes, 11.00%,
07/15/07 (acquired 07/22/97; cost $296,250)(d) 300,000 296,250
- -------------------------------------------------------------------------------
Wilson's - The Leather Experts, Inc., Sr. Notes,
11.25%, 08/15/04 (acquired 08/14/97; cost
$140,000)(d) 140,000 138,600
- -------------------------------------------------------------------------------
713,725
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.24%
J. Crew Operating Corp., Sr. Sub. Notes, 10.375%,
10/15/07 (acquired 10/14/97; cost $240,000)(d) 240,000 213,600
- -------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.47%
Sovereign Bancorp, Inc., Sub. Notes, 8.00%, 03/15/03 400,000 421,488
- -------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.36%
MDC Communications Corp. (Canada), Sr. Yankee Unsec.
Sub. Notes, 10.50%, 12/01/06 300,000 318,750
- -------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.59%
Dialog Corp. PLC (United Kingdom), Sr. Sub. Notes,
11.00%, 11/15/07 (acquired 11/10/97; cost
$350,000)(d) 350,000 364,875
- -------------------------------------------------------------------------------
Laidlaw Inc. (Canada), Yankee Deb., 6.65%, 10/01/04 550,000 553,899
- -------------------------------------------------------------------------------
Pegasus Shipping Hellas, Co. (Bermuda), Gtd. Sr.
Mortgage Notes, 11.875%, 11/15/04 (acquired 11/19/97;
cost $483,000)(d) 500,000 497,500
- -------------------------------------------------------------------------------
1,416,274
- -------------------------------------------------------------------------------
SHIPPING - 1.15%
Hutchison Whampoa Ltd. (Cayman Islands), Series D Sr.
Yankee Gtd. Unsec. Unsub. Deb., 6.988%, 08/01/37
(acquired 10/02/97; cost $753,008)(d) 750,000 700,830
- -------------------------------------------------------------------------------
Stena A.B. (Sweden), Sr. Yankee Unsec. Notes, 10.50%,
12/15/05 300,000 327,750
- -------------------------------------------------------------------------------
1,028,580
- -------------------------------------------------------------------------------
SOVEREIGN DEBT - 1.81%
Province of Manitoba (Canada), Yankee Bonds, 7.75%,
07/17/16 700,000 801,290
- -------------------------------------------------------------------------------
Province of Quebec (Canada), Yankee Deb., 6.29%, 03/06/26 800,000 816,920
- -------------------------------------------------------------------------------
1,618,210
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
19
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.46%
Clearnet Communications Inc. (Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%, 12/15/05(c) $ 110,000 $ 88,137
- --------------------------------------------------------------------------------
GST Equipment Funding, Sr. Sec. Notes, 13.25%, 05/01/07 300,000 342,750
- --------------------------------------------------------------------------------
Nextel Communications, Sr. Disc. Notes, 9.75%, 10/31/07
(acquired 10/22/97-10/23/97; cost $602,450)(c)(d) 1,000,000 620,000
- --------------------------------------------------------------------------------
Orion Network Systems, Inc., Units, 11.25%, 01/15/07(f) 580,000 659,750
- --------------------------------------------------------------------------------
Pricellular Wireless Corp., Sr. Notes, 10.75%, 11/01/04 230,000 251,275
- --------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Unsec. Notes, 11.50%,
10/01/06 220,000 238,700
- --------------------------------------------------------------------------------
2,200,612
- --------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.80%
Bell Canada, Yankee Deb., 9.50%, 10/15/10 (Canada) 350,000 440,821
- --------------------------------------------------------------------------------
Esprit Telecom Group PLC (United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 350,000 362,250
- --------------------------------------------------------------------------------
MCI Communications Corp., Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 650,000 680,251
- --------------------------------------------------------------------------------
PhoneTel Technologies, Inc., Sr. Unsec. Gtd. Notes,
12.00%, 12/15/06 120,000 125,100
- --------------------------------------------------------------------------------
1,608,422
- --------------------------------------------------------------------------------
TELEPHONE - 0.62%
ESAT Holdings Ltd. (Ireland), Sr. Yankee Notes, 12.50%,
02/01/07(c) 470,000 338,400
- --------------------------------------------------------------------------------
Hermes Europe Railtel BV (Netherlands), Sr. Yankee
Notes, 11.50%, 08/15/07 (acquired 08/14/97; cost
$193,238)(d) 190,000 211,850
- --------------------------------------------------------------------------------
550,250
- --------------------------------------------------------------------------------
TRUCKERS - 0.80%
AmeriTruck Distribution Corp., Series B Sr. Sub. Notes,
12.25%, 11/15/05 300,000 298,500
- --------------------------------------------------------------------------------
Travelcenters of America Inc., Sr. Gtd. Unsec. Sub.
Deb., 10.25%, 04/01/07 400,000 422,000
- --------------------------------------------------------------------------------
720,500
- --------------------------------------------------------------------------------
TRUCKS & PARTS - 0.13%
Blue Bird Body Co., Series B Sr. Sub. Notes, 10.75%,
11/15/06 110,000 118,800
- --------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.70%
Allied Waste Industries, Inc., Sr. Disc. Notes, 11.30%,
06/01/07 (acquired 05/01/97; cost $516,924)(c)(d) 900,000 636,750
- --------------------------------------------------------------------------------
WMX Technologies, Inc., Unsec. Notes, 7.10%, 08/01/26 850,000 879,725
- --------------------------------------------------------------------------------
1,516,475
- --------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non-Convertible Bonds &
Notes 58,158,588
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 9.89%(g)
CANADA - 5.74%
Bank of Montreal (Banks - Money Center), Sub. Deb.,
7.92%, 07/31/12 CAD 850,000 $ 670,323
- -------------------------------------------------------------------------------
Bell Mobility Cellular Inc. (Telecommunications -
Cellular/Wireless), Deb., 6.55%, 06/02/08 750,000 528,320
- -------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 450,000 352,965
- -------------------------------------------------------------------------------
Clearnet Communications Inc. (Telecommunications -
Cellular/Wireless), Sr. Disc. Notes, 11.75%,
08/13/07 (acquired 07/31/97-11/04/97; cost
$630,905)(c)(d) 1,500,000 666,527
- -------------------------------------------------------------------------------
Microcell Telecommunications (Telecommunications -
Cellular/Wireless), Sr. Disc. Notes, 11.125%,
10/15/07 (acquired 10/08/97; cost $424,107)(c)(d) 1,000,000 388,370
- -------------------------------------------------------------------------------
NAV Canada (Services - Commercial & Consumer), Bonds,
7.40%, 06/01/27 1,000,000 798,642
- -------------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 850,000 660,086
- -------------------------------------------------------------------------------
Trans-Canada Pipelines (Natural Gas),
Series Q Deb., 10.625%, 10/20/09 500,000 475,953
- -------------------------------------------------------------------------------
Unsec. Medium Term Notes, 8.55%, 02/01/06 280,000 226,819
- -------------------------------------------------------------------------------
Westcoast Energy, Inc. (Oil & Gas - Exploration &
Production), Deb., 6.45%, 12/18/06 (acquired
12/18/96; cost $369,585)(d) 500,000 358,770
- -------------------------------------------------------------------------------
5,126,775
- -------------------------------------------------------------------------------
GERMANY - 2.94%
Daimler-Benz A.G. (Automobiles), Gtd. Unsub.
Eurobonds, 4.125%, 07/05/03 DEM 570,000 443,580
- -------------------------------------------------------------------------------
International Bank for Reconstruction & Development
(Banks-Money Center), Unsec. Global Bonds, 7.125%,
04/12/05)(b) 725,000 446,324
- -------------------------------------------------------------------------------
LKB Global (Financial-Diversified), Gtd. Notes,
6.00%, 01/25/06 3,000,000 1,728,460
- -------------------------------------------------------------------------------
2,618,364
- -------------------------------------------------------------------------------
NEW ZEALAND - 0.32%
International Bank for Reconstruction & Development
(Banks-Money Center), Sr. Notes, 13.31%, 08/20/07(b) NZD1,000,000 288,693
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.89%
Sutton Bridge Financial Ltd. (Financial-Diversified),
Gtd. Eurobonds, 8.625%, 06/30/22 (acquired 05/29/97;
cost $733,585)(d) GBP 450,000 799,106
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-Convertible
Bonds & Notes 8,832,938
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES - 2.42%(g)
FRANCE - 0.32%
Societe Generale (Banks-Money Center), Conv. Deb.,
3.50%, 01/01/00 FRF1,419,000 288,352
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
20
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
JAPAN - 1.13%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds, 1.30%,
03/29/02 JPY 50,000,000 $ 475,798
- ----------------------------------------------------------------------------
Sony Corp. (Electrical Equipment), Conv. Deb.,
1.40%, 03/31/05 8,000,000 90,986
- ----------------------------------------------------------------------------
Toyota Motor Corp. (Automobiles), Conv. Bonds,
1.20%, 01/28/98 30,000,000 438,845
- ----------------------------------------------------------------------------
1,005,629
- ----------------------------------------------------------------------------
UNITED KINGDOM - 0.97%
British Airport Authority PLC (Airlines), Conv.
Bonds, 5.75%, 03/29/06 GBP 500,000 866,340
- ----------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes 2,160,321
- ----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED
GOVERNMENT BONDS & NOTES - 15.51%(g)
AUSTRALIA - 0.67%
Queensland Treasury Corp., Gtd. Bonds, 6.50%,
06/14/05 AUD 900,000 600,090
- ----------------------------------------------------------------------------
CANADA - 2.91%
Canadian Government, Bonds, 7.00%, 12/01/06 CAD 1,000,000 767,454
- ----------------------------------------------------------------------------
Municipal Finance Authority of British Columbia,
Unsec. Bonds, 7.75%, 12/01/05 500,000 393,356
- ----------------------------------------------------------------------------
Ontario Province
Sr. Unsec. Unsub. Deb, 6.875%, 09/15/00 GBP 465,000 759,821
- ----------------------------------------------------------------------------
Sr. Unsec. Unsub. Global Bonds, 8.00%, 03/11/03 CAD 750,000 581,521
- ----------------------------------------------------------------------------
Quebec (Province of), Deb., 9.375%, 01/16/23 100,000 95,116
- ----------------------------------------------------------------------------
2,597,268
- ----------------------------------------------------------------------------
GERMANY - 0.68%
Bundesrepublic Deutschland, Bonds, 6.875%,
05/12/05 DEM 1,000,000 610,962
- ----------------------------------------------------------------------------
ITALY - 0.35%
Republic of Italy, Conv. Eurobonds, 6.50%,
06/28/01 ITL400,000,000 312,323
- ----------------------------------------------------------------------------
NEW ZEALAND - 3.08%
Federal National Mortgage Association, Notes,
7.25%, 06/20/02 NZD 1,250,000 710,149
- ----------------------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 750,000 442,479
- ----------------------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,800,000 1,144,973
- ----------------------------------------------------------------------------
Bonds, 8.00%, 04/15/04 750,000 454,128
- ----------------------------------------------------------------------------
2,751,729
- ----------------------------------------------------------------------------
SWEDEN - 2.75%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 911,044
- ----------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 762,225
- ----------------------------------------------------------------------------
Bonds, 6.50%, 10/25/06 6,000,000 783,516
- ----------------------------------------------------------------------------
2,456,785
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM - 5.07%
Federal National Mortgage Association, Sr. Unsec.
Notes, 6.875%, 06/07/02 GBP 450,000 $ 741,312
- -------------------------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 400,000 679,729
- -------------------------------------------------------------------------------
Bonds, 7.50% 12/07/06 450,000 795,991
- -------------------------------------------------------------------------------
Gtd. Notes, 7.25%, 03/30/98 1,000,000 1,643,122
- -------------------------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 400,000 664,639
- -------------------------------------------------------------------------------
4,524,793
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated
Government Bonds & Notes 13,853,950
- -------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.25%
BANKS (REGIONAL) - 0.60%
Westpac Banking Corp. STRYPES Trust - $3.135 Conv.
Pfd. 16,000 536,000
- -------------------------------------------------------------------------------
ENTERTAINMENT - 0.00%
Time Warner Inc.-Series M, $102.50 PIK Conv. Pfd. 1 1,154
- -------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.40%
Conseco Inc.-$4.278 Conv. PRIDES 8,000 1,248,000
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.25%
Citizens Utilities Co.-$2.50 Conv. Pfd. 4,700 224,425
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 2,009,579
- -------------------------------------------------------------------------------
COMMON STOCK - 0.02%
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Nextel Communications, Inc. 743 19,318
- -------------------------------------------------------------------------------
WARRANTS - 0.05%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.00%
Wireless One, Inc., expiring 10/19/00(h) 420 0
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.01%
Electronic Retailing Systems, expiring 01/24/98(h) 590 11,800
- -------------------------------------------------------------------------------
GAMING, LOTTERY & PARI-MUTUEL COMPANIES - 0.00%
Boomtown, Inc., expiring 11/01/98 (acquired 11/03/93;
cost $0)(d)(h) 150 2
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.01%
MVE Inc., expiring 02/15/02(h) 190 5,700
- -------------------------------------------------------------------------------
METAL FABRICATORS - 0.00%
Gulf States Steel Corp., expiring 04/15/03(h) 230 1,035
- -------------------------------------------------------------------------------
PERSONAL CARE - 0.01%
IHF Capital Inc., expiring 11/14/99 (acquired
11/04/94-12/07/94; cost $150)(d)(h) 150 7,575
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
21
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Clearnet Communications Inc. (Canada), expiring
09/15/05(h) 891 $ 8,464
- ---------------------------------------------------------------------------
Orion Network Systems, Inc., expiring 01/15/07(h) 580 8,120
- ---------------------------------------------------------------------------
16,584
- ---------------------------------------------------------------------------
TELEPHONE - 0.00%
ESAT Holdings Ltd, expiring 02/01/07 (acquired
06/16/97; cost $0)(d)(h) 470 1,763
- ---------------------------------------------------------------------------
Total Warrants 44,459
- ---------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES - 0.46%
Notes, 6.50%, 05/31/01 $ 400,000 409,740
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.69%
Tennessee Valley Authority, Bonds, 5.98%, 04/01/36 600,000 614,082
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENT - 1.08%(i)
Smith Barney, Inc. 6.75%, 01/02/98(j) 966,742 966,742
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.48% 87,069,717
- ---------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 2.52% 2,248,935
- ---------------------------------------------------------------------------
NET ASSETS - 100.00% $89,318,652
===========================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (g).
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount
(c) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $11,793,420
which represented 13.20% of the Fund's net assets.
(e) Issued as a unit. This unit includes one Sr. Note plus one warrant to
purchase 0.003734 shares of preferred stock.
(f) Issued as a unit. This unit includes one Sr. Note plus warrants to purchase
0.8463 shares of common stock.
(g) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S.Government obligations, 0%
to 13.875%, due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Abbreviations:
AUD - Australian Dollar PIK - Payment in Kind
CAD - Canadian Dollar Pfd. - Preferred
Conv. - Convertible PRIDES - Preferred Redeemable Increased Dividend
Deb. - Debenture Equity Security
DEM - German Deutschemark Sec. - Secured
Disc. - Discounted SEK - Swedish Krona
FRF - French Franc Sr. - Senior
GBP - British Pound Sterling STRYPES- Structured Yield Product Exchangeable
Gtd. - Guaranteed for Stock
ITL - Italian Lire Sub. - Subordinated
JPY - Japanese Yen Unsec. - Unsecured
NZD - New Zealand Dollar Unsub. - Unsubordinated
Wt. - Warrants
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
22
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $84,751,367) $87,069,717
- ---------------------------------------------------------------------
Foreign currencies, at market value (cost $72,375) 72,202
- ---------------------------------------------------------------------
Receivables for:
Forward currency contracts 509,198
- ---------------------------------------------------------------------
Capital stock sold 75,556
- ---------------------------------------------------------------------
Dividends and interest 1,662,634
- ---------------------------------------------------------------------
Investment for deferred compensation plan 16,957
- ---------------------------------------------------------------------
Organizational costs, net 965
- ---------------------------------------------------------------------
Other assets 126
- ---------------------------------------------------------------------
Total assets 89,407,355
- ---------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 16,957
- ---------------------------------------------------------------------
Accrued advisory fees 44,572
- ---------------------------------------------------------------------
Accrued administrative service fees 4,150
- ---------------------------------------------------------------------
Accrued directors' fees 2,234
- ---------------------------------------------------------------------
Accrued operating expenses 20,790
- ---------------------------------------------------------------------
Total liabilities 88,703
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $89,318,652
=====================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 7,914,436
=====================================================================
Net asset value, offering and redemption price per share $ 11.29
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $5,682,303
- -------------------------------------------------------------------------------
Dividends 64,710
- -------------------------------------------------------------------------------
Total investment income 5,747,013
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 447,539
- -------------------------------------------------------------------------------
Administrative services fees 48,683
- -------------------------------------------------------------------------------
Custodian fees 39,847
- -------------------------------------------------------------------------------
Directors' fees and expenses 8,076
- -------------------------------------------------------------------------------
Organizational costs 2,892
- -------------------------------------------------------------------------------
Other 51,031
- -------------------------------------------------------------------------------
Total expenses 598,068
- -------------------------------------------------------------------------------
Less: Expenses paid indirectly (1,513)
- -------------------------------------------------------------------------------
Net expenses 596,555
- -------------------------------------------------------------------------------
Net investment income 5,150,458
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 676,109
- -------------------------------------------------------------------------------
Foreign currencies (439,310)
- -------------------------------------------------------------------------------
Forward currency contracts 838,669
- -------------------------------------------------------------------------------
1,075,468
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 282,391
- -------------------------------------------------------------------------------
Foreign currencies (9,268)
- -------------------------------------------------------------------------------
Forward currency contracts 422,581
- -------------------------------------------------------------------------------
695,704
- -------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and forward
currency contracts 1,771,172
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,921,630
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
23
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,150,458 $ 3,620,192
- -----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 1,075,468 967,204
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and forward
currency contracts 695,704 685,218
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 6,921,630 5,272,614
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (77,788) (3,857,482)
- -----------------------------------------------------------------------------
Net equalization credits -- 905,775
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 18,851,039 16,672,719
- -----------------------------------------------------------------------------
Net increase in net assets 25,694,881 18,993,626
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 63,623,771 44,630,145
- -----------------------------------------------------------------------------
End of year $89,318,652 $63,623,771
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $80,655,246 $59,753,245
- -----------------------------------------------------------------------------
Undistributed net investment income 4,195,077 1,655,895
- -----------------------------------------------------------------------------
Undistributed net realized gain on investment
securities, foreign currencies and forward
currency contracts 1,653,803 95,809
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 2,814,526 2,118,822
- -----------------------------------------------------------------------------
$89,318,652 $63,623,771
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Diversified Income Fund (the "Fund"). The Fund's investment
objective is to seek to achieve a high level of current income. The Fund will
seek to achieve its objective by investing primarily in a diversified
portfolio of foreign and U.S. government and corporate debt securities,
including lower rated high yield debt securities (commonly known as "junk
bonds"). These high yield bonds may involve special risks in addition to the
risks associated with investment in higher rated debt securities. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade bonds. Also, the secondary
market in which high yield bonds are traded may be less liquid than the market
for higher grade bonds. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which
prices are not provided by the pricing service and which are listed or
traded on an exchange are valued at the last sales price on the exchange
where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on
that day unless the Board of Directors, or persons designated by the Board
of Directors, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from
AIM V.I. DIVERSIFIED INCOME FUND
24
<PAGE>
an electronic quotation reporting system, if such prices are available, or
from established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean of the closing bid and asked prices.
Securities for which market quotations are either not readily available or
are questionable are valued at fair value as determined in good faith by or
under the supervision of the Fund's officers in accordance with methods which
are specifically authorized by the Board of Directors. Short-term obligations
having 60 days or less to maturity are valued at amortized cost which
approximates market value. Generally, trading in foreign securities as well
as corporate bonds and U.S. Government securities is substantially completed
each day at various times prior to the close of the New York Stock Exchange.
The values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally determined prior to the close of the New York Stock
Exchange. Occasionally, events affecting the values of such securities and
such exchange rates may occur between the times at which they are determined
and the close of the New York Stock Exchange which will not be reflected in
the computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these securities
will be valued at their fair value as determined in good faith by or under
the supervision of the Board of Directors.
B. Foreign Currency Translation - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for the
amount of a purchase or sale of a security denominated in a foreign currency
in order to "lock-in" the U.S. dollar price of that security. The Fund could
be exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
Outstanding contracts at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
SETTLEMENT ---------------------- UNREALIZED
DATE DELIVER RECEIVE VALUE APPRECIATION
- ---------- ---------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
01/14/98 JPY 5,000,000 $ 41,841 $ 38,294 $ 3,547
01/28/98 DEM 3,350,000 1,894,796 1,865,325 29,471
01/29/98 SEK 19,000,000 2,554,450 2,395,003 159,447
01/30/98 GBP 1,375,000 2,296,800 2,267,448 29,352
02/06/98 JPY 31,000,000 257,903 237,433 20,470
02/18/98 NZD 3,800,000 2,367,400 2,209,406 157,994
02/20/98 DEM 2,400,000 1,402,361 1,338,028 64,333
02/27/98 GBP 1,400,000 2,339,302 2,316,645 22,657
03/05/98 JPY 93,000,000 733,207 712,328 20,879
03/19/98 NZD 1,400,000 814,800 814,585 215
03/31/98 GBP 1,000,000 1,663,250 1,662,417 833
----------- ----------- --------
$16,366,110 $15,856,912 $509,198
========
</TABLE>
D. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on the
ex-dividend date. It is the policy of the Fund not to amortize premiums on
bonds for financial reporting purposes. Realized gains or losses from
securities transactions are recorded on the identified cost basis. On
December 31, 1997, undistributed net investment income was reduced by
$482,526 and undistributed net realized gains increased by $482,526 in order
to comply with the requirements of the American Institute of Certified
Public Accountants Statement of Position 93-2. Net assets of the Fund were
unaffected by the reclassifications discussed above.
E. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
F. Equalization - The Fund previously followed the accounting practice known as
equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount of
undistributed net investment income, is credited or charged to undistributed
net income when the transaction is recorded so that the undistributed net
investment income per share is unaffected by sales or redemptions of Fund
shares. During the year ended December 31, 1997, the Fund discontinued
equalization accounting and reclassified the cumulative equalization debits
of $2,050,962 from undistributed net investment income to paid-in capital.
This change has no effect on the net assets, the results of operations or
net asset value per share of the Fund.
G. Organizational Costs - Organizational costs of the Fund of $14,461 are being
amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
such Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $48,683 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,400 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of
the Fund's expenses related to pricing services used by the Fund which reduced
the Fund's expenses by $290 during the year ended December 31, 1997. The Fund
also received reductions in custodian fees of $1,223 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,513 during the year ended December 31, 1997.
AIM V.I. DIVERSIFIED INCOME FUND
25
<PAGE>
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $61,998,858 and $37,621,437, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $4,207,440
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,889,813)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,317,627
=========================================================================
</TABLE>
Cost of investments for tax purposes is $84,752,090.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 2,860,755 $ 30,505,544 2,366,508 $ 22,865,918
- ------------------------------------------------------------------------------
Issued as reinvestment of
distributions 6,908 77,788 377,444 3,857,482
- ------------------------------------------------------------------------------
Reacquired (1,114,698) (11,732,293) (1,044,208) (10,050,681)
- ------------------------------------------------------------------------------
1,752,965 $ 18,851,039 1,699,744 $ 16,672,719
==============================================================================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------------------- -----------------
1997 1996 1995 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.33 $ 10.00 $ 9.12 $ 10.46 $ 10.00
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.73 0.73 0.69 0.76 0.54
- -----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.24 0.28 0.94 (1.42) 0.29
- -----------------------------------------------------------------------------------
Total from investment
operations 0.97 1.01 1.63 (0.66) 0.83
- -----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.68) (0.75) (0.68) (0.35)
- -----------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- -- -- -- (0.02)
- -----------------------------------------------------------------------------------
Total distributions (0.01) (0.68) (0.75) (0.68) (0.37)
- -----------------------------------------------------------------------------------
Net asset value, end of
period $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
===================================================================================
Total return(a) 9.39% 10.19% 18.11% (6.35)% 8.33%
===================================================================================
Ratios/supplemental data:
Net assets, end of
period (000s omitted) $89,319 $63,624 $44,630 $25,271 $14,530
===================================================================================
Ratio of expenses to
average net assets(b) 0.80%(c)(d) 0.86% 0.88%(e) 0.91% 1.05%(e)
===================================================================================
Ratio of net investment
income to average net
assets(f) 6.90%(c) 7.09% 7.65%(e) 8.07% 6.78%(e)
===================================================================================
Portfolio turnover rate 52% 76% 72% 100% 57%
===================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.03% and 1.69% (annualized) for January 31, 1995 and 1994, respectively.
(c) Ratios are based on average net assets of $74,589,876.
(d) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have
remained the same.
(e) Annualized.
(f) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 7.95% and 6.14% (annualized) for January 31, 1995 and
1994, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
26
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Diversified Income Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended, and the financial highlights for each of the two years in
the period then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Diversified Income Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the financial highlights for each
of the two years in the period then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995 and the period May 5, 1993
(commencement of operations) through January 31, 1994, in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. DIVERSIFIED INCOME FUND
27
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FOURTH-QUARTER SURGE LEADS
TO IMPRESSIVE RETURNS
A roundtable discussion with the Fund management team for AIM V.I. Global Utilities Fund
about the fiscal year ended December 31, 1997.
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GLOBAL the Fund's total investments in the foreign ----------
UTILITIES FUND PERFORM DURING sector. We expect that figure to rise as we The foreign utilities
THE FISCAL YEAR? identify more foreign utilities with attrac-
A. We are pleased to report the Fund's tive earnings, and as more companies sector continued to
total return was 21.63%. This was good around the world go public. The foreign
performance, given the volatility and utilities sector continued to offer the Fund offer the Fund
uncertainty experienced in markets world- the best opportunities for growth. In fact,
wide as a result of the Asian financial for the first time two foreign holdings, the best opportunities
crisis. Telecom Italia and PowerGen PLC, fin-
Q. THE DOMESTIC UTILITIES SECTOR ished the reporting period among the for growth.
PERFORMED VERY WELL IN THE FOURTH portfolio's top 10 holdings. ----------
QUARTER OF 1997. WHAT CAUSED
THE OUTSTANDING PERFORMANCE FOR Q. WAS THE FUND AFFECTED BY THE tinued to be the Fund's largest overseas
THE SECTOR? FINANCIAL TURMOIL IN ASIA? region with almost 20% of the portfolio.
A. The Fund returned 6.45% during the A. Fortunately, only 1% of the portfolio European markets were less affected by
fourth quarter of the fiscal year. This was in Asia, so we were spared much of the troubles in Asia than other parts of
unusually high three-month return was the volatility during the last part of the the world.
caused by the low valuations of domestic reporting period. However, the portfolio
electric company stocks compared to the wasn't completely immune to the "Asian Q. TELECOMMUNICATIONS CONTINUED
rest of the market and by the financial Flu." About 4% of the portfolio was in TO BE A MAJOR COMPONENT OF THE
uncertainty in Asia. This combination Latin America, and those holdings did FUND'S PORTFOLIO. HOW DID THAT SECTOR
attracted investors to the domestic experience some turbulance, although it PERFORM DURING THE FISCAL YEAR?
electric utility sector and proved to be was not nearly as dramatic. Europe con- A. The fourth quarter saw a dramatic rise
very beneficial to the Fund.
PORTFOLIO COMPOSITION
Q. WHAT PERCENTAGE OF THE FUND'S
PORTFOLIO WAS IN DOMESTIC UTILITIES? As of 12/31/97, based on total net assets
A. We finished the fiscal year with just
over 61% of the Fund's total investments TOP 10 COMMON STOCK HOLDINGS TOP 10 INDUSTRIES
in domestic utilities. Electric power
companies continued to be the Fund's 1. Cincinnati Bell, Inc. 2.60% 1. Electric Companies 24.79%
largest industry weighting at almost 25% 2. El Paso Natural Gas Co. 2.35 2. Telephone 18.91
of the portfolio. Pinnacle West Capital 3. PowerGen PLC 2.28 3. Natural Gas 9.56
Corp., an electric company among the 4. Williams Companies, Inc. (The) 2.24 4. Communications Equipment 4.26
portfolio's top 10 holdings at the end of 5. Pinnacle West Capital Corp. 2.19 5. Real Estate Investment Trust 4.45
the reporting period, provided attractive 6. Ameritech Corp. 1.86 6. Power Producers (Independent) 4.34
current income for the Fund. 7. BellSouth Corp. 1.76 7. Telecommunications
8. FPL Group, Inc. 1.66 (Long Distance) 3.70
Q. WHAT PERCENTAGE OF THE FUND'S 9. Telecom Italia S.P.A. 1.60 8. Water Utilities 2.31
PORTFOLIO WAS OVERSEAS? 10. SBC Communications, Inc. 1.49 9. Telecommunications (Cellular/
A. We finished the fiscal year with 29% of Wireless) 2.23
10. Manufacturing (Diversified) 1.67
Please keep in mind that the Fund's portfolio composition is subject to change and
there is no assurance the Fund will continue to hold any particular security.
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
28
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
among the regional Bell telephone com- tially have the lowest volatility of any stock AVERAGE ANNUAL TOTAL RETURNS
panies due to their lower valuations when in any country. Given the global outlook As of 12/31/97
compared to the market, and the Fund for stable interest rates and healthy, mod-
participated in their positive perfor- erate growth in most areas in which the 1 Year 21.63%
mance. Some familiar names in the Fund's Fund invests, market conditions seem Inception (5/2/93) 15.15
top 10 holdings at the end of the report- favorable for utility companies in 1998.
ing period were Cincinnati Bell, Inc.,
Ameritech Corp., BellSouth Corp., and
SBC Communications, Inc.
Q. DISCUSSIONS CONTINUE ABOUT
THE DEREGULATION OF ELECTRIC
UTILITIES IN THE U.S. HOW WOULD
THAT AFFECT THE FUND?
A. Many people believe that electric
utilities deregulation, and the competition Growth of a $10,000 Investment
that theoretically would come from a free From 5/2/94-12/31/97
market caused by deregulation, will lead AIM V.I. Utilities S&P 500 Lipper Utilities
to lower bills for consumers. However, Fund Stock Index Fund Index
there is a lot of debate about whether a 5/2/94 $10,000 $10,000 $10,000
true free market actually can be created 7/31/94 9,920 10,193 9,848
for utilities. 10/31/94 9,921 10,581 9,777
Regardless, the utility sector is a differ- 1/31/95 9,944 10,615 9,938
ent investment option today than it was 15 4/30/95 10,259 11,687 10,241
years ago. The "guaranteed" dividends 7/31/95 11,015 12,847 10,815
that utility companies were expected to 10/31/95 11,626 13,370 11,509
provide to investors are a thing of the 1/31/96 12,441 14,708 12,409
past. Today an electric company may 4/30/96 12,420 15,209 12,171
choose to reinvest that capital in the 7/31/96 12,282 14,962 12,012
company to make it more competitive in 10/31/96 13,138 16,582 12,724
the face of deregulation or use it to buy 1/31/97 14,030 18,579 13,575
back its stock rather than distributing 4/30/97 13,821 19,028 13,313
those dividends to its shareholders. 7/31/97 15,415 22,759 14,723
Future mergers and acquisitions are 10/31/97 15,502 21,906 14,968
likely, and there will be many growth 12/31/97 16,772 23,338 16,761
opportunities.
Past performance cannot guarantee comparable future results.
Q. WHAT IS YOUR MARKET OUTLOOK
FOR UTILITIES IN THE NEAR FUTURE? The performance figures shown represent the AIM V.I. Global Utilities Fund and are
A. While it may be unrealistic to expect not intended to reflect actual annuity values, and do not reflect charges at the
continued returns of over 20% for the separate account level which, if applied, would lower the performance results. The
Fund, we are positive on the utilities Fund's performance figures are historical and reflect reinvestment of all
sector overall. We anticipate continuing distributions and changes in the net asset value. The Fund's investment return and
breakthroughs in telecommunications, principal value will fluctuate so that Fund shares, when redeemed, may be worth
and the prospects in the foreign utilities more or less than their original cost. Source: Towers Data Systems
markets are enticing as we expect to see HYPO--Registered Trademark--.
more privatization of government-owned The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
electric, gas, and telephone utilities over- unmanaged securities widely regarded by investors to be representative of the stock
seas. U.S. electric utilities also continue to market in general. The unmanaged Lipper Utilities Fund Index is an average of the
offer attractive opportunities. performance of the 30 largest utilities funds tracked by Lipper Analytical Services,
The new, competitive marketplace Inc., an independent mutual funds performance monitor.
means utility stocks will see more volatil- An investment cannot be made in the indexes listed. Index results include
ity. However, we expect utilities to poten- reinvested dividends.
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
29
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 44.14%
BROADCASTING (TELEVISION, RADIO, & CABLE) - 0.54%
Univision Communications Inc.(a) 1,700 $ 118,681
- ---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.65%
ADC Telecommunications, Inc.(a) 4,800 200,400
- ---------------------------------------------------------------------
Excel Switching Corp(a) 400 7,150
- ---------------------------------------------------------------------
Lucent Technologies, Inc. 2,000 159,750
- ---------------------------------------------------------------------
NEXTLINK Communications, Inc.-Class A(a) 1,100 23,444
- ---------------------------------------------------------------------
Qwest Communications International Inc.(a) 2,200 130,900
- ---------------------------------------------------------------------
Tellabs, Inc.(a) 1,200 63,450
- ---------------------------------------------------------------------
585,094
- ---------------------------------------------------------------------
ELECTRIC COMPANIES - 14.74%
Allegheny Energy, Inc. 8,300 269,750
- ---------------------------------------------------------------------
Carolina Power & Light Co. 4,400 186,725
- ---------------------------------------------------------------------
CINergy Corp. 4,500 172,406
- ---------------------------------------------------------------------
DQE, Inc. 7,700 270,462
- ---------------------------------------------------------------------
Edison International 4,800 130,500
- ---------------------------------------------------------------------
FPL Group, Inc. 6,200 366,963
- ---------------------------------------------------------------------
IPALCO Enterprises, Inc. 2,000 83,875
- ---------------------------------------------------------------------
New Century Energies, Inc. 4,600 220,513
- ---------------------------------------------------------------------
New York State Electric & Gas Corp. 5,000 177,500
- ---------------------------------------------------------------------
NIPSCO Industries, Inc. 6,000 296,625
- ---------------------------------------------------------------------
Pinnacle West Capital Corp. 11,400 483,075
- ---------------------------------------------------------------------
Public Service Company of New Mexico 3,600 85,275
- ---------------------------------------------------------------------
Sierra Pacific Resources 3,300 123,750
- ---------------------------------------------------------------------
Southern Co. 8,200 212,175
- ---------------------------------------------------------------------
Teco Energy, Inc. 6,200 174,375
- ---------------------------------------------------------------------
3,253,969
- ---------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.45%
Superior TeleCom Inc.(a) 2,900 100,230
- ---------------------------------------------------------------------
NATURAL GAS - 7.97%
Coastal Corp. (The) 1,400 86,713
- ---------------------------------------------------------------------
Columbia Gas System, Inc. 2,000 157,125
- ---------------------------------------------------------------------
El Paso Natural Gas Co. 7,800 518,700
- ---------------------------------------------------------------------
Energen Corp. 1,400 55,650
- ---------------------------------------------------------------------
KN Energy, Inc. 2,700 145,800
- ---------------------------------------------------------------------
Public Service Company of North Carolina, Inc. 3,000 68,625
- ---------------------------------------------------------------------
Sonat, Inc. 5,100 233,325
- ---------------------------------------------------------------------
Williams Companies, Inc. (The) 17,400 493,725
- ---------------------------------------------------------------------
1,759,663
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp.(a) 2,000 $ 93,250
- ------------------------------------------------------------------------
Calenergy, Inc.(a) 5,400 155,250
- ------------------------------------------------------------------------
248,500
- ------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 4.45%
Alexandria Real Estate Equities, Inc. 2,300 72,594
- ------------------------------------------------------------------------
Boston Properties, Inc. 3,100 102,493
- ------------------------------------------------------------------------
Cali Realty Corp. 3,100 127,100
- ------------------------------------------------------------------------
Captec Net Lease Realty, Inc. 2,900 49,844
- ------------------------------------------------------------------------
CCA Prison Realty Trust(a) 3,000 133,875
- ------------------------------------------------------------------------
Crescent Real Estate Equities, Co. 1,600 63,000
- ------------------------------------------------------------------------
Entertainment Properties Trust(a) 2,200 42,625
- ------------------------------------------------------------------------
Golf Trust of America, Inc. 800 23,200
- ------------------------------------------------------------------------
Imperial Credit Commercial Mortgage Investment Corp. 2,200 32,175
- ------------------------------------------------------------------------
Meditrust Corp. 1,562 57,208
- ------------------------------------------------------------------------
Parkway Properties, Inc. 1,100 37,744
- ------------------------------------------------------------------------
Patriot American Hospitality, Inc. 4,199 120,984
- ------------------------------------------------------------------------
Public Storage, Inc. 1,500 44,063
- ------------------------------------------------------------------------
Starwood Lodging Trust 1,300 75,237
- ------------------------------------------------------------------------
982,142
- ------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.28%
IXC Communications, Inc.(a) 2,600 81,575
- ------------------------------------------------------------------------
WinStar Communications, Inc.(a) 4,500 112,219
- ------------------------------------------------------------------------
WorldCom, Inc.(a) 2,968 89,782
- ------------------------------------------------------------------------
283,576
- ------------------------------------------------------------------------
TELEPHONE - 10.94%
Ameritech Corp. 5,100 410,550
- ------------------------------------------------------------------------
BellSouth Corp. 6,900 388,556
- ------------------------------------------------------------------------
Century Telephone Enterprises 5,200 259,025
- ------------------------------------------------------------------------
Cincinnati Bell, Inc. 18,500 573,500
- ------------------------------------------------------------------------
Electric Lightwave, Inc.-Class A(a) 6,300 93,712
- ------------------------------------------------------------------------
GTE Corp. 2,600 135,850
- ------------------------------------------------------------------------
McLeodUSA Inc.-Class A(a) 2,700 86,400
- ------------------------------------------------------------------------
SBC Communications, Inc. 4,500 329,625
- ------------------------------------------------------------------------
Teleport Communications Group Inc.-Class A(a) 2,500 137,188
- ------------------------------------------------------------------------
2,414,406
- ------------------------------------------------------------------------
Total Domestic Common Stocks 9,746,261
- ------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 2.60%
INVESTMENT BANKING/BROKERAGE - 0.11%
Salomon Inc.-$3.48 Conv. Pfd. 400 23,700
- ------------------------------------------------------------------------
NATURAL GAS - 0.43%
MCN Corp.-$2.013 Conv. Pfd. PRIDES 2,800 95,900
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
30
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
POWER PRODUCERS (INDEPENDENT) - 1.39%
AES Trust I-$2.69 Conv. Pfd. 3,000 $ 215,250
- ------------------------------------------------------------------------------
AES Trust II-$2.75 Conv. Pfd. (Acquired 10/24/97;
Cost $60,000)(b) 1,200 62,550
- ------------------------------------------------------------------------------
Citizens Utilities Co.-$2.50 Conv. Pfd. 600 28,650
- ------------------------------------------------------------------------------
306,450
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.67%
WorldCom, Inc.-$2.68 Conv. Pfd. 1,400 147,000
- ------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 573,050
- ------------------------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE PREFERRED STOCKS - 0.30%
ENTERTAINMENT - 0.30%
Time Warner Inc.-Series M, $102.50 PIK Pfd. 58 65,767
- ------------------------------------------------------------------------------
Total Domestic Non-Convertible Preferred Stocks 65,767
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 26.97%
ARGENTINA - 0.41%
Central Costanera S.A.-Class B (Electric Companies) 20,700 53,830
- ------------------------------------------------------------------------------
Telefonica de Argentina S.A.-ADR (Telephone) 1,000 37,250
- ------------------------------------------------------------------------------
91,080
- ------------------------------------------------------------------------------
AUSTRALIA - 0.14%
Telstra Corp. Ltd. (Telephone)(a) 14,380 30,366
- ------------------------------------------------------------------------------
AUSTRIA - 0.47%
Oesterreichische Elektrizitaetswirtschafts A.G.-Class A
(Electric Companies) 970 102,901
- ------------------------------------------------------------------------------
BELGIUM - 0.42%
Electrabel S.A. (Electric Companies) 400 92,521
- ------------------------------------------------------------------------------
BRAZIL - 1.70%
Centrais Eletricas de Santa Catarina S.A. (Electric
Companies) 40,000 49,819
- ------------------------------------------------------------------------------
Compania Paranaense de Energia-Copel (Electric
Companies)(a) 3,100 42,431
- ------------------------------------------------------------------------------
Eletricidade de Sao Paulo S.A. (Electric Companies)(a) 270 50,804
- ------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.-Telebras-ADR
(Telephone) 2,000 232,875
- ------------------------------------------------------------------------------
375,929
- ------------------------------------------------------------------------------
CANADA - 1.40%
MetroNet Communications Corp.-Class B (Communications
Equipment)(a) 1,800 31,275
- ------------------------------------------------------------------------------
Philip Services Corp. (Waste Management)(a) 3,500 50,313
- ------------------------------------------------------------------------------
TELUS Corp. (Telecommunications-Cellular/Wireless) 4,300 95,385
- ------------------------------------------------------------------------------
Westcoast Energy Inc. (Natural Gas) 5,500 126,500
- ------------------------------------------------------------------------------
Westshore Terminals Inc. (Services-Facilities &
Environmental) 2,200 5,542
- ------------------------------------------------------------------------------
309,015
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CHILE - 1.29%
Cia. de Telecomunicaciones de Chile S.A.-ADR (Telephone) 6,300 $ 188,213
- -------------------------------------------------------------------------------
Enersis S.A.-ADR (Electric Companies) 3,300 95,700
- -------------------------------------------------------------------------------
283,913
- -------------------------------------------------------------------------------
DENMARK - 0.22%
Tele Danmark A.S.-ADR (Telephone) 1,600 49,300
- -------------------------------------------------------------------------------
FINLAND - 0.32%
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 1,000 70,000
- -------------------------------------------------------------------------------
GERMANY - 2.20%
RWE A.G. (Electric Companies) 2,200 118,010
- -------------------------------------------------------------------------------
VEBA A.G. (Manufacturing-Diversified) 3,435 233,901
- -------------------------------------------------------------------------------
Viag A.G. (Manufacturing-Diversified) 250 134,658
- -------------------------------------------------------------------------------
486,569
- -------------------------------------------------------------------------------
FRANCE - 0.33%
France Telecom S.A.-ADR (Telecommunications-
Cellular/Wireless)(a) 2,000 72,000
- -------------------------------------------------------------------------------
HONG KONG - 0.20%
China Telecom Ltd.-ADR (Telecommunications-
Cellular/Wireless)(a) 1,300 43,631
- -------------------------------------------------------------------------------
HUNGARY - 0.36%
Magyar Tavkozlesi ADR (Telecommunications-Long
Distance)(a) 3,100 80,600
- -------------------------------------------------------------------------------
INDONESIA - 0.11%
PT Indosat-ADR (Telephone) 1,300 25,106
- -------------------------------------------------------------------------------
ISRAEL - 0.50%
ECI Telecommunications Ltd. (Communications Equipment) 2,700 68,850
- -------------------------------------------------------------------------------
Gilat Communications Ltd. (Communications Equipment)(a) 5,800 42,775
- -------------------------------------------------------------------------------
111,625
- -------------------------------------------------------------------------------
ITALY - 2.40%
Telecom Italia Mobile S.p.A. (Telecommunications-
Cellular/Wireless) 38,025 175,444
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 55,277 353,598
- -------------------------------------------------------------------------------
529,042
- -------------------------------------------------------------------------------
JAPAN - 0.45%
Nippon Telegraph & Telephone Corp. (Telephone) 50 42,889
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp.-ADR (Telephone) 1,300 56,306
- -------------------------------------------------------------------------------
99,195
- -------------------------------------------------------------------------------
NETHERLANDS - 0.43%
Royal PTT Nederland N.V. (Telephone) 280 11,682
- -------------------------------------------------------------------------------
Royal PTT Nederland N.V.-ADR (Telephone) 2,000 83,000
- -------------------------------------------------------------------------------
94,682
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
31
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NEW ZEALAND - 1.08%
Sky Network Television Ltd. (Broadcasting-Television,
Radio & Cable)(a) 1,700 $ 25,500
- ----------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd.-ADR (Telephone) 5,500 213,125
- ----------------------------------------------------------------------------
238,625
- ----------------------------------------------------------------------------
PERU - 0.37%
Luz Del Sur S.A. (Power Producers-Independent)(a) 1,700 29,325
- ----------------------------------------------------------------------------
Telefonica del Peru S.A.-ADR (Telephone)(a) 2,200 51,288
- ----------------------------------------------------------------------------
80,613
- ----------------------------------------------------------------------------
PORTUGAL - 1.27%
Electricidade de Portugal, S.A.-ADR (Electric
Companies)(a) 1,000 38,750
- ----------------------------------------------------------------------------
Portugal Telecom S.A.-ADR (Telephone) 4,700 220,900
- ----------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications-Cellular/Wireless)(a) 200 21,400
- ----------------------------------------------------------------------------
281,050
- ----------------------------------------------------------------------------
SPAIN - 1.92%
Autopistas Concesionaria Espanola S.A. (Services-
Commercial & Consumer) 3,900 52,350
- ----------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 15,700 206,619
- ----------------------------------------------------------------------------
Telefonica de Espana-ADR (Telephone) 1,800 163,913
- ----------------------------------------------------------------------------
422,882
- ----------------------------------------------------------------------------
SWEDEN - 0.64%
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 3,800 141,788
- ----------------------------------------------------------------------------
UNITED KINGDOM - 7.70%
Energy Group PLC (Power Producers-Independent)(a) 2,000 89,250
- ----------------------------------------------------------------------------
Hyder PLC (Water Utilities) 4,210 66,930
- ----------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 12,134 57,593
- ----------------------------------------------------------------------------
National Power PLC (Electric Companies) 22,950 226,152
- ----------------------------------------------------------------------------
National Power PLC-ADR (Electric Companies) 900 35,662
- ----------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 38,650 502,736
- ----------------------------------------------------------------------------
PowerGen PLC-ADR (Electric Companies) 1,100 58,438
- ----------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 15,950 140,932
- ----------------------------------------------------------------------------
Southern Electric PLC (Electric Companies) 9,706 80,660
- ----------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 14,725 188,632
- ----------------------------------------------------------------------------
Wessex Water PLC (Water Utilities) 11,650 98,154
- ----------------------------------------------------------------------------
Yorkshire Water PLC (Water Utilities) 19,580 155,962
- ----------------------------------------------------------------------------
1,701,101
- ----------------------------------------------------------------------------
VENEZUELA - 0.64%
Cia. Anonima Nacional Telefonos de Venezuela
(Telecommunications-Long Distance)(a) 3,400 141,525
- ----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 5,955,059
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS & NOTES - 6.55%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.48%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 $ 106,875
- ------------------------------------------------------------------------------
CONSUMER FINANCE - 0.38%
GMAC, Notes, 9.00%, 10/15/02 75,000 83,451
- ------------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.84%
El Paso Electric Co., Series D Sec. 1st Mortgage Bonds,
8.90%, 02/01/06 75,000 83,036
- ------------------------------------------------------------------------------
Western Resources Inc., Sr. Notes, 7.125%, 08/01/09 100,000 102,984
- ------------------------------------------------------------------------------
186,020
- ------------------------------------------------------------------------------
ENTERTAINMENT - 1.26%
Time Warner, Inc.
Deb., 9.125%, 01/15/13 100,000 119,454
- ------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 75,000 82,367
- ------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 75,000 76,039
- ------------------------------------------------------------------------------
277,860
- ------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.49%
California Energy Co., Notes, 10.25%, 01/15/04 100,000 108,000
- ------------------------------------------------------------------------------
NATURAL GAS - 0.58%
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 75,000 79,875
- ------------------------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 48,915
- ------------------------------------------------------------------------------
128,790
- ------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.48%
Tennessee Gas Pipeline Co., Bonds, 7.00%, 03/15/27 100,000 105,440
- ------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.29%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 81,563
- ------------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 81,700
- ------------------------------------------------------------------------------
Indiana Michigan Power, Sec. Lease Obligation Bonds,
9.82%, 12/07/22 93,421 122,242
- ------------------------------------------------------------------------------
285,505
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.75%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 164,414
- ------------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds & Notes 1,446,355
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
32
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOREIGN NON-CONVERTIBLE BONDS & NOTES - 2.25%
CANADA - 2.25%(c)
Bell Canada (Telecommunications-Cellular/Wireless),
Series EW Deb., 8.80%, 08/17/05 CAD 50,000 $ 41,062
- -------------------------------------------------------------------------------
Unsec. Deb., 10.875, 10/11/04 50,000 44,131
- -------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas-Exploration &
Production), Deb., 11.00%, 10/31/00 100,000 78,437
- -------------------------------------------------------------------------------
Ontario Hydro (Electric Companies), Global Bonds,
9.00%, 06/24/02 100,000 79,414
- -------------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 100,000 77,657
- -------------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas-Exploration & Production),
Series Q Deb., 10.625%, 10/20/09 125,000 118,988
- -------------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 70,000 56,705
- -------------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds & Notes 496,394
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 1.41%
U.S. TREASURY BONDS - 0.71%
7.625%, 02/15/25 $ 130,000 157,822
- -------------------------------------------------------------------------------
U.S. TREASURY NOTES - 0.70%
6.625%, 06/30/01 150,000 154,260
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities 312,082
- -------------------------------------------------------------------------------
Total Investments (excluding Repurchase Agreement) 18,594,968
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 17.27%(d)
Smith Barney, Inc., 6.75%, 01/02/98(e) 3,813,559 3,813,559
- -------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 101.49% 22,408,527
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.49%) (329,666)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $ 22,078,861
===============================================================================
</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
market value of this security at 12/31/97 represented 0.28% of the Fund's
net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
Canadian dollars.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreements. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds, private accounts, and certain non-registered
investment companies managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 at $408,000,323.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian dollars
Conv. - Convertible
Deb. - Debentures
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
PRIDES- Preferred Redeemable Increased Dividend Equity Securities
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec.- Unsecured
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
33
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $13,970,866) $18,594,968
- ---------------------------------------------------------------------
Repurchase agreement (cost $3,813,559) 3,813,559
- ---------------------------------------------------------------------
Foreign currencies, at market value (cost $3,234) 3,246
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 67,399
- ---------------------------------------------------------------------
Investments sold 39,932
- ---------------------------------------------------------------------
Dividends and interest 91,910
- ---------------------------------------------------------------------
Investment for deferred compensation plan 13,684
- ---------------------------------------------------------------------
Total assets 22,624,698
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 503,055
- ---------------------------------------------------------------------
Deferred compensation plan 13,684
- ---------------------------------------------------------------------
Accrued advisory fees 11,266
- ---------------------------------------------------------------------
Accrued directors' fees 1,839
- ---------------------------------------------------------------------
Accrued administrative services fees 3,629
- ---------------------------------------------------------------------
Accrued operating expenses 12,364
- ---------------------------------------------------------------------
Total liabilities 545,837
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $22,078,861
=====================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,446,729
=====================================================================
Net asset value, offering and redemption price per share $15.26
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $18,882 foreign withholding tax) $ 376,432
- -----------------------------------------------------------------------------
Interest 290,021
- -----------------------------------------------------------------------------
Total investment income 666,453
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 106,309
- -----------------------------------------------------------------------------
Administrative services fees 47,128
- -----------------------------------------------------------------------------
Custodian fees 17,887
- -----------------------------------------------------------------------------
Directors' fees and expenses 7,826
- -----------------------------------------------------------------------------
Professional fees 20,236
- -----------------------------------------------------------------------------
Other 8,597
- -----------------------------------------------------------------------------
Total expenses 207,983
- -----------------------------------------------------------------------------
Less:Expenses paid indirectly (179)
- -----------------------------------------------------------------------------
Net expenses 207,804
- -----------------------------------------------------------------------------
Net investment income 458,649
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities 181,733
- -----------------------------------------------------------------------------
Foreign currency transactions (16,050)
- -----------------------------------------------------------------------------
Futures contracts 10,462
- -----------------------------------------------------------------------------
176,145
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 2,780,466
- -----------------------------------------------------------------------------
Foreign currency transactions (759)
- -----------------------------------------------------------------------------
2,779,707
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currency transactions
and futures contracts 2,955,852
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,414,501
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
34
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 458,649 $ 400,253
- --------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currency transactions and futures contracts 176,145 67,729
- --------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currency transactions 2,779,707 880,598
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 3,414,501 1,348,580
- --------------------------------------------------------------------------------
Distributions to shareholders from net investment
income -- (410,247)
- --------------------------------------------------------------------------------
Distributions from net realized capital gains (6,795) (74,178)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 5,095,582 4,317,451
- --------------------------------------------------------------------------------
Net increase in net assets 8,503,288 5,181,606
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 13,575,573 8,393,967
- --------------------------------------------------------------------------------
End of year $22,078,861 $13,575,573
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $16,836,039 $11,740,457
- --------------------------------------------------------------------------------
Undistributed net investment income 439,576 (3,023)
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currency transactions
and futures contracts 179,652 (5,748)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currency transactions 4,623,594 1,843,887
- --------------------------------------------------------------------------------
$22,078,861 $13,575,573
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Global Utilities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income, and as a secondary
objective the Fund seeks to achieve capital appreciation, by investing
primarily in the common and preferred stocks of public utility companies
(either domestic or foreign). Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the New York Stock Exchange. The
values of such
AIM V.I. GLOBAL UTILITIES FUND
35
<PAGE>
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1997,
undistributed net investment income was decreased and undistributed net
realized gains increased by $16,050 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $47,128 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,254 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $65 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $114 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $179 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $7,558,487 and $3,982,219, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $4,712,475
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (88,373)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $4,624,102
=========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
--------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- ----------- -------- -----------
<S> <C> <C> <C> <C>
Sold 505,614 $ 6,971,987 578,877 $ 6,900,184
- ------------------------------------------------------------------------
Issued as reinvestment of
distributions 459 6,795 39,804 484,425
- ------------------------------------------------------------------------
Reacquired (140,799) (1,883,200) (258,571) (3,067,158)
- ------------------------------------------------------------------------
365,274 $ 5,095,582 360,110 $ 4,317,451
========================================================================
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
36
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------- JANUARY 31,
1997 1996 1995 1995
------- ------- ------ -----------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 12.55 $11.64 $9.69 $10.00
- -----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.32 0.40 0.29 0.27
- -----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.40 0.99 1.98 (0.33)
- -----------------------------------------------------------------------------------
Total from investment
operations 2.72 1.39 2.27 (0.06)
- -----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.41) (0.31) (0.25)
- -----------------------------------------------------------------------------------
Distributions from net
realized capital gains (0.01) (0.07) (0.01) --
- -----------------------------------------------------------------------------------
Total distributions (0.01) (0.48) (0.32) (0.25)
- -----------------------------------------------------------------------------------
Net asset value, end of
period $ 15.26 $12.55 $11.64 $ 9.69
===================================================================================
Total return(a) 21.63% 12.07% 23.73% (0.56)%
===================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $22,079 $13,576 $8,394 $2,958
===================================================================================
Ratio of expenses to
average net assets 1.28%(b)(c) 1.40%(d) 1.47%(d)(e) 1.31%(e)(f)
===================================================================================
Ratio of net investment
income to average net
assets 2.81%(b) 3.56%(d) 3.76%(d)(e) 4.39%(e)(f)
===================================================================================
Portfolio turnover rate 28% 47% 58% 69%
===================================================================================
Average brokerage
commission rate paid(g) $0.0365 $0.0477 N/A N/A
===================================================================================
</TABLE>
(a) Totals returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $16,297,147.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have remained
the same.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.55%, 3.42%, 2.44% (annualized) and 2.79% (annualized)
for 1996 and 1995, respectively.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 2.80% and 2.90%, respectively.
(g) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GLOBAL UTILITIES FUND
37
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the two years in the
period then ended, the eleven month period ended December 31, 1995 and the
period May 2, 1994 (commencement of operations) through January 31, 1995.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Global Utilities Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the two years in the period then ended, the eleven month period ended
December 31, 1995 and the period May 2, 1994 (commencement of operations)
through January 31, 1995, in conformity with generally accepted accounting
principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. GLOBAL UTILITIES FUND
38
<PAGE>
<TABLE>
<CAPTION>
The Manager's Overview
THE FUND PROVIDES ATTRACTIVE
CURRENT INCOME AND RELATIVE STABILITY
A roundtable discussion with the Fund management team for AIM V.I. Government
Securities Fund about the fiscal year ended December 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. ALTHOUGH FINANCIAL MARKETS WERE PAST 12 MONTHS? first, data showing decreasing
TURBULENT IN 1997, IT WAS A GOOD A. The largest single investment inflation in the U.S., and second,
YEAR FOR BONDS. WHAT CONTRIBUTED category in the Fund's portfolio money moving from emerging markets
TO THEIR PERFORMANCE? is mortgage-backed obligations. into long-term U.S. Treasury securities.
A. The major factor determining The mortgage index staged another The barbell portfolio structure was
Treasury performance was the very strong performance in 1997, well suited to this environment.
lowering of inflation expectations. beating duration-matched Treasuries
Inflation and price data were by over 1.3%, after outperforming Q. DO YOU THINK MORTGAGE REFINANCINGS
positive all year, and much of the in 1996 by over 1%. Despite falling WILL HAVE A NEGATIVE IMPACT ON FUND
positive performance by bonds U.S. interest rates, the mortgage- PERFORMANCE IN COMING MONTHS?
occurred during the second half of backed obligations sector performed A. Thus far the impact has been minimal
1997 as it became evident that the well as prepayments remained tame for three reasons. First, well over half
Federal Reserve Board (the Fed) was and volatility declined. Despite the mortgage-backed securities held by
showing no signs of tightening monetary the fact that interest rates the Fund are owned below par, which means
policy. During the fourth quarter, generally declined during 1997, we will realize a gain when mortgage
Treasury prices edged higher as all particularly during the second half refinancings occur on these securities.
focus was on trouble abroad and its of the year prepayments were Second, the last time we saw an
potentially positive effect on generally muted in 1997. The 30-year environment like today's was in 1993.
inflation and growth. mortgage rate began the year at 7.67%, At that time it made sense for 75%
gradually fell most of the year, and of homeowners' existing mortgages to
Q. HOW DID THE FUND DO IN THIS reached a level of 6.99% by the end be refinanced. Today, estimates are that
ENVIRONMENT? of December. it makes sense for only about 30% of
A. The Fund provided an attractive total Demand from a broader investor base existing mortgages to be refinanced.
return of 8.16% for the fiscal year. re-emerge in the mortgage market in Finally, and even more important, most
1997, another positive contributor to of the refinancings occurring today will
Q. THE REPORTING PERIOD WAS performance. be of adjustable-rate mortgages taken out
CHARACTERIZED BY LOW INFLATION, LOW All of this outperformance came in in 1993, and the Fund does not hold any
INTEREST RATES AND A VOLATILE STOCK the first half of the year. During adjustable-rate mortgages.
MARKET. HOW DID THOSE FACTORS the second half of the year, as Although we currently do not expect
AFFECT BOND INVESTMENTS? expectations of lower inflation and prepayments to reach 1993 levels, we are
A. News at mid-year that the Consumer lower interest rates began to be cautiously monitoring the market as a
Price Index had risen 0.1%-half the prominent in the market, the Fund significant further drop in the 10-year
increase expected by analysts, moved to reduce mortgage exposure Treasury could ignite a further wave of
combined with a record six in anticipation of an increase in homeowners to refinance.
consecutive declines in producer mortgage prepayments and refinancings.
prices, encouraged the Fed to The Fund also positioned itself Q. WAS THERE ANY IMPACT ON THE FUND FROM
avoid tightening monetary policy. for the continued flattening of the THE DECLINE IN LONG-TERM INTEREST RATES
Borrowing costs actually declined yield curve by pursuing a barbell LATE IN 1997?
slightly during the remainder of strategy of holding both short- and A. The Fund was positively affected by the
the year as inflation levels remained long-dated securities. The benchmark decline in long-term interest rates.
low. In addition, investors looking 30-year Treasury yield declined 72 Although the Fund maintains an average
for greater diversification amid the basis points to 5.92%, and the curve maturity of between three and 10 years,
volatility of the stock market turned from the two-year Treasury note to the Fund held a core position of long-
to bonds. the 30-year Treasury bond flattened
49 basis points to end the year at 28
Q. WHAT ADJUSTMENTS DID THE FUND basis points. (A basis point is one
MAKE IN THE PORTFOLIO OVER THE one-hundredth of a percentage point.)
Two main factors contributing to the
flattening were:
AIM V.I. GOVERNMENT SECURITIES FUND
39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
maturity Treasury securities. Thirty-year AVERAGE ANNUAL TOTAL RETURNS
securities had a total return of 15.42% for As of 12/31/97
1997. Growth of a $10,000 Investment 1 Year 8.16%
From 5/5/93-12/31/97 Inception (5/5/93) 5.35
Q. WHAT IMPORTANCE DOES DIVERSI-
FICATION PLAY IN THE COMPOSITION OF AIM V.I. Government Lehman Brothers
THE FUND'S PORTFOLIO? Securities Fund Intermediate Government
A. The Fund invests only in debt securities Bond Index
issued, guaranteed or backed by the U.S. 5/5/93 $10,000 $10,000
government and its agencies. However, 7/31/93 10,150 10,169
within those parameters, achieving diver- 10/31/93 10,363 10,184
sification of the Fund's portfolio is a key 1/31/94 10,355 10,186
to successful performance. 4/30/94 10,063 9,979
The emphasis in the portfolio is to fine 7/31/94 9,922 10,141
tune the amount allocated to the best- 10/31/94 9,968 10,175
performing areas in the government mar- 1/31/95 9,969 10,407
ket, but to maintain a significant alloca- 4/30/95 10,367 10,885
tion to all sectors of this market. 7/31/95 10,935 11,051
10/31/95 11,077 11,384
Q. WHAT IS YOUR OUTLOOK FOR THE 1/31/96 11,520 11,471
GOVERNMENT BOND MARKET? 4/30/96 11,293 11,379
A. 1977 was the year of what Fed Chair- 7/31/96 11,316 11,543
man Alan Greenspan dubbed "the new 10/31/96 11,497 12,028
paradigm": strong growth, high produc- 1/31/97 11,784 12,028
tivity, full employment, and low inflation. 4/30/97 11,736 12,189
1998 brings new challenges as the market 7/31/97 12,094 12,472
begins to question whether most of the 10/31/97 12,429 12,784
good news is behind us and how much 12/31/97 12,745 12,887
longer this ideal environment can last.
On the positive side for the bond mar- Past performance cannot guarantee comparable future results.
ket, the financial difficulties Asian coun-
tries are experiencing is ultimately defla- The performance figures shown represent the AIM V.I. Government Securities Fund and
tionary, with higher trade deficits and are not intended to reflect actual annuity values, and do not reflect charges at the
downward pressure on wages, especially separate account level which, if applied, would lower the performance results. The
in the manufacturing sector. It is too early Fund's performance figures are historical and reflect reinvestment of all
to tell how big the deflationary impact will distributions and changes in the net asset value. The Fund's investment return and
be on the U.S. principal value will fluctuate so that Fund shares, when redeemed, may be worth more
The vastly improved U.S. budget deficit or less than their original cost. Source: Towers Data Systems HYPO--Registered
is more good news for the market as we Trademark--.
can expect reduced Treasury supply. On The Lehman Bros. Intermediate Government Bond Index is an unmanaged composite
the negative side, the unemployment rate generally considered representative of intermediate U.S. Treasury and U.S. government
is continuing to decline, which tradition- agency securities. Results shown here are for the period 4/30/93 through 12/31/97.
ally has signaled inflation. At a minimum, Source: Lipper Analytical Services, Inc.
the effects of Asian developments will not The unmanaged Lipper Intermediate U.S. Government Funds Index represents an average
be apparent for several months and the of the performance of the largest government securities funds. It is compiled by
Fed will probably remain prudent in Lipper Analytical Services, Inc., an independent mutual funds performance monitor.
leaving rates unchanged until the effects The Salomon Brothers Mortgage Index is the mortgage component of the Salomon
are known. Brothers Broad Investment-Grade Bond Index. It is composed of 30- and 15-year
Government National Mortgage Assn., Federal Home Loan Mortgage Corp., and Federal
National Mortgage Assn. Securities.
The Consumer Price Index (CPI) is a measure of change in consumer prices as
determined by the U.S. Bureau of Labor Statistics.
An investment cannot be made in any index listed. Index results include reinvested
dividends.
PORTFOLIO COMPOSITION
As of 12/31/97, based on total net assets
Cash Equivalents 5.60%
U.S. Agency Obligations 18.07%
U.S. Treasury Obligations 17.23
Mortgage-backed Obligations 59.10%
BREAKDOWN OF MORTGAGE-BACKED OBLIGATIONS
Federal National Mortgage Assn. 61.02%
Federal Home Loan Mortgage Corp. 22.98
Government National Mortgage Assn. 16.00
Please keep in mind that the Fund's portfolio composition is
subject to change and there is no assurance the Fund will
continue to hold any particular security.
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
40
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 77.17%
FEDERAL FARM CREDIT BANK - 0.59%
Medium term notes
5.96%, 07/14/03 $ 200,000 $ 200,504
- ----------------------------------------------------------
FEDERAL HOME LOAN BANK BOARD - 7.06%
Debentures
8.375%, 10/25/99 150,000 156,620
- ----------------------------------------------------------
6.00%, 06/27/00 250,000 251,220
- ----------------------------------------------------------
5.97%, 12/11/00 1,000,000 1,004,790
- ----------------------------------------------------------
7.31%, 07/06/01 500,000 523,005
- ----------------------------------------------------------
8.17%, 12/16/04 400,000 449,296
- ----------------------------------------------------------
2,384,931
- ----------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 14.03%
Debentures
6.13%, 08/19/99 150,000 150,825
- ----------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 832,849 823,996
- ----------------------------------------------------------
6.50%, 12/01/08 to 07/01/23 1,454,590 1,456,294
- ----------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 1,778,087 1,809,874
- ----------------------------------------------------------
10.50%, 08/01/19 258,784 284,338
- ----------------------------------------------------------
8.50%, 08/01/24 206,125 216,044
- ----------------------------------------------------------
4,741,371
- ----------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") - 41.22%
Debentures
7.55%, 04/22/02 400,000 425,244
- ----------------------------------------------------------
8.50%, 02/01/05 500,000 523,305
- ----------------------------------------------------------
Medium term notes
7.375%, 03/28/05 300,000 324,159
- ----------------------------------------------------------
Pass through certificates
5.504%, 06/02/99 500,000 498,795
- ----------------------------------------------------------
6.24%, 02/01/06 490,964 493,498
- ----------------------------------------------------------
6.625%, 02/01/07 664,965 687,940
- ----------------------------------------------------------
7.50%, 11/01/09 to 07/01/27 3,774,432 3,873,116
- ----------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 582,304 583,737
- ----------------------------------------------------------
7.00%, 07/01/11 to 12/01/27 5,671,038 5,742,794
- ----------------------------------------------------------
8.50%, 09/01/24 294,970 309,255
- ----------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 1,800,000 470,124
- ----------------------------------------------------------
13,931,967
- ----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") - 9.45%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 $ 90,877 $ 98,796
- ----------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 175,375 190,075
- ----------------------------------------------------------------
11.00%, 10/15/15 45,876 51,424
- ----------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 43,969 48,641
- ----------------------------------------------------------------
6.50%, 12/15/23 463,594 462,579
- ----------------------------------------------------------------
8.00%, 07/15/26 1,263,321 1,312,666
- ----------------------------------------------------------------
7.50%, 05/15/27 1,004,475 1,030,521
- ----------------------------------------------------------------
3,194,702
- ----------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 0.93%
Debentures
7.30%, 01/31/02 300,000 315,321
- ----------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 2.38%
Debentures
5.629%, 02/22/99 500,000 499,670
- ----------------------------------------------------------------
5.55%, 12/15/99 150,000 149,393
- ----------------------------------------------------------------
6.50%, 08/01/02 150,000 153,732
- ----------------------------------------------------------------
802,795
- ----------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 1.51%
Debentures
6.375%, 06/15/05 500,000 511,605
- ----------------------------------------------------------------
Total U.S. Government Agency Securities 26,083,196
- ----------------------------------------------------------------
U.S. TREASURY SECURITIES - 17.23%
U.S. TREASURY NOTES & BONDS - 16.17%
5.625%, 11/30/99 1,000,000 999,560
- ----------------------------------------------------------------
6.125%, 12/31/01 1,500,000 1,521,030
- ----------------------------------------------------------------
6.00%, 07/31/02 300,000 303,360
- ----------------------------------------------------------------
6.625%, 05/15/07 500,000 529,475
- ----------------------------------------------------------------
6.125%, 08/15/07 500,000 514,010
- ----------------------------------------------------------------
6.875%, 08/15/25 500,000 557,695
- ----------------------------------------------------------------
6.375%, 08/15/27 500,000 527,670
- ----------------------------------------------------------------
6.125%, 11/15/27 500,000 513,895
- ----------------------------------------------------------------
5,466,695
- ----------------------------------------------------------------
U.S. TREASURY STRIPS(a) - 1.06%
6.80%, 11/15/18 1,250,000 356,675
- ----------------------------------------------------------------
Total U.S. Treasury Securities 5,823,370
- ----------------------------------------------------------------
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
41
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT - 4.42%(b)
Goldman, Sachs & Co., 6.53%, 01/02/98(c) $1,493,291 $ 1,493,291
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 98.82% 33,399,857
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.18% 399,939
- ----------------------------------------------------------------
NET ASSETS - 100.00% $33,799,796
================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) STRIPS are traded on a discount basis. In such cases the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Government obligations,
0% to 14%, due 01/08/98 to 08/15/23 with an aggregate market value at
12/31/97 of $918,902,583.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
42
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $32,662,725) $ 33,399,857
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 173,205
- ----------------------------------------------------------------------
Interest 258,350
- ----------------------------------------------------------------------
Investment for deferred compensation plan 16,668
- ----------------------------------------------------------------------
Organizational costs, net 967
- ----------------------------------------------------------------------
Other assets 2,813
- ----------------------------------------------------------------------
Total assets 33,851,860
- ----------------------------------------------------------------------
LIABILITIES:
Deferred compensation payable 16,668
- ----------------------------------------------------------------------
Accrued advisory fees 14,074
- ----------------------------------------------------------------------
Accrued directors' fees 2,519
- ----------------------------------------------------------------------
Accrued administrative service fees 2,920
- ----------------------------------------------------------------------
Accrued operating expenses 15,883
- ----------------------------------------------------------------------
Total liabilities 52,064
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 33,799,796
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 3,167,800
======================================================================
Net asset value, offering and redemption price per share $10.67
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,862,279
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 138,550
- --------------------------------------------------------------------------
Administrative services fees 37,872
- --------------------------------------------------------------------------
Custodian fees 13,275
- --------------------------------------------------------------------------
Directors' fees and expenses 8,571
- --------------------------------------------------------------------------
Professional fees 23,862
- --------------------------------------------------------------------------
Organizational costs 2,903
- --------------------------------------------------------------------------
Other 16,788
- --------------------------------------------------------------------------
Total expenses 241,821
- --------------------------------------------------------------------------
Net investment income 1,620,458
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES:
Net realized gain (loss) on sales of investment securities (100,162)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities 728,502
- --------------------------------------------------------------------------
Net gain on investment securities 628,340
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,248,798
==========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
43
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,620,458 $ 1,246,854
- ----------------------------------------------------------------------------
Net realized gain (loss) on sales of investment
securities (100,162) (33,180)
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of
investment securities 728,502 (626,394)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 2,248,798 587,280
- ----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (15,600) (1,251,057)
- ----------------------------------------------------------------------------
Net equalization credits -- 247,547
- ----------------------------------------------------------------------------
Net increase from capital stock transactions 7,040,082 5,397,355
- ----------------------------------------------------------------------------
Net increase in net assets 9,273,280 4,981,125
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 24,526,516 19,545,391
- ----------------------------------------------------------------------------
End of year $33,799,796 $24,526,516
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $31,984,676 $24,348,661
- ----------------------------------------------------------------------------
Undistributed net investment income 1,585,397 653,121
- ----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (507,409) (483,896)
- ----------------------------------------------------------------------------
Unrealized appreciation of investment securities 737,132 8,630
- ----------------------------------------------------------------------------
$33,799,796 $24,526,516
============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Government Securities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the U.S. Government. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate, maturity and seasoning differential.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations
are either not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are recorded on the ex-dividend date.
Realized gains or losses from securities transactions are recorded on the
identified cost basis. On December 31, 1997, undistributed net realized
gain (loss) was increased and undistributed
AIM V.I. GOVERNMENT SECURITIES FUND
44
<PAGE>
net investment income decreased by $76,649 as a result of permanent book/tax
differences due to the differing book/tax treatment for principal paydown
losses on mortgage back securities. Net assets of the Fund were unaffected by
the reclassifications discussed above.
C. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $507,409, which expires, if
not previously utilized, through the year 2004. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
D. Equalization - The Fund previously followed the accounting practice known
as equalization by which a portion of the proceeds from sales and costs of
repurchases of Fund shares, equivalent on a per share basis to the amount
of undistributed net investment income, is credited or charged to
undistributed net income when the transaction is recorded so that the
undistributed net investment income per share is unaffected by sales or
redemptions of Fund shares. During the year ended December 31, 1997, the
Fund discontinued equalization accounting and reclassified the cumulative
equalization debits of $595,933 from undistributed net investment income to
paid-in capital. This change has no effect on the net assets, the results
of operations or net asset value per share of the Fund.
E. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of
0.50% of the first $250 million of the Fund's average daily net assets, plus
0.45% of the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $37,872 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,280 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $24,965,236 and $16,850,495, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $757,075
- -----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (19,943)
- -----------------------------------------------------------------------
Net unrealized appreciation of investment securities $737,132
=======================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
---------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- -------- ----------
<S> <C> <C> <C> <C>
Sold 1,272,288 $13,023,561 872,793 $8,373,957
- ------------------------------------------------------------------------
Issued as reinvestment of
distributions 1,468 15,600 126,754 1,220,637
- ------------------------------------------------------------------------
Reacquired (591,274) (5,999,079) (435,586) (4,197,239)
- ------------------------------------------------------------------------
682,482 $ 7,040,082 563,961 $5,397,355
========================================================================
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
45
<PAGE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
---------------------------- -------------------
1997 1996 1995 1995 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 9.87 $ 10.17 $ 9.39 $ 10.24 $ 10.00
- --------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.59 0.58 0.54 0.53 0.38
- --------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.22 (0.35) 0.74 (0.88) 0.10
- --------------------------------------------------------------------------------------
Total from investment
operations 0.81 0.23 1.28 (0.35) 0.48
- --------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.53) (0.50) (0.50) (0.24)
- --------------------------------------------------------------------------------------
Net asset value, end of
period $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
======================================================================================
Total return(a) 8.16% 2.29% 13.84% (3.42)% 4.78%
======================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $33,800 $24,527 $19,545 $12,887 $10,643
======================================================================================
Ratio of expenses to
average net assets 0.87%(b) 0.91% 1.19%(c) 0.95%(d) 1.00%(c)(d)
======================================================================================
Ratio of net investment
income to average net
assets 5.85%(b) 5.80% 5.78%(c) 5.51%(e) 4.74%(c)(e)
======================================================================================
Portfolio turnover rate 66% 32% 41% 29% 0%
======================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $27,710,072.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.10% and 1.80% (annualized) for January, 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.35% and 3.94% (annualized) for January, 1995 and
1994, respectively.
AIM V.I. GOVERNMENT SECURITIES FUND
46
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Government Securities Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1997, the related statement of operations for the year then
ended, the statement of changes in net assets for each of the two years in the
period then ended and the financial highlights for each of the two years in
the period then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Government Securities Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each
of the two years in the period then ended, the eleven month period ended
December 31, 1995, the year ended January 31, 1995, and the period May 5, 1993
(commencement of operations) through January 31, 1994, in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. GOVERNMENT SECURITIES FUND
47
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
DESPITE VOLATILITY, FUND LOGS
SOLID RETURNS
A roundtable discussion with the Fund management team for AIM V.I. Growth Fund
about the fiscal year ended December 31, 1997.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GROWTH FUND PERFORM all of its losses and ended the year ---------------------
DURING THE FISCAL YEAR? below the record high it set in early The Fund was in good position
A. Despite dramatic fluctuations in the August.
stock market and a narrow market environment to take advantage of
favoring large-company stocks, your Fund Q. HOW DID INVESTORS REACT TO THE UNSTABLE
posted an impressive 26.87% total return MARKET CONDITIONS? the market sentiment
for the year ended December 31, 1997. A. For most of the year, investors tended
to favor the more liquid stocks of larger favoring large-cap equities.
Q. WHAT WERE THE MAJOR TRENDS IN THE STOCK companies with more predictable earnings. ---------------------
MARKET DURING THE YEAR? This trend was interrupted in the third
A. Although the Dow Jones Industrial Average quarter of 1997 when the more reasonably
(DJIA) soared to record heights in 1997, the priced stocks of smaller companies with A. With large-company stocks
market experienced two major declines, the greater earnings potential emerged as the forming 68% of the portfolio,
first from mid-March to mid-April when the market leaders. However, when the problems the Fund was in a good position
industrial average lost nearly 10% of its in Asia jolted stock markets worldwide, to take advantage of the market
value. The initial selloff stemmed from investors again shifted their focus to sentiment favoring large-cap
concerns that inflation, the product of rapid large-company stocks. equities. Although mid-and
economic growth, might accelerate and erode small-sized company stocks
corporate profits. However, inflation remained Q. HOW DID MARKET TRENDS AFFECT FUND posted solid gains for the year,
subdued and the market resumed its upward climb PERFORMANCE? large-cap stocks were by far
at the end of April. the strongest performers.
The second and more dramatic of the two PORTFOLIO COMPOSITION
selloffs occurred from early August to late
October and saw the DJIA lose 13.2% of its value. As of 12/31/97, based on total net
The decline was precipitated by the currency assets
devaluations in Southeast Asia and culminated on Top 10 Holdings Top 10 Industries
October 27, when the DJIA plunged 7.2% in a 1. Merck & Co., Inc. 1.68% 1. Oil & Gas
single day. 2. Microsoft Corp. 1.60 (Drilling & Equipment) 4.80%
3. International Business 2. Computer(Software/Services)4.45
Q. WHAT TRIGGERED THE EVENTS OF OCTOBER 27-28, Machines Corp. 1.49 3. Financial (Diversified) 4.44
1997? 4. Chase Manhattan Corp. 1.48 4. Health Care (Drugs-Major
A. The Southeast Asian currency devaluations 5. General Electric Co. 1.32 Pharmaceuticals) 3.67
sparked a major selloff in the Hong Kong 6. Merrill Lynch & Co., Inc. 1.18 5. Health Care (Diversified) 3.33
market with global repercussions. Although 7. Cendant Corp. 1.12 6. Computer (Hardware) 2.96
the sharp drop in the DJIA was followed by an 8. SLM Holding Corp. 1.07 7. Health Care (Medical
impressive rally on October 28, the stock 9. Service Corp. International 1.05 Products & Supplies) 2.79
market remained extremely volatile for 10. Travelers Group, Inc. 0.99 8. Consumer Finance 2.55
the remainder of the year because of the 9. Banks (Money Center) 2.43
Asian currency situations. The DJIA was 10. Electrical Equipment 2.31
unable to recoup
Please keep in mind that the Fund's portfolio composition is subject to change
and there is no assurance the Fund will continue to hold any particular
security.
</TABLE>
AIM V.I. GROWTH FUND
48
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Fund's top sector holdings as of A. Our main focus was on the stocks of A. We continue to be optimistic
December 31, 1997 included: financial pharmaceutical companies and medical- about the stock market because
25%; technology, 15%; and health care, product suppliers. These companies have inflation is low, corporate profits
15%. been bringing a steady stream of new are strong, and the economy is
products to the market to meet the needs growing at a healthy pace. After a
Q. WHAT WAS BEHIND THE STRONG PERFORMANCE of a health-conscious population. In 1997, record three straight years of 20%
OF FINANCIAL-COMPANY STOCKS? SmithKline Beecham PLC, one of the stocks or more returns, stock returns may
A. The financial sector was the top-per- in the portfolio, reported strong sales of trend back to their historic levels
forming Dow Jones U.S. industry group in new pharmaceutical products. of 10% to 12% annually. Moreover,
1997. The sector benefited from declining Other health-care stocks in the port- the problems in Asia could slow
interest rates, low inflation, and a con- folio included Bristol-Myers Squibb Co., economic growth, reducing corporate
tinuing wave of mergers and acquisitions. Merck & Co. Inc., and HEALTHSOUTH Corp. profits and stock returns.
For example, Travelers Group, Inc., one We expect market volatility to
of the stocks in the portfolio, acquired Q. WHAT IS YOUR OUTLOOK FOR THE FUTURE? continue. In such an environment,
Salomon Brothers, a leading investment investors would be well advised to
banking firm, in September. Travelers Growth of a $10,000 Investment focus on their long-term financial
reported significant earnings growth From 5/5/93-12/31/97 goals rather than transitory
in 1997. fluctuations in the markets.
The Fund also benefited from owning AIM V.I. GROWTH S&P 500
the stocks of Allstate Corp., Franklin FUND STOCK INDEX AVERAGE ANNUAL TOTAL RETURNS
Resources, Inc., and Household Inter- 5/5/93 $10,000 $10,000 As of 12/31/97
national Inc. 7/31/93 10,420 10,155
If the low-interest rate, low- 10/31/93 11,160 10,675 1 Year 26.87%
inflation environment persists, it 1/31/94 11,607 11,062
should be a boon to financial companies. 4/30/94 10,626 10,430 Inception (5/5/93) 18.20
However, firms that were heavily involved 7/31/94 10,425 10,681
in making loans in Southeast Asia could 10/31/94 10,207 11,088
be adversely affected by the currency 1/31/95 10,782 11,123
devaluations in that region. 4/30/95 12,060 12,247
7/31/95 14,094 13,462
Q. IT WAS A DIFFICULT YEAR FOR TECHNOLOGY 10/31/95 14,436 14,011
STOCKS. ARE YOU STILL OPTIMISTIC ABOUT 1/31/96 14,806 15,412
THIS SECTOR? 4/30/96 15,712 15,937
A. Yes, because technology continues to be 7/31/96 14,887 15,678
the fastest-growing segment of the economy. 10/31/96 16,639 17,376
The largest portion of corporate and global 1/31/97 18,105 19,768
capital expenditures is being channeled into 4/30/97 17,640 19,939
technology. 7/31/97 21,635 23,848
The technology sector took a beating in 10/31/97 21,213 22,955
1997 because of the Asian financial crisis. 12/31/97 21,790 24,455
However, the currency devaluations in Southeast
Asia may ultimately work in favor of some Past performance cannot guarantee comparable future results.
technology companies as it could reduce the cost
of components while not shrinking the size of The performance figures shown represent the AIM V.I. Growth Fund and are not
their markets. intended to reflect actual annuity values, and do not reflect charges at the
Moreover, we only invest in the stocks of separate account level which, if applied, would lower the performance results.
technology companies that show earnings growth The Fund's performance figures are historical and reflect reinvestment of all
potential. distributions and changes in net asset value. The Fund's investment return and
Technology stocks we found attractive principal value will fluctuate so that Fund shares, when redeemed, may be worth
included Microsoft Corp., Dell Computer Corp., more or less than their original cost. Source: Towers Data Systems
and BMC Software, Inc. HYPO--Registered Trademark--.
The Standard and Poor's Composite Index of 500 Stocks (S&P 500) is a group
Q. WHERE WAS YOUR EMPHASIS IN THE HEALTH-CARE of unmanaged securities widely regarded by investors to be representative of the
SECTOR? stock market in general.
The Dow Jones Industrial Average is a price-weighted average of 30 actively
traded primarily industrial stocks.
An investment cannot be made in any index listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. GROWTH FUND
49
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 78.99%
AEROSPACE/DEFENSE - 0.64%
Coltec Industries, Inc.(a) 6,500 $ 150,718
- ---------------------------------------------------------------
Sundstrand Corp. 30,000 1,511,250
- ---------------------------------------------------------------
1,661,968
- ---------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.64%
DIMON, Inc. 23,600 619,500
- ---------------------------------------------------------------
Universal Corp. 25,000 1,028,124
- ---------------------------------------------------------------
1,647,624
- ---------------------------------------------------------------
AIR FREIGHT - 0.23%
CNF Transportation Inc. 15,500 594,812
- ---------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.31%
Federal-Mogul Corp. 16,200 656,100
- ---------------------------------------------------------------
MascoTech, Inc. 8,400 154,350
- ---------------------------------------------------------------
810,450
- ---------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.55%
First Union Corp. 28,000 1,435,000
- ---------------------------------------------------------------
BANKS (MONEY CENTER) - 2.43%
BankAmerica Corp. 18,000 1,314,000
- ---------------------------------------------------------------
Chase Manhattan Corp. 35,000 3,832,500
- ---------------------------------------------------------------
Citicorp 9,000 1,137,936
- ---------------------------------------------------------------
6,284,436
- ---------------------------------------------------------------
BANKS (REGIONAL) - 0.26%
North Fork Bancorporation, Inc. 20,000 671,250
- ---------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.66%
Chancellor Media Corp.(a) 11,100 828,338
- ---------------------------------------------------------------
Jacor Communications, Inc.(a) 16,500 876,562
- ---------------------------------------------------------------
1,704,900
- ---------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.56%
Crompton & Knowles Corp. 28,000 742,000
- ---------------------------------------------------------------
Millennium Chemicals Inc. 30,000 706,875
- ---------------------------------------------------------------
1,448,875
- ---------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.52%
Lucent Technologies, Inc.(b)(c) 22,000 1,757,250
- ---------------------------------------------------------------
QUALCOMM, Inc.(a) 16,000 808,000
- ---------------------------------------------------------------
Tellabs, Inc.(a) 26,000 1,374,750
- ---------------------------------------------------------------
3,940,000
- ---------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.96%
Compaq Computer Corp. 37,500 2,116,405
- ---------------------------------------------------------------
Dell Computer Corp.(a) 20,000 1,680,000
- ---------------------------------------------------------------
International Business Machines Corp. 37,000 3,868,812
- ---------------------------------------------------------------
7,665,217
- ---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING) - 0.26%
Cisco Systems, Inc.(a) 12,000 $ 669,000
- -----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.53%
EMC Corp.(a) 50,000 1,371,873
- -----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 4.45%
America Online, Inc.(a)(b)(c) 15,500 1,382,404
- -----------------------------------------------------------------
BMC Software, Inc.(a) 20,000 1,312,500
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 31,000 759,500
- -----------------------------------------------------------------
Computer Associates International, Inc. 34,500 1,824,186
- -----------------------------------------------------------------
Compuware Corp.(a) 40,000 1,280,000
- -----------------------------------------------------------------
Microsoft Corp.(a) 32,000 4,136,000
- -----------------------------------------------------------------
Unisys Corp.(a) 60,000 832,500
- -----------------------------------------------------------------
11,527,090
- -----------------------------------------------------------------
CONSUMER FINANCE - 2.55%
ContiFinancial Corp.(a) 12,800 322,400
- -----------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 42,000 1,611,750
- -----------------------------------------------------------------
Household International, Inc. 10,000 1,275,625
- -----------------------------------------------------------------
Money Store, Inc. (The) 29,000 609,000
- -----------------------------------------------------------------
SLM Holding Corp. 20,000 2,782,500
- -----------------------------------------------------------------
6,601,275
- -----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.15%
AmeriSource Health Corp.-Class A(a) 24,000 1,398,000
- -----------------------------------------------------------------
Cardinal Health, Inc. 9,000 676,125
- -----------------------------------------------------------------
Sysco Corp. 20,000 911,250
- -----------------------------------------------------------------
2,985,375
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.31%
American Power Conversion Corp.(a) 20,000 472,500
- -----------------------------------------------------------------
General Electric Co. 46,700 3,426,612
- -----------------------------------------------------------------
SCI Systems, Inc.(a) 7,800 339,788
- -----------------------------------------------------------------
Solectron Corp.(a) 22,600 939,312
- -----------------------------------------------------------------
Symbol Technologies, Inc. 21,200 800,300
- -----------------------------------------------------------------
5,978,512
- -----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.59%
Perkin-Elmer Corp. 5,500 390,844
- -----------------------------------------------------------------
Waters Corp.(a) 30,500 1,147,562
- -----------------------------------------------------------------
1,538,406
- -----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.34%
Intel Corp. 12,600 885,150
- -----------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.21%
Applied Materials, Inc.(a)(b)(c) 18,000 542,250
- -----------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
50
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED) - 3.22%
American Express Co. 17,000 $ 1,517,250
- ---------------------------------------------------------------------
Amresco, Inc.(a) 33,000 998,250
- ---------------------------------------------------------------------
Fannie Mae 30,000 1,711,875
- ---------------------------------------------------------------------
Freddie Mac 36,000 1,509,750
- ---------------------------------------------------------------------
MBIA, Inc. 12,600 841,836
- ---------------------------------------------------------------------
MGIC Investment Corp. 13,000 864,500
- ---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 15,000 886,875
- ---------------------------------------------------------------------
8,330,336
- ---------------------------------------------------------------------
FOODS - 0.33%
ConAgra, Inc.(b) 22,000 721,874
- ---------------------------------------------------------------------
Sara Lee Corp. 2,300 129,518
- ---------------------------------------------------------------------
851,392
- ---------------------------------------------------------------------
FOOTWEAR - 0.26%
Wolverine World Wide, Inc. 30,000 678,750
- ---------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 2.97%
Abbott Laboratories 14,000 917,874
- ---------------------------------------------------------------------
American Home Products Corp. 11,800 902,700
- ---------------------------------------------------------------------
Bristol-Myers Squibb Co.(b) 24,100 2,280,462
- ---------------------------------------------------------------------
Johnson & Johnson 20,000 1,317,500
- ---------------------------------------------------------------------
Warner-Lambert Co. 18,400 2,281,600
- ---------------------------------------------------------------------
7,700,136
- ---------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 1.64%
Dura Pharmaceuticals, Inc.(a) 12,700 582,612
- ---------------------------------------------------------------------
ICN Pharmaceuticals, Inc. 38,300 1,869,519
- ---------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 55,000 1,784,062
- ---------------------------------------------------------------------
4,236,193
- ---------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 3.11%
Lilly (Eli) & Co. 15,000 1,044,375
- ---------------------------------------------------------------------
Merck & Co., Inc. 41,000 4,356,250
- ---------------------------------------------------------------------
Pfizer Inc. 14,300 1,066,244
- ---------------------------------------------------------------------
Schering-Plough Corp. 25,500 1,584,188
- ---------------------------------------------------------------------
8,051,057
- ---------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.58%
Quorum Health Group, Inc.(a) 37,000 966,625
- ---------------------------------------------------------------------
Universal Health Services, Inc.-Class B(a) 10,700 539,012
- ---------------------------------------------------------------------
1,505,637
- ---------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.64%
Health Care and Retirement Corp.(a) 6,700 269,675
- ---------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 50,000 1,387,500
- ---------------------------------------------------------------------
1,657,175
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.79%
Arterial Vascular Engineering, Inc.(a) 26,200 $ 1,703,000
- ------------------------------------------------------------------------
Becton, Dickinson & Co. 40,000 2,000,000
- ------------------------------------------------------------------------
DePuy, Inc. 7,800 224,250
- ------------------------------------------------------------------------
Guidant Corp. 15,000 933,750
- ------------------------------------------------------------------------
Stryker Corp. 29,800 1,110,050
- ------------------------------------------------------------------------
Sybron International Corp.(a) 26,400 1,239,150
- ------------------------------------------------------------------------
7,210,200
- ------------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.44%
Furniture Brands International, Inc.(a) 21,000 430,500
- ------------------------------------------------------------------------
Maytag Corp. 19,200 716,400
- ------------------------------------------------------------------------
1,146,900
- ------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.72%
Dial Corp. (The) 40,000 832,500
- ------------------------------------------------------------------------
Procter & Gamble Co. 13,000 1,037,563
- ------------------------------------------------------------------------
1,870,063
- ------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.55%
Conseco, Inc. 30,000 1,363,125
- ------------------------------------------------------------------------
Equitable Companies, Inc. 20,000 995,000
- ------------------------------------------------------------------------
Nationwide Financial Services, Inc.-Class A(a) 25,000 903,125
- ------------------------------------------------------------------------
Torchmark Corp. 18,000 757,125
- ------------------------------------------------------------------------
4,018,375
- ------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.20%
Ace, Ltd. 14,400 1,389,600
- ------------------------------------------------------------------------
Allmerica Financial Corp. 16,000 799,000
- ------------------------------------------------------------------------
American International Group, Inc. 8,600 935,250
- ------------------------------------------------------------------------
Travelers Group, Inc. 47,602 2,564,558
- ------------------------------------------------------------------------
5,688,408
- ------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 1.93%
Allstate Corp. 19,900 1,808,412
- ------------------------------------------------------------------------
Everest Reinsurance Holdings, Inc. 35,000 1,443,750
- ------------------------------------------------------------------------
EXEL Ltd. 13,200 836,550
- ------------------------------------------------------------------------
Fremont General Corp. 16,500 903,375
- ------------------------------------------------------------------------
4,992,087
- ------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.18%
Merrill Lynch & Co., Inc. 42,000 3,063,375
- ------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.85%
Franklin Resources, Inc. 12,350 1,073,678
- ------------------------------------------------------------------------
T. Rowe Price Associates, Inc. 18,000 1,131,750
- ------------------------------------------------------------------------
2,205,428
- ------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.36%
Harley-Davidson, Inc. 33,500 917,062
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
51
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LODGING (HOTELS) - 1.40%
Carnival Corp.-Class A 31,000 $ 1,716,625
- ------------------------------------------------------------------
Host Marriott Corp.(a) 7,400 145,225
- ------------------------------------------------------------------
ITT Corp. 14,000 1,160,250
- ------------------------------------------------------------------
Promus Hotel Corp.(a) 14,460 607,320
- ------------------------------------------------------------------
3,629,420
- ------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.82%
Dover Corp.(a) 37,800 1,365,525
- ------------------------------------------------------------------
Ingersoll-Rand Co. 18,450 747,225
- ------------------------------------------------------------------
2,112,750
- ------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.47%
Carlisle Companies, Inc. 4,000 171,000
- ------------------------------------------------------------------
Crane Co. 6,600 286,275
- ------------------------------------------------------------------
Eaton Corp. 7,500 669,375
- ------------------------------------------------------------------
Thermo Electron Corp.(a) 45,000 2,002,500
- ------------------------------------------------------------------
U.S. Industries, Inc. 22,500 677,812
- ------------------------------------------------------------------
3,806,962
- ------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.31%
Diebold, Inc. 15,650 792,280
- ------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 4.31%
BJ Services Co.(a) 18,500 1,330,844
- ------------------------------------------------------------------
Cooper Cameron Corp.(a) 22,000 1,342,000
- ------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 30,000 1,443,750
- ------------------------------------------------------------------
ENSCO International, Inc.(a) 19,000 636,500
- ------------------------------------------------------------------
Halliburton Co. 12,000 623,250
- ------------------------------------------------------------------
Nabors Industries, Inc.(a) 40,000 1,257,500
- ------------------------------------------------------------------
Newpark Resources, Inc.(a) 15,600 273,000
- ------------------------------------------------------------------
Santa Fe International Corp. 30,500 1,240,968
- ------------------------------------------------------------------
Schlumberger Ltd. 17,200 1,384,600
- ------------------------------------------------------------------
Transocean Offshore Inc. 2,300 110,830
- ------------------------------------------------------------------
Western Atlas Inc.(a) 20,500 1,517,000
- ------------------------------------------------------------------
11,160,242
- ------------------------------------------------------------------
PERSONAL CARE - 1.16%
Avon Products, Inc. 25,000 1,534,375
- ------------------------------------------------------------------
Gillette Co. 14,500 1,456,344
- ------------------------------------------------------------------
2,990,719
- ------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.63%
AES Corp.(a) 35,000 1,631,875
- ------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.63%
Gannett Co., Inc. 14,000 865,375
- ------------------------------------------------------------------
New York Times Co.-Class A 11,700 773,663
- ------------------------------------------------------------------
1,639,038
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
REAL ESTATE INVESTMENT TRUST - 1.16%
Crescent Real Estate Equities, Co. 20,000 $ 787,500
- ------------------------------------------------------------------
Patriot American Hospitality, Inc. 32,000 922,000
- ------------------------------------------------------------------
Starwood Lodging Trust 22,000 1,273,250
- ------------------------------------------------------------------
2,982,750
- ------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.32%
Home Depot, Inc.(b)(c) 13,950 821,306
- ------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.56%
CompUSA, Inc.(a) 38,100 1,181,100
- ------------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 45,000 1,310,625
- ------------------------------------------------------------------
Tech Data Corp.(a) 39,900 1,551,112
- ------------------------------------------------------------------
4,042,837
- ------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.81%
Federated Department Stores, Inc. 15,000 645,938
- ------------------------------------------------------------------
Nordstrom, Inc. 1,900 114,712
- ------------------------------------------------------------------
Proffitt's, Inc.(a) 47,000 1,336,562
- ------------------------------------------------------------------
2,097,212
- ------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.94%
Consolidated Stores Corp.(a) 23,750 1,043,516
- ------------------------------------------------------------------
Family Dollar Stores, Inc. 19,200 562,800
- ------------------------------------------------------------------
Ross Stores, Inc. 23,000 836,625
- ------------------------------------------------------------------
2,442,941
- ------------------------------------------------------------------
RETAIL (DRUG STORES) - 1.01%
CVS Corp. 18,000 1,153,125
- ------------------------------------------------------------------
Rite Aid Corp. 25,000 1,467,188
- ------------------------------------------------------------------
2,620,313
- ------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.70%
Albertson's, Inc. 24,200 1,146,475
- ------------------------------------------------------------------
Kroger Co.(a) 47,000 1,736,063
- ------------------------------------------------------------------
Safeway, Inc.(a)(b) 24,000 1,518,000
- ------------------------------------------------------------------
4,400,538
- ------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 2.22%
Costco Companies, Inc.(a) 38,000 1,695,750
- ------------------------------------------------------------------
Dayton Hudson Corp. 24,500 1,653,750
- ------------------------------------------------------------------
Fred Meyer, Inc.(a) 40,000 1,455,000
- ------------------------------------------------------------------
Wal-Mart Stores, Inc. 24,100 950,444
- ------------------------------------------------------------------
5,754,944
- ------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.04%
Bed Bath & Beyond, Inc.(a)(b)(c) 18,000 693,000
- ------------------------------------------------------------------
Office Depot, Inc.(a) 57,300 1,371,618
- ------------------------------------------------------------------
Payless ShoeSource, Inc.(a) 9,500 637,688
- ------------------------------------------------------------------
2,702,306
- ------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
52
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY-APPAREL) - 0.41%
Intimate Brands, Inc. 9,900 $ 238,218
- --------------------------------------------------------------------------
TJX Companies, Inc. 24,000 825,000
- --------------------------------------------------------------------------
1,063,218
- --------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 1.43%
Ahmanson (H.F.) & Co. 28,700 1,921,105
- --------------------------------------------------------------------------
Charter One Financial, Inc. 10,840 684,275
- --------------------------------------------------------------------------
Washington Mutual, Inc. 17,000 1,084,812
- --------------------------------------------------------------------------
3,690,192
- --------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.52%
Outdoor Systems, Inc.(a) 19,800 759,825
- --------------------------------------------------------------------------
Universal Outdoor Holdings, Inc. 11,400 592,800
- --------------------------------------------------------------------------
1,352,625
- --------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.14%
Cendant Corp.(b)(c) 84,108 2,891,228
- --------------------------------------------------------------------------
Service Corp. International 71,700 2,648,454
- --------------------------------------------------------------------------
5,539,682
- --------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.50%
Equifax, Inc. 65,600 2,324,700
- --------------------------------------------------------------------------
Fiserv, Inc.(a) 11,400 560,024
- --------------------------------------------------------------------------
National Data Corp. 27,264 984,910
- --------------------------------------------------------------------------
3,869,634
- --------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.25%
AccuStaff, Inc.(a) 28,100 646,300
- --------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.56%
AT&T Corp. 25,000 1,531,250
- --------------------------------------------------------------------------
CIENA Corp.(a) 15,000 916,875
- --------------------------------------------------------------------------
MCI Communications Corp. 20,000 856,250
- --------------------------------------------------------------------------
WorldCom, Inc.(a) 24,000 726,000
- --------------------------------------------------------------------------
4,030,375
- --------------------------------------------------------------------------
TELEPHONE - 0.60%
Bell Atlantic Corp. 17,000 1,547,000
- --------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.29%
Warnaco Group, Inc. (The) 23,800 746,725
- --------------------------------------------------------------------------
TOBACCO - 0.56%
Philip Morris Companies, Inc. 32,000 1,450,000
- --------------------------------------------------------------------------
WASTE MANAGEMENT - 0.32%
USA Waste Services, Inc.(a) 20,900 820,324
- --------------------------------------------------------------------------
Total Domestic Common Stocks 204,470,545
- --------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 1.15%
FINANCIAL (DIVERSIFIED) - 0.89%
MGIC Investment Corp.-$3.12 Conv. Pfd. 15,000 1,665,000
- --------------------------------------------------------------------------
SunAmerica, Inc.-Series E, $3.10 Dep. Conv. Pfd. 4,900 637,000
- --------------------------------------------------------------------------
2,302,000
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LODGING (HOTELS) - 0.26%
Host Marriott Corp., $3.375 Conv. Pfd. 10,950 $ 672,746
- ------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 2,974,746
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE NOTES - 0.67%
ELECTRICAL EQUIPMENT - 0.67%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(d) (acquired 10/31/96-12/06/96; cost
$1,166,399) $ 923,000 1,728,945
- ------------------------------------------------------------------------------
Total Domestic Convertible Corporate Notes 1,728,945
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 6.27%
BERMUDA - 0.52%
Tyco International Ltd. (Manufacturing-Diversified) 30,000 1,351,875
- ------------------------------------------------------------------------------
CANADA - 0.77%
Northern Telecom Ltd.-ADR (Communications
Equipment)(b)(c) 9,300 827,700
- ------------------------------------------------------------------------------
Philip Services Corp. (Waste Management)(a) 80,000 1,150,000
- ------------------------------------------------------------------------------
1,977,700
- ------------------------------------------------------------------------------
FRANCE - 1.77%
Banque Nationale de Paris (Banks-Major Regional) 26,000 1,381,972
- ------------------------------------------------------------------------------
ELF Aquitaine S.A. (Oil & Gas-Drilling & Equipment) 11,000 1,279,388
- ------------------------------------------------------------------------------
Renault S.A. (Automobiles)(b) 22,500 632,922
- ------------------------------------------------------------------------------
Societe Generale (Banks-Major Regional) 9,500 1,294,342
- ------------------------------------------------------------------------------
4,588,624
- ------------------------------------------------------------------------------
GERMANY - 0.15%
Adidas A.G. (Footwear) 2,950 387,976
- ------------------------------------------------------------------------------
IRELAND - 0.24%
Elan Corp. PLC-ADR (Health Care-Drugs-Generic &
Other)(a) 12,100 619,368
- ------------------------------------------------------------------------------
NETHERLANDS - 0.36%
Akzo Nobel N.V. (Chemicals-Diversified) 5,450 939,668
- ------------------------------------------------------------------------------
SINGAPORE - 0.11%
Asia Pulp & Paper Co. Ltd.-ADR (Paper & Forest
Products) 28,100 282,756
- ------------------------------------------------------------------------------
SWEDEN - 0.46%
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 32,000 1,194,000
- ------------------------------------------------------------------------------
SWITZERLAND - 1.33%
Novartis A.G. (Healthcare-Diversified) 570 924,324
- ------------------------------------------------------------------------------
UBS-Union Bank of Switzerland (Banks-Major Regional) 1,750 2,528,908
- ------------------------------------------------------------------------------
3,453,232
- ------------------------------------------------------------------------------
UNITED KINGDOM - 0.56%
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceuticals) 28,200 1,450,536
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 16,245,735
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
53
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.33%
SWITZERLAND - 0.33%
Sandoz Capital BVI Ltd. (Financial-Diversified), Sr.
Conv. Deb., 2.00%, 10/06/02 (acquired 11/04/96-
11/08/96; cost $612,162)(d) $ 550,000 $ 848,375
- -------------------------------------------------------------------------------
Total Foreign Convertible Bonds 848,375
- -------------------------------------------------------------------------------
Total Investments, excluding repurchase agreements 226,268,346
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 12.82%(e)
Smith Barney, Inc., 6.75%, 01/02/98(f) 33,186,429 33,186,429
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.23% 259,454,775
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.23)% (603,005)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $258,851,770
===============================================================================
</TABLE>
Investment Abbreviations:
ADR-American Depositary Receipt
Conv.-Convertible
Deb.-Debentures
Pfd.-Preferred
Sr.-Senior
Sub.-Subordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) A portion of this security is subject to put options purchased. See Note 8.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $2,577,320 which
represented 1.00% of the Fund's net assets.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreements entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
December 31, 1997 of $408,000,323.
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
54
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at market
value (cost $173,804,805) $226,268,346
- ----------------------------------------------------------------------
Repurchase agreements (cost $33,186,249) 33,186,429
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 104,657
- ----------------------------------------------------------------------
Investments sold 1,355,180
- ----------------------------------------------------------------------
Dividends and interest 171,225
- ----------------------------------------------------------------------
Options written 137,059
- ----------------------------------------------------------------------
Organizational costs, net 965
- ----------------------------------------------------------------------
Investment for deferred compensation plan 17,734
- ----------------------------------------------------------------------
Other assets 1,495
- ----------------------------------------------------------------------
Total assets 261,243,090
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,327,198
- ----------------------------------------------------------------------
Capital stock reacquired 139,112
- ----------------------------------------------------------------------
Options written 731,831
- ----------------------------------------------------------------------
Deferred compensation plan 17,734
- ----------------------------------------------------------------------
Accrued advisory fees 134,357
- ----------------------------------------------------------------------
Accrued directors' fees 2,202
- ----------------------------------------------------------------------
Accrued administrative service fees 3,053
- ----------------------------------------------------------------------
Accrued operating expenses 35,833
- ----------------------------------------------------------------------
Total liabilities 2,391,320
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $258,851,770
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 13,054,326
======================================================================
Net asset value, offering and redemption price per share $19.83
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $18,515 foreign withholding tax) $ 1,864,707
- ----------------------------------------------------------------------------
Interest 990,927
- ----------------------------------------------------------------------------
Total investment income 2,855,634
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,453,488
- ----------------------------------------------------------------------------
Administrative service fees 44,692
- ----------------------------------------------------------------------------
Custodian fees 68,311
- ----------------------------------------------------------------------------
Directors' fees and expenses 8,967
- ----------------------------------------------------------------------------
Organizational costs 2,892
- ----------------------------------------------------------------------------
Other 67,219
- ----------------------------------------------------------------------------
Total expenses 1,645,569
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,708)
- ----------------------------------------------------------------------------
Net expenses 1,643,861
- ----------------------------------------------------------------------------
Net investment income 1,211,773
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
Net realized gain (loss) from:
Investment securities 19,739,112
- ----------------------------------------------------------------------------
Foreign currencies (41,236)
- ----------------------------------------------------------------------------
Futures contracts 2,272,116
- ----------------------------------------------------------------------------
Options contracts 139,988
- ----------------------------------------------------------------------------
22,109,980
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 28,602,661
- ----------------------------------------------------------------------------
Foreign currencies 351
- ----------------------------------------------------------------------------
Futures contracts (83,436)
- ----------------------------------------------------------------------------
Options contracts (449,591)
- ----------------------------------------------------------------------------
28,069,985
- ----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures
and options contracts 50,179,965
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $51,391,738
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
55
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,211,773 $ 1,113,772
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and options
contracts 22,109,980 8,362,709
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 28,069,985 13,695,426
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 51,391,738 23,171,907
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (1,119,140) (662,515)
- ------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (8,443,286) (7,442,940)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 38,384,566 60,971,328
- ------------------------------------------------------------------------------
Net increase in net assets 80,213,878 76,037,780
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 178,637,892 102,600,112
- ------------------------------------------------------------------------------
End of year $258,851,770 $178,637,892
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $183,975,681 $145,591,115
- ------------------------------------------------------------------------------
Undistributed net investment income 1,182,806 1,090,173
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
options contracts 21,643,385 7,976,691
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options
contracts 52,049,898 23,979,913
- ------------------------------------------------------------------------------
$258,851,770 $178,637,892
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth Fund (the "Fund"). The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Currently, shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable annuity contracts
and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the mean between the closing bid and asked prices
on that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If no mean is available, as is the case
in some foreign markets, the closing bid will be used absent a last sales
price. Each security reported on the NASDAQ National Market System is valued
at the last sales price on the valuation date or absent a last sales price,
at the mean of the closing bid and asked prices. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value. Generally, trading
in foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
AIM V.I. GROWTH FUND
56
<PAGE>
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will
be valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
F. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
G. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
H. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
I. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $44,692 for such
services.
AIM V.I. GROWTH FUND
57
<PAGE>
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,727 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $863 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $845 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,708 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$278,678,426 and $271,014,953, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $54,538,052
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,523,682)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $52,014,370
==========================================================================
</TABLE>
Cost of investments for tax purposes is $174,253,976.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 2,757,339 $ 51,600,352 3,676,649 $57,637,947
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions 492,909 9,562,426 511,063 8,105,455
- ----------------------------------------------------------------------------
Reacquired (1,185,922) (22,778,212) (304,826) (4,772,074)
- ----------------------------------------------------------------------------
2,064,326 $ 38,384,566 3,882,886 $60,971,328
============================================================================
</TABLE>
NOTE 7 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year 824 $ 342,973
------------------------------------------
Written 5,180 1,732,123
------------------------------------------
Closed (2,655) (1,028,115)
------------------------------------------
Exercised (1,251) (372,509)
------------------------------------------
Expired (283) (142,568)
------------------------------------------
End of year 1,815 $ 531,904
==========================================
</TABLE>
Open call options written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online Inc. Jan. 98 80 155 $ 80,782 $158,875 $ (78,093)
Applied Materials Jan. 98 37.5 90 25,042 1,406 23,636
Bed Bath & Beyond, Inc. Feb. 98 35 180 25,334 84,375 (59,041)
Bristol-Myers Squibb Co. Jan. 98 95 241 106,562 52,719 53,843
ConAgra, Inc. Mar. 98 37.5 220 39,214 9,625 29,589
Cendant Corp. Jan. 98 75 350 61,044 266,875 (205,831)
Home Depot, Inc. Jan. 98 55 139 44,757 54,731 (9,974)
Lucent Technologies,
Inc. Jan. 98 85 220 64,495 15,125 49,370
Northern Telecom Ltd. Mar. 98 95 93 52,512 41,269 11,243
Safeway, Inc. Jan. 98 60 127 32,162 46,831 (14,669)
----- -------- -------- ---------
1,815 $531,904 $731,831 $(199,927)
===== ======== ======== =========
</TABLE>
AIM V.I. GROWTH FUND
58
<PAGE>
NOTE 8 - PUT OPTIONS CONTRACTS PURCHASED
Transactions in put options purchased during the year ended December 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ---------
<S> <C> <C>
Beginning of year -- $ --
----------------------------------------
Purchased 2,047 565,769
----------------------------------------
Closed (500) (182,680)
----------------------------------------
Expired (230) (32,315)
----------------------------------------
End of year 1,317 $ 350,774
========================================
</TABLE>
Open put options held at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS PAID MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online Inc. Jan. 98 70 155 $ 70,928 $ 3,875 $ (67,053)
Applied Materials, Inc. Jan. 98 32.5 180 51,165 57,375 6,210
Bed Bath & Beyond, Inc. Feb. 98 30 180 26,415 3,938 (22,477)
Cendant Corp. Jan. 98 65 350 75,521 6,563 (68,958)
Home Depot, Inc. Jan. 98 50 139 14,178 1,303 (12,875)
Lucent Technologies,
Inc. Jan. 98 75 220 72,160 19,250 (52,910)
Northern Telecom Ltd. Mar. 98 85 93 40,407 44,754 4,347
----- -------- -------- ---------
1,317 $350,774 $137,058 $(213,716)
===== ======== ======== =========
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
---------------------------------- -----------------
1997 1996 1995 1995 1994
-------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.25 $ 14.44 $ 10.71 $ 11.59 $ 10.00
- ----------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.07 0.09 0.06 0.02
- ----------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 4.27 2.52 3.65 (0.88) 1.59
- ----------------------------------------------------------------------------------
Total from investment
operations 4.35 2.59 3.74 (0.82) 1.61
- ----------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.09) (0.06) (0.01) (0.06) (0.02)
- ----------------------------------------------------------------------------------
Distributions from net
realized gains (0.68) (0.72) -- -- --
- ----------------------------------------------------------------------------------
Total distributions (0.77) (0.78) (0.01) (0.06) (0.02)
- ----------------------------------------------------------------------------------
Net asset value, end of
period $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
==================================================================================
Total return(a) 26.87% 18.09% 34.89% (7.11)% 16.07%
==================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $258,852 $178,638 $102,600 $45,497 $25,115
==================================================================================
Ratio of expenses to
average net assets 0.73%(b)(c) 0.78% 0.84%(d) 0.95% 0.85%(d)(e)
==================================================================================
Ratio of net investment
income to average net
assets 0.54%(b) 0.79% 0.95%(d) 0.71% 0.51%(d)(e)
==================================================================================
Portfolio turnover rate 132% 143% 125% 179% 99%
==================================================================================
Average brokerage
commission rate paid(f) $ 0.0618 $ 0.0629 N/A N/A N/A
==================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $224,542,366.
(c) Ratio includes indirectly paid expenses. Excluding indirectly
paid expenses, the ratio of expenses to average net assets would
have been the same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursement. Annualized
ratios of expenses and net investment income (loss) to average
net assets prior to fee waivers and/or expense reimbursements
were 1.50% and (0.14)%, respectively.
(f) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities
for the period divided by the total number of related shares
purchased and sold, which is required to be disclosed for fiscal
years beginning September 1, 1995 and thereafter.
AIM V.I. GROWTH FUND
59
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1997, the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the two years in the period then ended,
the eleven month period ended December 31, 1995, the year ended January 31,
1995, and the period May 5, 1993 (commencement of operations) through January
31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth Fund, as of December 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the two years in
the period then ended, the eleven month period ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994 in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. GROWTH FUND
60
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
THREE SECTORS PROPEL FUND
TO SOLID RESULTS
A roundtable discussion with the fund management team for AIM V.I. Growth and
Income Fund about the fiscal year ended December 31, 1997.
- --------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GROWTH AND their product lines to compete globally. improvements that have been driving eco-
INCOME FUND PERFORM DURING THE Through careful securities selection, we want nomic growth.
FISCAL YEAR? to focus on the companies initiating this Manufacturers in the tech sector have
A. The Fund produced an excellent consolidation--the franchise companies that done well, and for many of these companies,
total return of 25.72% during a will be around five years from now. the currency devaluations in Southeast Asia
year marked by significant market Second, with a growing economy, stable are lowering their costs. Specialized semicon-
turbulence. interest rates, and demographic trends lead- ductor makers like Texas Instruments Inc.,
ing more people into retirement-oriented networking-equipment producers such as Bay
Q. WHICH HOLDINGS CONTRIBUTED TO financial planning, financial institutions have Networks Inc., and such industry-leading
SUCH GOOD PERFORMANCE? prospered. Earnings growth for big money personal computer manufacturers as Compaq
A. Our three largest sectors center banks such as Chase Manhattan Corp. Computer Corp. have been very good holdings.
continue to be financials, and Citicorp outdid analysts' expectations. On the software/services side, another
technology, and health care. The Although late in the year concerns were successful holding is software maker
individual stocks we invest within voiced about the exposure of some multina- Compuware Corp., have been very good holdings.
these sectors will change over tional banks to the Asian loan situation, the from the so-called "millennium problem", the
time, and the mix of industries financial sector was the year's best performer need to reprogram older computers to recog-
will vary, but we think these among the Dow Jones U.S. industry group. nize the year 2000.
three sectors represent excellent
long-term growth potential. Q. WHY DO YOU CONTINUE TO OWN SUCH A LARGE Q. WHY DOES HEALTH CARE REMAIN A LONG-TERM
NUMBER OF TECHNOLOGY STOCKS? THEME?
Q. WHAT IS ATTRACTIVE ABOUT FINAN- A. Our technology holdings may be some- A. Demographic trends in the U.S. argue for
CIAL COMPANIES? thing of a vulnerability in the wake of the continued growth in the health-care sector for
A. Our holdings in the financial financial crisis in Southeast Asia, where many some time to come. Health care constituted
sector, including banks, insurers, American tech companies have a large pres- about 5% of the portfolio at the close of the
and brokerage houses, were up ence. Nevertheless, the biggest portion of fiscal year.
during the fiscal year. At fiscal corporate capital expenditures, domestically Our factor contributing to strength in the
year end, they were approximately and overseas, has been spent on technology. health-care sector is the Federal Drug
20% of the portfolio. This investment has fueled the productivity Administration's move toward more rapid
The sector is attractive for two approval of drugs and medical devices, which
reasons. First, it is experiencing should reduce costs for the medical instru-
a wave of mergers and acquisitions. ment and pharmaceutical industries. We hold
Firms are broadening
Portfolio Composition
As of 12/31/97, based on total net assets
Top 10 Common Stock Holdings Top 10 Industries
Number of holdings as of 12/31/97: 176
1. Chase Manhattan Corp. 2.31% 1. Financial (Diversified) 6.39%
2. Phillip Morris Companies Inc. 1.91 2. Health Care Common Stock 80.98%
3. Cendant Corp. 1.62 (Drugs - Major Pharmaceuticals) 4.44 Cash/Cash Equivalents & Others 2.09%
4. SmithKline Beecham PLC-ADR 1.61 3. Health Care (Diversified) 4.39 Convertible Bonds 6.27%
5. Cincinnati Bell, Inc. 1.60 4. Computers (Software & Services) 4.16 Convertible Preferred Stocks 5.42%
6. Service Corp. International 1.59 5. Banks (Money Center) 4.03 U.S. Government Securities 5.24%
7. Morgan Stanley, Dean Witter, 6. Services (Commercial & Consumer) 3.74
Discover & Co. 1.53 7. Telecommunications (Long Distance) 3.60
8. Brunswick Corp. 1.42 8. Oil & Gas (Drilling & Equipment) 3.47
9. Pfizer Inc. 1.34 9. Computers (Hardware) 2.72
10. Allstate Corp. 1.28 10. Insurance (Multi-Line) 2.47
Please keep in mind that the Fund's portfolio is subject to change and there is no guarantee it will continue to hold any particular
security.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND 61
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
such major pharmaceutical makers as Merck among the best performing industries late in
& Co., Inc. and SmithKline Beecham, PLC, and 1997. These income-producing investments AVERAGE ANNUAL TOTAL RETURNS
the portfolio includes companies like Arterial should help cushion volatility in uncertain As of 12/31/97
Vascular Engine Inc., a maker of sophisticated markets. However, they are not major growth
implantable therapeutic devices such as stents companies, so we intend to limit our exposure 1 Year 25.72%
used in bypass surgery. to them. One of our main strategies for deal-
Given the level of uncertainty the Asian ing with market uncertainty is portfolio Inception (5/2/94) 21.11
crisis generated in markets, it is worth noting diversification. At fiscal year end, we held
that the pharmaceutical industry is relatively 176 securities broadly distributed among the
immune to Asia's current woes. various sectors of the economy.
Q. DOES THE PORTFOLIO STILL INCLUDE
CONVERTIBLE SECURITIES TO GENERATE
INCOME? Growth of a $10,000 Investment
A. About 11% of the portfolio consisted of
convertible bonds or convertible preferred From 5/2/94 - 12/31/97
stocks at the close of the fiscal year. As men- AIM V.I. GROWTH S&P 500 LIPPER GROWTH & INCOME
tioned earlier, we stress dividend-paying & INCOME FUND STOCK INDEX FUND INDEX
securities in this portfolio because of our 5/2/94 $10,000 $10,000 $10,000
investment object, which is primarily 7/31/94 10,030 10,193 10,189
growth with income as a secondary goal. 10/31/94 10,344 10,581 10,442
The tradeoff between growth and income 1/31/95 10,090 10,615 10,313
has been difficult. Yields on U.S. stocks are 4/30/95 11,201 11,687 11,253
at historic lows, and many companies have been 7/31/95 12,559 12,847 12,247
"returning" capital to shareholders through 10/31/95 13,056 13,370 12,560
stock buybacks rather than in the form of 1/31/96 13,680 14,708 13,712
dividends. Corporations also have elected to 4/30/96 14,398 15,209 14,296
reinvest cash flow in capital equipment, 7/31/96 13,881 14,962 13,854
largely new technology, or in acquisitions of 10/31/96 15,274 16,582 15,247
new or complementary businesses. We will 1/31/97 16,994 18,579 16,787
continue to employ convertibles as opportuni- 4/31/97 16,717 19,028 16,943
ties arise. 7/31/97 20,423 22,759 19,968
10/31/97 19,740 21,906 19,520
12/31/97 20,183 23,338 20,404
Past performance cannot guarantee comparable future results.
Q. WHAT DO YOU FORESEE IN THE
ECONOMY AND MARKETS?
A. In the U.S., the economic fundamentals are
sound: inflation is low, corporate profits are
strong, and the economy is growing at a
healthy pace. However, stock returns may
gravitate to their more historic levels of
10% to 12% annually.
Continuing problems in Asia could slow
economic growth worldwide, reducing corpo- The performance figures shown represent the AIM V.I. Growth and Income Fund and are
rate profits and stock returns. We still not intended to reflect actual annuity values, and do not reflect charges at the
haven't sorted out the true magnitude of Asia's separate account level which, if applied, would lower the performance results. The
troubles and of their impact on the rest of the Fund's investment return and principal value will fluctuate so that Fund shares,
world. In such a volatile environment, inves- when redeemed, may be worth more or less than their original cost. Source: Towers
tors would be well advised to focus on their Data Systems HYPO--Registered Trademark--.
long-term financial goals rather than on The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
transitory fluctuations in the markets. unmanaged securities widely regarded by investors to be representative of the stock
market in general. Source: Towers Data Systems HYPO--Registered Trademark--.
Q. WHAT IS YOUR OUTLOOK FOR The unmanaged Lipper Growth & Income Fund Index represents an average of the
THE FUND? performance of the 30 largest growth-and-income funds. It's compiled by Lipper
A. We think the Fund is well-positioned. We Analytical Services, Inc., an independent mutual fund performance monitor. Results
recently added to our holdings of more do- shown reflect reinvestment of dividends.
mestically oriented real estate investment The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the
trusts and utilities companies. Utilities were performance of 30 large-company stocks.
An investment cannot be made in any indexes listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
62
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 80.98%
AIRLINES - 0.68%
Continental Airlines, Inc.(a) 90,000 $ 4,331,250
- ----------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.72%
Lear Corp.(a) 70,000 3,325,000
- ----------------------------------------------------------------------
Tower Automotive, Inc.(a) 30,000 1,261,875
- ----------------------------------------------------------------------
4,586,875
- ----------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 2.33%
Banc One Corp. 70,000 3,801,875
- ----------------------------------------------------------------------
Schweizerischer Bankverein (Switzerland)(a) 10,000 3,106,397
- ----------------------------------------------------------------------
UBS-Union Bank of Switzerland (Switzerland) 4,000 5,780,362
- ----------------------------------------------------------------------
Wells Fargo & Co. 6,500 2,206,344
- ----------------------------------------------------------------------
14,894,978
- ----------------------------------------------------------------------
BANKS (MONEY CENTER) - 4.03%
BankAmerica Corp. 55,000 4,015,000
- ----------------------------------------------------------------------
Chase Manhattan Corp. 135,000 14,782,500
- ----------------------------------------------------------------------
Citicorp 55,000 6,954,062
- ----------------------------------------------------------------------
25,751,562
- ----------------------------------------------------------------------
BANKS (REGIONAL) - 0.29%
Marshall & Ilsley Corp. 30,000 1,863,750
- ----------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.20%
Lubrizol Corp. (The) 35,000 1,290,625
- ----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.46%
ADC Telecommunications, Inc.(a) 95,000 3,966,250
- ----------------------------------------------------------------------
Comverse Technology, Inc.(a) 35,000 1,365,000
- ----------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 80,000 2,040,000
- ----------------------------------------------------------------------
Lucent Technologies, Inc. 25,000 1,996,875
- ----------------------------------------------------------------------
Nokia Oyj - Class A - A-ADR (Finland) 25,000 1,750,000
- ----------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 45,000 1,679,062
- ----------------------------------------------------------------------
Tellabs, Inc.(a) 55,000 2,908,125
- ----------------------------------------------------------------------
15,705,312
- ----------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.72%
Compaq Computer Corp. 100,000 5,643,750
- ----------------------------------------------------------------------
Dell Computer Corp.(a)(b) 30,000 2,520,000
- ----------------------------------------------------------------------
International Business Machines Corp. 65,000 6,796,563
- ----------------------------------------------------------------------
Sun Microsystems, Inc.(a) 60,000 2,392,500
- ----------------------------------------------------------------------
17,352,813
- ----------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.08%
Bay Networks, Inc.(a) 140,000 3,578,750
- ----------------------------------------------------------------------
Cisco Systems, Inc.(a) 60,000 3,345,000
- ----------------------------------------------------------------------
6,923,750
- ----------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.43%
EMC Corp.(a) 100,000 2,743,750
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 3.56%
America Online, Inc.(a)(b) 40,000 $ 3,567,500
- ----------------------------------------------------------------------
Computer Associates International, Inc. 150,000 7,931,250
- ----------------------------------------------------------------------
Compuware Corp.(a) 44,000 1,408,000
- ----------------------------------------------------------------------
HBO & Co. 50,000 2,400,000
- ----------------------------------------------------------------------
Microsoft Corp.(a) 40,000 5,170,000
- ----------------------------------------------------------------------
Sterling Commerce, Inc.(a) 60,000 2,306,250
- ----------------------------------------------------------------------
22,783,000
- ----------------------------------------------------------------------
CONSUMER FINANCE - 1.58%
Household International, Inc. 40,000 5,102,500
- ----------------------------------------------------------------------
MBNA Corp. 80,000 2,185,000
- ----------------------------------------------------------------------
SLM Holding Corp. 20,000 2,782,500
- ----------------------------------------------------------------------
10,070,000
- ----------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.44%
AmeriSource Health Corp.-Class A(a) 21,300 1,240,725
- ----------------------------------------------------------------------
Bergen Brunswig Corp.-Class A 100,000 4,212,500
- ----------------------------------------------------------------------
Cardinal Health, Inc. 30,000 2,253,750
- ----------------------------------------------------------------------
Sysco Corp. 32,500 1,480,781
- ----------------------------------------------------------------------
9,187,756
- ----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.03%
General Electric Co.(b) 90,000 6,603,750
- ----------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.18%
Kent Electronics Corp.(a) 45,000 1,130,625
- ----------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.73%
Intel Corp. 45,000 3,161,250
- ----------------------------------------------------------------------
Microchip Technology, Inc.(a) 50,000 1,500,000
- ----------------------------------------------------------------------
4,661,250
- ----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.82%
American Express Co. 70,000 6,247,500
- ----------------------------------------------------------------------
CIT Group, Inc. (The)(a) 35,000 1,128,750
- ----------------------------------------------------------------------
Fannie Mae 135,000 7,703,437
- ----------------------------------------------------------------------
Freddie Mac 175,000 7,339,063
- ----------------------------------------------------------------------
MBIA, Inc. 50,000 3,340,625
- ----------------------------------------------------------------------
MGIC Investment Corp. 25,000 1,662,500
- ----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 165,000 9,755,625
- ----------------------------------------------------------------------
37,177,500
- ----------------------------------------------------------------------
FOODS - 0.54%
Ralston-Ralston Purina Group 16,000 1,487,000
- ----------------------------------------------------------------------
Sara Lee Corp. 35,000 1,970,938
- ----------------------------------------------------------------------
3,457,938
- ----------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.36%
Mirage Resorts, Inc.(a) 100,000 2,275,000
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
63
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED) - 4.39%
Abbott Laboratories 25,000 $ 1,639,063
- -----------------------------------------------------------------------
American Home Products Corp.(b) 100,000 7,650,000
- -----------------------------------------------------------------------
Bristol-Myers Squibb Co. 85,000 8,043,125
- -----------------------------------------------------------------------
Johnson & Johnson 50,000 3,293,750
- -----------------------------------------------------------------------
Warner-Lambert Co. 60,000 7,440,000
- -----------------------------------------------------------------------
28,065,938
- -----------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 4.44%
Lilly (Eli) & Co. 30,000 2,088,750
- -----------------------------------------------------------------------
Merck & Co., Inc. 70,000 7,437,500
- -----------------------------------------------------------------------
Pfizer Inc. 115,000 8,574,688
- -----------------------------------------------------------------------
SmithKline Beecham PLC-ADR (United Kingdom) 200,000 10,287,500
- -----------------------------------------------------------------------
28,388,438
- -----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.78%
Health Management Associates, Inc.-Class A(a) 65,000 1,641,250
- -----------------------------------------------------------------------
Tenet Healthcare Corp.(a) 100,000 3,312,500
- -----------------------------------------------------------------------
4,953,750
- -----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.28%
HEALTHSOUTH Corp.(a) 65,000 1,803,750
- -----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.17%
MedPartners, Inc.(a) 250,000 5,593,750
- -----------------------------------------------------------------------
PhyCor, Inc.(a) 70,000 1,890,000
- -----------------------------------------------------------------------
7,483,750
- -----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.85%
Arterial Vascular Engineering, Inc.(a) 61,600 4,004,000
- -----------------------------------------------------------------------
Boston Scientific Corp.(a) 44,000 2,018,500
- -----------------------------------------------------------------------
Henry Schein, Inc.(a) 70,000 2,450,000
- -----------------------------------------------------------------------
Medtronic, Inc. 64,000 3,348,000
- -----------------------------------------------------------------------
11,820,500
- -----------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.65%
Covance, Inc.(a) 45,000 894,375
- -----------------------------------------------------------------------
Omnicare, Inc. 105,000 3,255,000
- -----------------------------------------------------------------------
4,149,375
- -----------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.16%
Leggett & Platt, Inc. 24,900 1,042,688
- -----------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.59%
Colgate-Palmolive Co. 65,000 4,777,500
- -----------------------------------------------------------------------
Kimberly-Clark Corp. 60,000 2,958,750
- -----------------------------------------------------------------------
Procter & Gamble Co. (The) 30,000 2,394,375
- -----------------------------------------------------------------------
10,130,625
- -----------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.54%
Provident Companies, Inc. 90,000 3,476,250
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE) - 2.47%
Ace, Ltd. 40,000 $ 3,860,000
- -------------------------------------------------------------------------
American International Group, Inc. 65,000 7,068,750
- -------------------------------------------------------------------------
Travelers Group, Inc. 90,000 4,848,750
- -------------------------------------------------------------------------
15,777,500
- -------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 1.56%
Allstate Corp. 90,000 8,178,750
- -------------------------------------------------------------------------
Travelers Property Casualty Corp.-Class A 40,000 1,760,000
- -------------------------------------------------------------------------
9,938,750
- -------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.64%
E*TRADE Group, Inc.(a) 170,000 3,910,000
- -------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 90,000 6,564,375
- -------------------------------------------------------------------------
10,474,375
- -------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.44%
Franklin Resources, Inc. 32,000 2,782,000
- -------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 1.42%
Brunswick Corp. 300,000 9,093,750
- -------------------------------------------------------------------------
LODGING-HOTELS - 0.68%
Carnival Corp.-Class A 41,600 2,303,600
- -------------------------------------------------------------------------
ITT Corp.(a) 25,000 2,071,875
- -------------------------------------------------------------------------
4,375,475
- -------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.94%
Eaton Corp. 25,000 2,231,250
- -------------------------------------------------------------------------
Hillenbrand Industries, Inc. 30,000 1,535,625
- -------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 50,000 2,253,125
- -------------------------------------------------------------------------
6,020,000
- -------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.34%
Diebold, Inc. 43,500 2,202,188
- -------------------------------------------------------------------------
NATURAL GAS - 0.52%
El Paso Natural Gas Co. 50,000 3,325,000
- -------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.77%
Boise Cascade Office Products Corp.(a) 10,400 155,350
- -------------------------------------------------------------------------
Danka Business Systems PLC-ADR (United Kingdom) 89,200 1,421,625
- -------------------------------------------------------------------------
Wallace Computer Services, Inc. 85,900 3,339,363
- -------------------------------------------------------------------------
4,916,338
- -------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 1.38%
Exxon Corp. 55,000 3,365,312
- -------------------------------------------------------------------------
Royal Dutch Petroleum Co.-ADR-New York Shares
(Netherlands) 60,000 3,251,250
- -------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Argentina) 65,000 2,222,188
- -------------------------------------------------------------------------
8,838,750
- -------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
64
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT) - 2.32%
BJ Services Co.(a) 45,000 $ 3,237,188
- ----------------------------------------------------------------------
EVI, Inc.(a)(b) 45,000 2,328,750
- ----------------------------------------------------------------------
Halliburton 47,500 2,467,031
- ----------------------------------------------------------------------
Hvide Marine, Inc.-Class A(a) 60,000 1,545,000
- ----------------------------------------------------------------------
Petroleum Geo-Services ASA-ADR (Norway)(a) 35,000 2,266,250
- ----------------------------------------------------------------------
Santa Fe International Corp. 60,000 2,441,250
- ----------------------------------------------------------------------
Schlumberger Ltd. (Netherlands) 3,500 277,375
- ----------------------------------------------------------------------
Transocean Offshore Inc. 6,100 276,788
- ----------------------------------------------------------------------
14,839,632
- ----------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.45%
Tosco Corp. 76,000 2,873,750
- ----------------------------------------------------------------------
PERSONAL CARE - 1.16%
Avon Products, Inc.(b) 55,000 3,375,625
- ----------------------------------------------------------------------
Gillette Co. 40,000 4,017,500
- ----------------------------------------------------------------------
7,393,125
- ----------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.52%
Xerox Corp. 45,000 3,321,562
- ----------------------------------------------------------------------
PUBLISHING - 0.38%
Dow Jones & Co., Inc. 45,000 2,415,937
- ----------------------------------------------------------------------
RAILROADS - 0.03%
Kansas City Southern Industries, Inc. 5,700 180,975
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 1.71%
Cali Realty Corp. 50,000 2,050,000
- ----------------------------------------------------------------------
Crescent Real Estate Equities, Co. 60,000 2,362,500
- ----------------------------------------------------------------------
Patriot American Hospitality, Inc. 80,000 2,305,000
- ----------------------------------------------------------------------
Starwood Lodging Trust 40,000 2,315,000
- ----------------------------------------------------------------------
Vornado Realty Trust 40,000 1,877,500
- ----------------------------------------------------------------------
10,910,000
- ----------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONIC) - 0.56%
CompUSA, Inc.(a)(b) 115,000 3,565,000
- ----------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 1.85%
Carson Pirie Scott & Co.(a) 35,000 1,754,375
- ----------------------------------------------------------------------
Federated Department Stores, Inc.(a) 50,000 2,153,125
- ----------------------------------------------------------------------
J.C. Penney Co., Inc. 55,000 3,317,187
- ----------------------------------------------------------------------
Kohl's Corp.(a) 30,000 2,043,750
- ----------------------------------------------------------------------
Proffitt's, Inc.(a) 90,000 2,559,375
- ----------------------------------------------------------------------
11,827,812
- ----------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.31%
Consolidated Stores Corp.(a) 45,000 1,977,187
- ----------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.32%
Walgreen Co. 65,000 2,039,375
- ----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.40%
Albertson's, Inc. 30,200 1,430,725
- ----------------------------------------------------------------------
Blue Square-Israel Ltd.-ADR (Israel) 90,000 1,113,750
- ----------------------------------------------------------------------
2,544,475
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE) - 0.35%
Costco Companies, Inc.(a) 50,000 $ 2,231,250
- ------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.77%
Corporate Express, Inc.(a) 280,000 3,605,000
- ------------------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 53,200 1,293,425
- ------------------------------------------------------------------------
4,898,425
- ------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.20%
Stage Stores, Inc.(a) 35,000 1,308,125
- ------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.80%
Washington Mutual, Inc. 80,000 5,105,000
- ------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 3.57%
Cendant Corp.(a)(b) 301,000 10,346,875
- ------------------------------------------------------------------------
Service Corp. International 275,000 10,157,812
- ------------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 50,000 2,331,250
- ------------------------------------------------------------------------
22,835,937
- ------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.07%
Ceridian Corp.(a) 55,000 2,519,687
- ------------------------------------------------------------------------
Equifax, Inc. 60,000 2,126,250
- ------------------------------------------------------------------------
Fiserv, Inc.(a) 45,000 2,210,625
- ------------------------------------------------------------------------
6,856,562
- ------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.33%
AT&T Corp. 55,000 3,368,750
- ------------------------------------------------------------------------
MCI Communications Corp. 120,000 5,137,500
- ------------------------------------------------------------------------
8,506,250
- ------------------------------------------------------------------------
TELEPHONE - 2.17%
Cincinnati Bell, Inc. 330,000 10,230,000
- ------------------------------------------------------------------------
SBC Communications, Inc. 50,000 3,662,500
- ------------------------------------------------------------------------
13,892,500
- ------------------------------------------------------------------------
TOBACCO - 1.91%
Philip Morris Companies, Inc. 270,000 12,234,375
- ------------------------------------------------------------------------
WASTE MANAGEMENT - 0.61%
USA Waste Services, Inc.(a) 100,000 3,925,000
- ------------------------------------------------------------------------
Total Common Stocks 517,532,928
- ------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 5.42%
HEALTH CARE (MANAGED CARE) - 0.69%
Medpartners Inc.-$1.44 Conv. Pfd. 200,000 4,400,000
- ------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.22%
Conseco Inc.-$4.278 Conv. PRIDES 50,000 7,800,000
- ------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.11%
Hvide Capital Trust-$3.25 Conv. Pfd. (Acquired
06/24/97; Cost $600,000)(c) 12,000 682,092
- ------------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.15%
Tosco Financial Trust-$2.875 Conv. Pfd. 15,300 1,000,238
- ------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.57%
AES Trust I-Series A-$2.69 Conv. Pfd. 51,000 3,659,250
- ------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.36%
TJX Companies, Inc.-Series E-$7.00 Conv. Pfd. 6,000 2,280,000
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
65
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER) - 0.17%
Automatic Common Exchange Security Trust II-$1.55
Conv. Pfd. 45,000 $ 1,057,500
- ------------------------------------------------------------------------------
SHIPPING - 0.18%
CNF Trust I-$2.50 Conv. Pfd. 20,000 1,170,000
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.97%
WorldCom, Inc.-$2.68 Dep. Conv. Pfd. 120,000 12,600,000
- ------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks 34,649,080
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 6.27%
COMPUTERS (SOFTWARE & SERVICES) - 0.59%
Platinum Technology, Inc., Conv. Sub. Notes, 6.25%,
12/15/02 (Acquired 12/11/97; Cost $1,997,000)(c) $ 2,000,000 2,147,500
- ------------------------------------------------------------------------------
Veritas Software Corp., Conv. Sub. Notes, 5.25%,
11/01/04 (Acquired 10/09/97; Cost $1,500,000)(c) 1,500,000 1,627,500
- ------------------------------------------------------------------------------
3,775,000
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.44%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06
(Acquired 10/24/96-12/04/97; Cost $2,409,413)(c) 1,500,000 2,809,770
- ------------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.22%
Analog Devices, Conv. Sub. Notes, 3.50%, 12/01/00 1,000,000 1,419,680
- ------------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.44%
Dura Pharmaceuticals Inc., Sub. Notes, 3.50%,
07/15/02 2,500,000 2,810,350
- ------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.04%
NCS Healthcare Inc., Conv. Sub. Notes, 5.75%,
08/15/04 2,500,000 2,550,550
- ------------------------------------------------------------------------------
Omnicare, Inc., Sub. Deb., 5.00%, 12/01/07 (Acquired
12/04/97; Cost $4,000,000)(c) 4,000,000 4,060,000
- ------------------------------------------------------------------------------
6,610,550
- ------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.39%
Thermo Electron Corp., Conv. Sub. Deb., 4.25%,
01/01/03 (Acquired 06/20/97-06/27/97; Cost
$2,294,492)(c) 2,000,000 2,500,000
- ------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.40%
U.S. Filter Corp., Conv. Sub. Notes, 4.50%, 12/15/01 2,500,000 2,575,000
- ------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.35%
Danka Business Systems PLC, (United Kingdom) Conv.
Sub. Notes, 6.75%, 04/01/02 2,500,000 2,237,450
- ------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.04%
Diamond Offshore Drilling, Inc., Conv. Sub. Notes,
3.75%, 02/15/07 3,500,000 4,795,420
- ------------------------------------------------------------------------------
Nabors Industries, Inc., Conv. Sub. Notes, 5.00%,
05/15/06 1,000,000 1,837,670
- ------------------------------------------------------------------------------
6,633,090
- ------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.21%
Home Depot, Inc., Conv. Sub. Notes, 3.25%, 10/01/01 1,000,000 1,347,170
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
RETAIL (SPECIALTY) - 0.36%
Staples Inc., Conv. Sub. Deb., 4.50%, 10/01/00
(Acquired 10/23/97-12/30/97; Cost $2,299,750)(c) $ 1,750,000 $ 2,303,438
- ------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.49%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02 1,500,000 3,100,500
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.30%
Tel-Save Holdings, Inc., Conv. Sub. Notes, 5.00%,
12/15/04 (Acquired 12/05/97; Cost $2,000,000)(c) 2,000,000 1,930,000
- ------------------------------------------------------------------------------
Total Convertible Corporate Bonds 40,051,998
- ------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 5.24%
9.125%, 05/15/99(d) 9,000,000 9,405,720
- ------------------------------------------------------------------------------
11.75%, 02/15/01(d) 10,000,000 11,731,000
- ------------------------------------------------------------------------------
13.125%, 05/15/01(d) 5,000,000 6,134,500
- ------------------------------------------------------------------------------
13.375%, 08/15/01 5,000,000 6,244,250
- ------------------------------------------------------------------------------
Total U.S. Treasury Securities 33,515,470
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT(e) - 4.42%
Smith Barney, Inc. 6.75%, 01/02/98(f) 28,276,446 28,276,446
- ------------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 102.33% 654,025,922
- ------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (2.33)% (14,913,377)
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $639,112,545
==============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security
(b) A portion of these securities are subject to call options written. See
Note 7.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/97 was $18,060,300,
which represented 2.83% of the Fund's net assets.
(d) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See note 9.
(e) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor.
(f) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Dep. - Depositary
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
66
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $566,330,159) $654,025,922
- ----------------------------------------------------------------------
Cash 16,995
- ----------------------------------------------------------------------
Receivables for:
Investments sold 9,550,866
- ----------------------------------------------------------------------
Capital stock sold 978,416
- ----------------------------------------------------------------------
Dividends and interest 1,693,975
- ----------------------------------------------------------------------
Options purchased 145,453
- ----------------------------------------------------------------------
Variation margin 37,500
- ----------------------------------------------------------------------
Investment for deferred compensation plan 14,757
- ----------------------------------------------------------------------
Other assets 12,621
- ----------------------------------------------------------------------
Total assets 666,476,505
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 26,264,800
- ----------------------------------------------------------------------
Capital stock reacquired 93,155
- ----------------------------------------------------------------------
Options written 609,300
- ----------------------------------------------------------------------
Deferred compensation plan 14,757
- ----------------------------------------------------------------------
Accrued advisory fees 322,312
- ----------------------------------------------------------------------
Accrued administrative services fees 3,500
- ----------------------------------------------------------------------
Accrued directors' fees 1,653
- ----------------------------------------------------------------------
Accrued operating expenses 54,483
- ----------------------------------------------------------------------
Total liabilities 27,363,960
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $639,112,545
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 33,868,543
======================================================================
Net asset value, offering and redemption price per share $ 18.87
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $36,441 foreign withholding tax) $ 5,115,419
- -----------------------------------------------------------------------------
Interest 2,487,104
- -----------------------------------------------------------------------------
Total investment income 7,602,523
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,609,695
- -----------------------------------------------------------------------------
Administrative services fees 43,065
- -----------------------------------------------------------------------------
Custodian fees 84,481
- -----------------------------------------------------------------------------
Directors' fees and expenses 9,116
- -----------------------------------------------------------------------------
Other 93,580
- -----------------------------------------------------------------------------
Total expenses 2,839,937
- -----------------------------------------------------------------------------
Less: Expenses paid indirectly (5,032)
- -----------------------------------------------------------------------------
Net expenses 2,834,905
- -----------------------------------------------------------------------------
Net investment income 4,767,618
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCY TRANSACTIONS, FUTURES, AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 9,687,148
- -----------------------------------------------------------------------------
Foreign currency transactions 80,193
- -----------------------------------------------------------------------------
Future contracts (236,996)
- -----------------------------------------------------------------------------
Option contracts 205,761
- -----------------------------------------------------------------------------
9,736,106
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 67,471,540
- -----------------------------------------------------------------------------
Futures contracts (277,200)
- -----------------------------------------------------------------------------
Option contracts (204,922)
- -----------------------------------------------------------------------------
66,989,418
- -----------------------------------------------------------------------------
Net gain from investment securities, foreign currency
transactions, futures and option contracts 76,725,524
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $81,493,142
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
67
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 4,767,618 $ 2,140,854
- -------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currency transactions, futures and option
contracts 9,736,106 465,498
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, futures and option contracts 66,989,418 17,682,951
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 81,493,142 20,289,303
- -------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (326,695) (1,850,460)
- -------------------------------------------------------------------------------
Distributions from net realized gains (490,042) (401,149)
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 349,104,509 152,726,725
- -------------------------------------------------------------------------------
Net increase in net assets 429,780,914 170,764,419
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 209,331,631 38,567,212
- -------------------------------------------------------------------------------
End of year $639,112,545 $209,331,631
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $537,626,187 $188,521,678
- -------------------------------------------------------------------------------
Undistributed net investment income 4,850,844 329,728
- -------------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities, foreign currency
transactions, futures and option contracts 9,421,873 256,002
- -------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currency transactions and option
contracts 87,213,641 20,224,223
- -------------------------------------------------------------------------------
$639,112,545 $209,331,631
===============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth and Income Fund (the "Fund"). The Fund's investment
objective is to seek growth of capital, with current income as a secondary
objective. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between the last bid and
asked prices based upon quotes furnished by independent sources. Securities
for which market quotations either are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Generally, trading in foreign securities is
AIM V.I. GROWTH AND INCOME FUND
68
<PAGE>
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis. On December 31, 1997,
undistributed net investment income was increased and undistributed net
realized gains decreased by $80,193 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations -- Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts -- A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 25% of the net assets of the
Fund.
H. Put options -- The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The options's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting
AIM V.I. GROWTH AND INCOME FUND 69
<PAGE>
services to the Fund. During the year ended December 31, 1997, AIM was
reimbursed $43,065 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,950 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $1,957 during the year ended December 31, 1997. The Fund
also received reductions in custodian fees of $3,075 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $5,032 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $892,669,891 and $547,036,684, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $94,187,176
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,077,496)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $86,109,680
==========================================================================
</TABLE>
Cost of investments for tax purposes is $567,916,242.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 20,645,975 $361,699,824 10,983,786 $153,919,542
- ------------------------------------------------------------------------------
Issued as reinvestment of
distributions 44,268 816,737 154,220 2,251,608
- ------------------------------------------------------------------------------
Reacquired (745,032) (13,412,052) (255,903) (3,444,425)
- ------------------------------------------------------------------------------
19,945,211 $349,104,509 10,882,103 $152,726,725
==============================================================================
</TABLE>
NOTE 7 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year -- $ --
- -----------------------------------------
Written 10,942 2,589,611
- -----------------------------------------
Closed (5,011) (1,443,882)
- -----------------------------------------
Exercised (140) (65,272)
- -----------------------------------------
Expired (2,691) (456,212)
- -----------------------------------------
End of year 3,100 $624,245
=========================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
70
<PAGE>
Open call option contracts written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1997 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
America Online, Inc. Jan $ 90 150 $ 35,500 $ 48,750 $ (13,250)
- --------------------------------------------------------------------------------------
American Home Products
Corp. Jan 80 300 19,399 14,063 5,336
- --------------------------------------------------------------------------------------
Avon Products, Inc. Jan 55 250 170,869 165,625 5,244
- --------------------------------------------------------------------------------------
Cendant Corp. Feb 35 900 91,993 137,812 (45,819)
- --------------------------------------------------------------------------------------
CompUSA, Inc. Feb 35 600 80,697 101,175 (20,478)
- --------------------------------------------------------------------------------------
Dell Computer Corp. Jan 100 250 28,937 6,250 22,687
- --------------------------------------------------------------------------------------
EVI, Inc. Feb 55 450 139,270 73,125 66,145
- --------------------------------------------------------------------------------------
General Electric Co. Mar 75 200 57,580 62,500 (4,920)
- --------------------------------------------------------------------------------------
3,100 $624,245 $609,300 $ 14,945
======================================================================================
</TABLE>
NOTE 8 - PUT OPTIONS PURCHASED
Transactions in put options purchased during the year ended December 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION
CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- ---------
<S> <C> <C>
Beginning of year -- $ --
- ---------------------------------------
Purchased 2,437 484,119
- ---------------------------------------
Closed (475) (118,799)
- ---------------------------------------
End of year 1,962 $365,320
=======================================
</TABLE>
Open put option contracts purchased at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1997 MARKET APPRECIATION
MONTH PRICE CONTRACTS PAID VALUE (DEPRECIATION)
-------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
American Home Products
Corp. Apr $70 300 $ 85,367 $ 58,125 $ (27,242)
- ---------------------------------------------------------------------------------------
Diamond Offshore
Drilling, Inc. Jan 40 400 72,700 7,500 (65,200)
- ---------------------------------------------------------------------------------------
EVI, Inc. Jan 40 225 65,600 2,813 (62,787)
- ---------------------------------------------------------------------------------------
EVI, Inc. Jan 45 225 51,300 10,547 (40,753)
- ---------------------------------------------------------------------------------------
Halliburton Co. Jan 45 237 31,817 7,406 (24,411)
- ---------------------------------------------------------------------------------------
Nabors Industries, Inc. Jan 30 275 33,619 51,562 17,943
- ---------------------------------------------------------------------------------------
Santa Fe International
Corp. Jan 35 300 24,917 7,500 (17,417)
- ---------------------------------------------------------------------------------------
1,962 $365,320 $145,453 $(219,867)
=======================================================================================
</TABLE>
NOTE 9- OPEN FUTURES CONTRACTS
On December 31, 1997, $538,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NUMBER OF MONTH/ APPRECIATION
CONTRACTS COMMITMENT (DEPRECIATION)
--------- ---------- --------------
<S> <C> <C> <C>
Russell 2000 Index 30 Mar 98 $(354,625)
- -------------------------------------------------------
S&P 500 Index 30 Mar 98 77,425
- -------------------------------------------------------
$(277,200)
=======================================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
71
<PAGE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
December 31,
--------------------------------- January 31,
1997 1996 1995 1995
-------- -------- ------- -----------
<S> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.03 $ 12.68 $ 9.98 $10.00
- -------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.13 0.16 0.14 0.11
- -------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 3.74 2.36 3.11 (0.02)
- -------------------------------------------------------------------------------
Total from investment
operations 3.87 2.52 3.25 0.09
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.01) (0.14) (0.14) (0.11)
- -------------------------------------------------------------------------------
Distributions from
capital gains (0.02) (0.03) (0.41) --
- -------------------------------------------------------------------------------
Total distributions (0.03) (0.17) (0.55) (0.11)
- -------------------------------------------------------------------------------
Net asset value, end of
period $ 18.87 $ 15.03 $ 12.68 $ 9.98
===============================================================================
Total return(a) 25.72% 19.95% 32.65% 0.90%
===============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $639,113 $209,332 $38,567 $7,380
===============================================================================
Ratio of expenses to
average net assets 0.69%(b)(c) 0.78% 0.78%(d) 1.07%(d)(e)
===============================================================================
Ratio of net investment
income to average net
assets 1.15%(b) 2.05% 1.92%(d) 1.95%(d)(e)
===============================================================================
Portfolio turnover rate 135% 148% 145% 96%
===============================================================================
Average brokerage
commission rate paid(f) $ 0.0612 $ 0.0644 N/A N/A
===============================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $414,115,808.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GROWTH AND INCOME FUND
72
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the two years in the period then
ended, the eleven month period ended December 31, 1995 and the period May 2,
1994 (commencement of operations) through January 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth and Income Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the two years in the period then ended, the eleven month period ended December
31, 1995 and the period May 2, 1994 (commencement of operations) through
January 31, 1995, in conformity with generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. GROWTH AND INCOME FUND
73
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
EUROPEAN EQUITIES OFFSET
"ASIAN FLU"
A roundtable discussion with the Fund management team for AIM V.I. International Equity Fund
about the fiscal year ended December 31, 1997
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. WORLD EQUITY MARKETS HAD A Unfortunately, the same cannot be said ment savings. As more households there
VOLATILE YEAR IN 1997. HOW DID for Asia. The economic crisis that hit see the advantages of stock market invest-
THE FUND PERFORM DURING THE RE- Japan and the Asian Tigers was reflected ing, we think demand for European equi-
PORTING PERIOD? in the poor performance of those markets ties will continue to grow. At the fiscal
A. Despite a very difficult year for during the reporting period. year end, five of the Fund's 10 largest
foreign equities, we are pleased to holdings were in continental Europe or
report that the Fund outperformed its Q. WHAT CAUSED THE EXCELLENT the United Kingdom, including four of the
index. Total return for the Fund was MARKET RETURNS IN EUROPE? top five holdings.
6.94%, compared to just 1.78% for the A. There were two major factors at work
Morgan Stanley Capital International in European markets. The first was ongo- Q. WHAT CAUSED THE ECONOMIC
Europe, Australia and Far East (EAFE) ing economic restructuring as Europe TURBULENCE IN THE PACIFIC RIM?
Index of foreign stocks. prepares for the European Monetary Unit A. Simply put, the emerging markets in
standards. During the fiscal year we saw countries like Thailand, Malaysia, Indone-
Q. WHAT WERE THE MAJOR INFLU- the economic returns caused by restruc- sia, and the Philippines grew too quickly
ENCES ON THE FUND'S PORTFOLIO turing gain considerable momentum. for their size. New construction of office
DURING THE PAST 12 MONTHS? Europe remains an area with fairly cheap buildings and factories far outstripped
A. European markets had an outstand- valuations, especially when compared to demand, and the debt used to finance the
ing year. Five of the 10 best- the United States. More importantly, earn- construction burgeoned. When cash flow
performing markets in the world during ings growth in Europe also continued to became a problem, the markets in that
the reporting period were in Europe. be strong. region went into a tailspin.
Latin America also posted solid per- The second major stimulus on markets The first warning sign came when Thai-
formance during the fiscal year, al- in Europe was the growth of real investing land devalued its currency in July. Every-
though its returns were tempered by by individual Europeans, whose invest- thing came to a head on October 23 when
global market volatility in the final ments represent a large pool of retire- the Hong Kong market plunged 10.4%.
quarter of the reporting period.
As of 12/31/97, based on total net assets
Top 10 Equity Holdings Top 10 Countries Top 10 Industries
1. NovoNordisk A/S (Denmark) 1.17% 1. United Kingdom 16.37% 1. Banks (Major Regional) 8.79%
2. NTT Data Communications 2. Japan 14.07 2. Telephone 6.70
Systems Co. (Japan) 1.15 3. France 10.93 3. Electronics (Component Distributors) 4.13
3. Portugal Telecom S.A. (Portugal) 1.10 4. Germany 5.43 4. Oil & Gas (Refining & Marketing) 3.65
4. Societe Generale (France) 1.10 5. Netherlands 5.24 5. Computers (Software & Services) 3.43
5. Railtrack Group PLC (UK) 1.09 6. Mexico 5.10 6. Services (Commercial & Consumer) 3.37
6. Honda Motor Co. Ltd. (Japan) 1.06 7. Switzerland 4.85 7. Manufacturing (Diversified) 3.09
7. Novartis A.G. (Switzerland) 1.05 8. Italy 4.61 8. Oil (international Integrated) 3.00
8. Sony Corp. (Japan) 0.97 9. Hong Kong 4.12 9. Telecommunications (Cellular/Wireless) 2.91
9. Rohm Co. (Japan) 0.96 10. Canada 3.58 10. Insurance (Multi-Line) 2.76
10. Fuji Photo Film Co. (Japan) 0.94
Please keep in mind that the Fund's portfolio composition is subject to change and there is no assurance the Fund will continue to
hold any particular security.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
74
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The so-called "Asian Flu"-- which was excellent year until they, too, caught any time soon. In Europe, though, we
how market analysts termed the economic "Asian Flu" in the last quarter of the re- believe there will be faster earnings
turmoil in Asia--caused severe drops all porting period. Still, in U.S. dollars Brazil growth with better valuations than in the
over the world, including the 554-point was up over 27%, Colombia up 42%, and United States, because Europe's cash-to-
drop in the Dow Jones Industrial Average Mexico up 53% during the reporting period. price earnings, price-to-book, price-to-
on October 27. dividend, and P/E ratios all are lower than
Q. WHAT IS YOUR OUTLOOK FOR THE in the U.S. The economic outlook in Latin
Q. HOW DID THE TURMOIL IN THOSE FUND IN THE NEAR TERM? America seems positive as well.
MARKETS AFFECT THE FUND? A. We are still very positive on Europe, The economic indicators in the U.S.
A. Fortunately, we had lowered the and very hesitant on the pacific Rim. also remain positive, and that is good for
portfolio's weightings in Asia prior to Conditions worldwide remain quite good markets around the world because they
October's troubles. We began 1997 with for equities, although it is unrealistic to often take their lead from the U.S. As long
17% of the portfolio in Asia, excluding expect continued equity returns of 20% or as we continue to see the combination of
Japan, and that figure was around 5% at more. Asian markets may worsen before low inflation and low interest rates
the end of the reporting period. experiencing a recovery, so we do not around the globe, the short-term outlook
Our earnings discipline facilitated expect to increase our Asian weightings for global equities will remain promising.
our exit from markets in the Pacific
Rim. The earnings in most of the compan- Growth of a $10,000 Investment
ies in that region were on a downward From 5/5/93-12/31/97
trend prior to the October market drop,
and our discipline dictated that it was AIM V.I. International Lipper International Europe-Australia-
time to sell those holdings. Equity Fund Fund Index Asia-Far East Index
5/5/93 $10,000 $10,000 $10,000
6/1/93 10,000 10,000 10,000
Q. WHAT WAS THE ECONOMIC 8/93 10,474 10,783 10,699
SITUATION IN JAPAN? 11/93 10,770 10,827 9,802
A. Unfortunately, the second-largest 2/94 11,964 12,350 11,327
economy in the world was still in the 5/94 11,649 12,079 11,195
grips of a major recession during the 8/94 12,182 12,678 11,692
reporting period. A number of Japanese 11/94 11,599 11,985 11,097
banks had investments and outstanding 2/95 11,182 11,235 10,664
loans to their Asian neighbors, so the 5/95 12,251 12,073 11,568
"Asian Flu" spread here, as well. 8/95 12,923 12,569 11,564
However, because of the size and matur- 11/95 13,141 12,643 11,745
ity of the Japanese market, many Japan- 2/96 14,173 13,375 12,263
ese companies are global, rather than 5/96 14,985 14,012 12,602
regional, players. 8/96 14,906 13,841 12,280
The Fund still owned familiar names 11/96 16,016 14,756 12,922
such as Honda Motor Company and Sony 2/97 16,412 15,181 12,462
Corp. We believe that large, multi- 5/97 17,247 16,192 13,339
national companies such as these will 8/97 17,257 16,247 13,187
weather the economic storm in Japan and 11/97 17,217 15,843 12,675
prosper once things there stabilize. 12/97 17,380 15,969 12,769
Just over 14% of the Fund was in Japan
at the end of the reporting period. AVERAGE ANNUAL TOTAL RETURNS Past performance cannot guarantee
As of 12/31/97 comparable future results.
Q. YOU MENTIONED THAT YOU HAVE 1 Year 6.94%
REDUCED THE FUND'S EXPOSURE IN Inception (5/5/93) 12.91
ASIA. WHERE HAVE YOU PUT THAT
MONEY TO WORK? The performance figures shown represent the AIM V.I. International Equity Fund and are not
A. The portfolio's holdings in Latin intended to reflect actual annuity values, and do not reflect charges at the separate
America increased dramatically. At the account level which, if applied, would lower the performance results. The Fund's perform-
end of the reporting period, 11% of the ance figures are historical and reflect reinvestment of all distributions and changes in
Fund was invested there. The markets in net asset value. The Fund's investment return and principal value will fluctuate so that
Brazil, Colombia, Mexico, and other Fund shares, when redeemed, may be worth more or less than their original cost.
countries in the region were enjoying an Source: Towers Data Systems HYPO--Registered Trademark--.
The Europe, Australia, and Far East Index (EAFE) is a group of unmanaged foreign sec-
urities. It is compiled by Morgan Stanley Capital International. Lipper Analytical
Services, Inc. is an imdependent mutual fund performance monitor. The unmanaged Lipper
International Fund Index represents an average of the performance of the 30 largest
international mutual funds.
An investment cannot be made in any index listed. Index results include reinvested
dividends.
International investing presents certain risks not associated with investing solely in
the United States. These include, for instance, risks relating to fluctuations in the
value of the U.S. dollar relative to the values of other currencies, the custody
arrangements made for the Fund's foreign holdings, differences in accounting, political
risks, and the lesser degree of public information required to be provided by non-U.S.
companies.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
75
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 94.10%
ARGENTINA - 2.81%
Banco de Galicia y Buenos Aires S.A. de C.V.-ADR
(Banks-Regional) 35,574 $ 916,031
- ------------------------------------------------------------------------------
Banco Rio de La Plata S.A. (Banks-Money Center)(a) 40,000 560,000
- ------------------------------------------------------------------------------
Perez Companc S.A.-Class B (Oil & Gas-Refining &
Marketing) 167,141 1,193,614
- ------------------------------------------------------------------------------
Telefonica de Argentina S.A.-ADR (Telephone) 41,000 1,527,250
- ------------------------------------------------------------------------------
YPF Sociedad Anonima-ADR (Oil-International
Integrated) 50,400 1,723,050
- ------------------------------------------------------------------------------
5,919,945
- ------------------------------------------------------------------------------
AUSTRALIA - 1.92%
Boral Ltd. (Engineering & Construction) 402,000 1,016,574
- ------------------------------------------------------------------------------
Coca-Cola Amatil Ltd. (Beverages-Non-Alcoholic) 80,241 599,638
- ------------------------------------------------------------------------------
QBE Insurance Group Ltd. (Insurance-Property-
Casualty) 231,019 1,039,963
- ------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 157,160 331,870
- ------------------------------------------------------------------------------
Westpac Banking Corp., Ltd. (Banking) 168,000 1,074,793
- ------------------------------------------------------------------------------
4,062,838
- ------------------------------------------------------------------------------
AUSTRIA - 0.75%
OMV A.G. (Oil & Gas-Refining & Marketing) 6,500 900,526
- ------------------------------------------------------------------------------
VA Technologie A.G. (Engineering & Construction) 4,550 690,884
- ------------------------------------------------------------------------------
1,591,410
- ------------------------------------------------------------------------------
BELGIUM - 1.21%
Barco Industries (Manufacturing-Diversified) 4,000 734,123
- ------------------------------------------------------------------------------
COLRUYT S.A. (Retail-Food Chains) 1,500 766,174
- ------------------------------------------------------------------------------
UCB S.A. (Manufacturing-Diversified) 320 1,056,274
- ------------------------------------------------------------------------------
2,556,571
- ------------------------------------------------------------------------------
BRAZIL - 2.19%
Companhia Energetica de Minas Gerais (Electric
Companies) 17,000 738,614
- ------------------------------------------------------------------------------
Petroleo Brasileiro S.A.-Petrobras, Pfd. (Oil & Gas-
Exploration & Production) 3,013 704,645
- ------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A.-Telebras-ADR
(Telephone) 14,700 1,711,631
- ------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A.-TELESP, Pfd.
(Telephone) 5,500 1,463,595
- ------------------------------------------------------------------------------
4,618,485
- ------------------------------------------------------------------------------
CANADA - 3.59%
Bank of Montreal (Banks-Money Center) 11,800 523,096
- ------------------------------------------------------------------------------
Canadian National Railway Co. (Railroads) 9,000 425,250
- ------------------------------------------------------------------------------
Canadian Natural Resources Ltd. (Oil & Gas-
Exploration & Production)(a) 33,000 706,623
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA - (CONTINUED)
Canadian Pacific, Ltd. (Railroads) 15,000 $ 408,750
- ------------------------------------------------------------------------------
Magna International, Inc.-Class A (Machinery-
Diversified) 10,050 630,125
- ------------------------------------------------------------------------------
Northern Telecom Ltd.-ADR (Communications Equipment) 6,000 534,000
- ------------------------------------------------------------------------------
Petro-Canada (Oil-Domestic Integrated) 54,000 982,471
- ------------------------------------------------------------------------------
Royal Bank of Canada (Savings & Loan Companies) 18,800 994,563
- ------------------------------------------------------------------------------
Suncor, Inc. (Oil-International Integrated) 38,000 1,302,963
- ------------------------------------------------------------------------------
Toronto-Dominion Bank (Banks-Regional) 28,100 1,057,892
- ------------------------------------------------------------------------------
7,565,733
- ------------------------------------------------------------------------------
CHILE - 0.64%
Cia. de Telecomunicaciones de Chile S.A.-ADR
(Telephone) 25,500 761,813
- ------------------------------------------------------------------------------
Quinenco S.A.-ADR (Financial-Diversified)(a) 50,500 580,750
- ------------------------------------------------------------------------------
1,342,563
- ------------------------------------------------------------------------------
DENMARK - 1.17%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 17,200 2,460,048
- ------------------------------------------------------------------------------
FINLAND - 0.46%
Nokia Oy A.B.-Class A (Telecommunications-
Cellular/Wireless) 14,000 978,545
- ------------------------------------------------------------------------------
FRANCE - 10.47%
Accor S.A. (Lodging-Hotels) 2,900 539,188
- ------------------------------------------------------------------------------
Alcatel Alsthom (Manufacturing-Diversified) 8,000 1,016,865
- ------------------------------------------------------------------------------
AXA S.A. (Insurance-Multi-Line) 13,000 1,005,915
- ------------------------------------------------------------------------------
Banque Nationale de Paris (Banks-Major Regional) 24,300 1,291,613
- ------------------------------------------------------------------------------
Cap Gemini Sogeti S.A. (Computers-Software &
Services) 16,000 1,311,955
- ------------------------------------------------------------------------------
Compagnie Francaise d'Etudes et de Construction
Technip (Oil & Gas-Refining & Marketing) 4,250 448,409
- ------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil & Gas-Refining & Marketing) 9,000 1,046,772
- ------------------------------------------------------------------------------
Essilor International (Manufacturing-Specialized) 2,275 680,402
- ------------------------------------------------------------------------------
Lafarge S.A. (Engineering & Construction) 13,600 892,355
- ------------------------------------------------------------------------------
Legrand S.A. (Housewares) 3,000 597,657
- ------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail-General
Merchandise) 3,560 1,899,337
- ------------------------------------------------------------------------------
Promodes (Retail-Food Chains) 2,750 1,140,940
- ------------------------------------------------------------------------------
Renault S.A.(Automobiles)(a) 45,000 1,265,847
- ------------------------------------------------------------------------------
Renault S.A.(Automobiles) (Acquired 07/31/97; cost
$581,584)(a)(b) 21,000 590,729
- ------------------------------------------------------------------------------
Rexel S.A. (Distributors-Food & Health) 2,000 623,079
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
76
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - (CONTINUED)
Rhone-Poulenc-Class A (Chemicals-Diversified) 26,500 $ 1,187,073
- ------------------------------------------------------------------------------
Schneider S.A. (Housewares) 15,800 857,928
- ------------------------------------------------------------------------------
Societe BIC S.A. (Office Equipment & Supplies) 22,000 1,605,815
- ------------------------------------------------------------------------------
Societe Generale (Banks-Major Regional) 17,000 2,316,192
- ------------------------------------------------------------------------------
Sodexho S.A. (Services-Commercial & Consumer) 900 481,964
- ------------------------------------------------------------------------------
Total S.A.-Class B (Oil & Gas-Refining & Marketing) 10,300 1,120,960
- ------------------------------------------------------------------------------
Valeo S.A. (Auto Parts & Equipment) 2,500 169,561
- ------------------------------------------------------------------------------
22,090,556
- ------------------------------------------------------------------------------
GERMANY - 5.43%
Adidas A.G. (Footwear) 4,100 539,222
- ------------------------------------------------------------------------------
Adidas A.G. (Footwear) (Acquired 04/11/97; cost
$837,524)(b) 7,950 1,045,564
- ------------------------------------------------------------------------------
Allianz A.G. (Insurance-Multi-Line) 2,300 595,775
- ------------------------------------------------------------------------------
Bayerische Vereinsbank A.G. (Banks-Major Regional) 18,000 1,177,654
- ------------------------------------------------------------------------------
Commerzbank A.G. (Banks-Major Regional) 29,500 1,160,978
- ------------------------------------------------------------------------------
Continental A.G. (Auto Parts & Equipment) 28,000 617,899
- ------------------------------------------------------------------------------
Dresdner Bank A.G. (Banks-Major Regional) 24,000 1,107,282
- ------------------------------------------------------------------------------
Henkel KGaA (Chemicals-Diversified) 12,650 798,096
- ------------------------------------------------------------------------------
Mannesmann A.G. (Machinery-Diversified) 2,380 1,202,568
- ------------------------------------------------------------------------------
Porsche A.G. (Automobiles) 300 500,278
- ------------------------------------------------------------------------------
SAP A.G. (Computers-Software & Services) 2,650 805,017
- ------------------------------------------------------------------------------
SAP A.G., Pfd. (Computers-Software & Services) 2,700 883,241
- ------------------------------------------------------------------------------
VEBA A.G. (Manufacturing-Diversified) 15,000 1,021,401
- ------------------------------------------------------------------------------
11,454,975
- ------------------------------------------------------------------------------
HONG KONG - 3.99%
Cheung Kong (Holdings) Ltd. (Land Development) 86,000 563,234
- ------------------------------------------------------------------------------
China Telecom (Hong Kong) Ltd.-ADR
(Telecommunications-Cellular/Wireless)(a) 16,900 567,206
- ------------------------------------------------------------------------------
Cosco Pacific Ltd. (Financial-Diversified) 962,000 782,114
- ------------------------------------------------------------------------------
First Pacific Company Ltd. (Distributors-Food &
Health) 1,137,368 550,411
- ------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Natural Gas) 878,352 1,700,256
- ------------------------------------------------------------------------------
HSBC Holdings PLC (Banks-Major Regional) 48,000 1,183,120
- ------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail-Food Chains) 242,000 1,517,770
- ------------------------------------------------------------------------------
New World Infrastructure Ltd. (Services-Commercial &
Consumer)(a) 290,000 653,052
- ------------------------------------------------------------------------------
Ng Fung Hong Ltd. (Foods) 460,000 483,804
- ------------------------------------------------------------------------------
Sun Hung Kai Properties Ltd. (Land Development) 59,600 415,331
- ------------------------------------------------------------------------------
8,416,298
- ------------------------------------------------------------------------------
INDONESIA - 0.61%
Gulf Indonesia Resources Ltd. (Oil-International
Integrated)(a) 45,700 1,005,400
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INDONESIA - (CONTINUED)
PT Indosat (Telecommunications-Cellular/Wireless) 91,000 $ 168,764
- -------------------------------------------------------------------------------
PT Indosat-ADR (Telecommunications-Cellular/Wireless) 6,400 123,600
- -------------------------------------------------------------------------------
1,297,764
- -------------------------------------------------------------------------------
IRELAND - 0.67%
Bank of Ireland (Banks-Major Regional) 38,500 591,211
- -------------------------------------------------------------------------------
Elan Corp. PLC-ADR (Health Care-Drugs-Generic &
Other)(a) 16,000 819,000
- -------------------------------------------------------------------------------
1,410,211
- -------------------------------------------------------------------------------
ITALY - 4.61%
Assicurazioni Generali (Insurance-Multi-Line) 49,100 1,208,237
- -------------------------------------------------------------------------------
Credito Italiano S.p.A. (Banks-Major Regional) 610,000 1,886,897
- -------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas-Refining
& Marketing) 201,000 1,147,825
- -------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 81,000 960,324
- -------------------------------------------------------------------------------
Pirelli S.p.A. (Electrical Equipment) 387,441 1,026,970
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications-
Cellular/Wireless) 365,000 1,684,076
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 283,333 1,812,434
- -------------------------------------------------------------------------------
9,726,763
- -------------------------------------------------------------------------------
JAPAN - 13.87%
Advantest Corp. (Electronics-Instrumentation) 24,530 1,390,227
- -------------------------------------------------------------------------------
Bridgestone Corp. (Auto Parts & Equipment) 47,000 1,018,687
- -------------------------------------------------------------------------------
Canon, Inc. (Office Equipment & Supplies) 80,000 1,862,602
- -------------------------------------------------------------------------------
Fuji Photo Film Co. (Leisure Time-Products) 52,000 1,991,269
- -------------------------------------------------------------------------------
Hitachi Cable, Ltd. (Metal Fabricators) 124,000 795,834
- -------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 61,000 2,237,803
- -------------------------------------------------------------------------------
Hoya Corp.(Manufacturing-Specialized) 24,000 753,619
- -------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics-Component Distributors) 118,000 1,427,893
- -------------------------------------------------------------------------------
Matsushita Electric Industrial Co. Ltd. (Electrical
Equipment) 57,000 833,806
- -------------------------------------------------------------------------------
Minebea Company Ltd. (Electronics-Component
Distributors) 157,000 1,683,388
- -------------------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronics-
Component Distributors) 31,000 778,739
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 2,320 1,990,044
- -------------------------------------------------------------------------------
Nippon Television Network (Broadcasting-Television,
Radio & Cable) 2,690 789,056
- -------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computers-
Software & Services) 450 2,422,838
- -------------------------------------------------------------------------------
Ricoh Corp. Ltd. (Office Equipment & Supplies) 108,000 1,339,971
- -------------------------------------------------------------------------------
Rohm Co. (Electronics-Component Distributors) 20,000 2,037,221
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
77
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN - (CONTINUED)
SMC Corp.(Machinery-Diversified) 10,200 $ 898,369
- -------------------------------------------------------------------------------
Sony Corp. (Electronics-Component Distributors) 23,000 2,043,348
- -------------------------------------------------------------------------------
TDK Corp. (Electrical Equipment) 24,000 1,808,685
- -------------------------------------------------------------------------------
Tokyo Electron Ltd. (Electronics-Semiconductors) 36,500 1,168,492
- -------------------------------------------------------------------------------
29,271,891
- -------------------------------------------------------------------------------
MEXICO - 5.10%
Cifra S.A. de C.V. (Retail-General Merchandise) 538,000 1,206,592
- -------------------------------------------------------------------------------
Coca-Cola Femsa S.A.-ADR (Beverages-Non-Alcoholic) 31,600 1,832,800
- -------------------------------------------------------------------------------
Fomento Economico Mexicano, S.A. de C.V.-Class B
(Beverages-Alcoholic) 232,000 1,862,784
- -------------------------------------------------------------------------------
Grupo Industrial Maseca S.A. de C.V.-Class B (Foods) 646,200 667,779
- -------------------------------------------------------------------------------
Grupo Televisa S.A.-GDR (Entertainment)(a) 35,600 1,377,275
- -------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V.-Class A (Paper
& Forest Products) 322,000 1,552,048
- -------------------------------------------------------------------------------
Panamerican Beverages, Inc.-Class A (Beverages-Non-
Alcoholic) 60,200 1,964,025
- -------------------------------------------------------------------------------
TV Azteca, S.A. de C.V.-ADR (Broadcasting-Television,
Radio & Cable)(a) 13,400 302,337
- -------------------------------------------------------------------------------
10,765,640
- -------------------------------------------------------------------------------
NETHERLAND - 5.24%
Akzo Nobel N.V. (Chemicals-Diversified) 7,350 1,267,260
- -------------------------------------------------------------------------------
CMG PLC (Computers-Software & Services) 35,400 883,407
- -------------------------------------------------------------------------------
Getronics N.V. (Computers-Software & Services) 29,200 930,299
- -------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail-Food Chains) 38,000 991,394
- -------------------------------------------------------------------------------
Koninklijke Nutricia Verenigde Bedrijven N.V. (Foods) 15,000 454,960
- -------------------------------------------------------------------------------
Koninklijke Pakhoed N.V. (Shipping) 24,700 712,623
- -------------------------------------------------------------------------------
Oce-Van Der Grinten N.V. (Office Equipment &
Supplies) 4,500 490,469
- -------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 16,400 983,523
- -------------------------------------------------------------------------------
Randstad Holdings N.V. (Services-Commercial &
Consumer) 13,000 489,187
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. (Oil-International
Integrated) 18,000 988,040
- -------------------------------------------------------------------------------
Stork N.V. (Manufacturing-Diversified) 13,000 448,795
- -------------------------------------------------------------------------------
Vendex International N.V. (Retail-General
Merchandise) 20,500 1,131,334
- -------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 32,500 916,825
- -------------------------------------------------------------------------------
Wolters Kluwer N.V. (Specialty Printing) 2,900 374,577
- -------------------------------------------------------------------------------
11,062,693
- -------------------------------------------------------------------------------
NORWAY - 0.63%
Petroleum Geo-Services A.S.A. (Oil-International
Integrated)(a) 21,000 1,322,644
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PHILIPPINES - 0.36%
Metro Pacific Corp. (Manufacturing-Diversified) 4,745,440 $ 131,232
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co. (Telephone) 16,660 361,995
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co.-ADR
(Telephone) 11,600 261,000
- -------------------------------------------------------------------------------
754,227
- -------------------------------------------------------------------------------
PORTUGAL - 1.69%
Cimpor-Cimentos de Portugal S.A. (Construction-Cement
& Aggregates) 17,650 462,610
- -------------------------------------------------------------------------------
Electricidade de Portugal, S.A.-ADR (Electric
Companies)(a) 13,800 534,750
- -------------------------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 50,000 2,320,021
- -------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications-Cellular/Wireless)(a) 2,400 255,713
- -------------------------------------------------------------------------------
3,573,094
- -------------------------------------------------------------------------------
SINGAPORE - 0.96%
City Developments Ltd. (Land Development) 155,000 717,295
- -------------------------------------------------------------------------------
DBS Land Ltd. (Land Development) 408,000 624,527
- -------------------------------------------------------------------------------
Overseas Union Bank Ltd. (Banks-Major Regional) 181,200 693,408
- -------------------------------------------------------------------------------
2,035,230
- -------------------------------------------------------------------------------
SPAIN - 2.35%
Banco Bilbao Vizcaya, S.A. (Banks-Major Regional) 42,900 1,388,231
- -------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 49,200 873,554
- -------------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 83,800 1,102,849
- -------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 56,000 1,598,950
- -------------------------------------------------------------------------------
4,963,584
- -------------------------------------------------------------------------------
SWEDEN - 2.06%
Electrolux A.B. (Household Furniture & Appliances) 15,700 1,089,522
- -------------------------------------------------------------------------------
Hennes & Mauritz A.B.-Class B (Retail-Specialty-
Apparel) 37,000 1,631,003
- -------------------------------------------------------------------------------
Sparbanken Sverige A.B.-Class A (Banks-Major
Regional) 52,000 1,182,131
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 12,000 447,750
- -------------------------------------------------------------------------------
4,350,406
- -------------------------------------------------------------------------------
SWITZERLAND - 4.85%
Ciba Specialty Chemicals A.G. (Chemicals-
Specialty)(a) 11,800 1,404,858
- -------------------------------------------------------------------------------
Clariant A.G. (Chemicals-Specialty) 1,900 1,586,042
- -------------------------------------------------------------------------------
Credit Suisse Group (Banks-Major Regional) 7,700 1,190,694
- -------------------------------------------------------------------------------
Holderbank Financiere Glarus A.G.-Class B
(Construction-Cement & Aggregates) 1,190 970,565
- -------------------------------------------------------------------------------
Nestle S.A. (Foods) 770 1,153,288
- -------------------------------------------------------------------------------
Novartis A.G. (Health Care-Diversified) 1,368 2,218,378
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
78
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND - (CONTINUED)
Schweizerischer Bankverein (Banks-Major Regional) 3,300 $ 1,025,111
- -------------------------------------------------------------------------------
Zurich Versicherungs-Gesellschaft (Insurance-Multi-
Line) 1,450 690,523
- -------------------------------------------------------------------------------
10,239,459
- -------------------------------------------------------------------------------
TAIWAN - 0.10%
Taiwan Semiconductor Manufacturing Co. Ltd.-ADR
(Electronics-Semiconductors)(a) 12,000 218,250
- -------------------------------------------------------------------------------
UNITED KINGDOM - 16.37%
Airtours PLC (Services-Commercial & Consumer) 45,150 919,486
- -------------------------------------------------------------------------------
Amersham International PLC (Health Care-Drugs-Generic
& Other) 21,000 780,149
- -------------------------------------------------------------------------------
Barclays PLC (Banks-Major Regional) 25,000 664,330
- -------------------------------------------------------------------------------
Blue Circle Industries PLC (Construction-Cement &
Aggregates) 155,000 869,337
- -------------------------------------------------------------------------------
Bodycote International PLC (Chemicals-Specialty) 40,500 600,965
- -------------------------------------------------------------------------------
Bodycote International PLC (Chemicals-Specialty),
Rts. expiring 01/09/98 10,125 66,515
- -------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 42,000 1,196,780
- -------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas-Refining &
Marketing) 140,000 1,839,432
- -------------------------------------------------------------------------------
Cable & Wireless PLC (Telecommunications-
Cellular/Wireless) 117,000 1,028,029
- -------------------------------------------------------------------------------
Compass Group PLC (Services-Commercial & Consumer) 78,000 959,494
- -------------------------------------------------------------------------------
Dixons Group PLC (Retail-Specialty) 107,000 1,073,719
- -------------------------------------------------------------------------------
EMAP PLC (Publishing) 62,500 929,981
- -------------------------------------------------------------------------------
General Electric Co. PLC (Manufacturing-Diversified) 168,100 1,089,132
- -------------------------------------------------------------------------------
GKN PLC (Manufacturing-Diversified) 50,000 1,024,005
- -------------------------------------------------------------------------------
Granada Group PLC (Leisure Time-Products) 43,000 656,776
- -------------------------------------------------------------------------------
Hays PLC (Services-Commercial & Consumer) 104,000 1,386,932
- -------------------------------------------------------------------------------
Kingfisher PLC (Retail-Department Stores) 80,000 1,114,170
- -------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time-Products) 365,200 1,583,467
- -------------------------------------------------------------------------------
Lloyds TSB Group PLC (Banks-Major Regional) 57,000 736,742
- -------------------------------------------------------------------------------
Misys PLC (Services-Commercial & Consumer) 25,000 755,481
- -------------------------------------------------------------------------------
Next PLC (Retail-General Merchandise) 97,500 1,108,093
- -------------------------------------------------------------------------------
Pearson PLC (Specialty Printing) 95,000 1,234,144
- -------------------------------------------------------------------------------
Provident Financial PLC (Consumer Finance) 92,800 1,219,281
- -------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 145,000 2,302,821
- -------------------------------------------------------------------------------
Rentokil Initial PLC (Services-Commercial & Consumer) 274,000 1,192,510
- -------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group PLC (Insurance-
Multi-Line) 133,000 1,338,992
- -------------------------------------------------------------------------------
Siebe PLC (Electronics-Component/Distributors) 38,000 745,791
- -------------------------------------------------------------------------------
Smiths Industries PLC (Machinery-Diversified) 26,000 362,105
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - (CONTINUED)
Tarmac PLC (Engineering & Construction) 844,500 $ 1,581,140
- ------------------------------------------------------------------------------
Unilever PLC (Foods) 208,000 1,779,782
- ------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications-
Cellular/Wireless) 185,000 1,333,835
- ------------------------------------------------------------------------------
WPP Group PLC (Services-Advertising/Marketing) 240,000 1,068,184
- ------------------------------------------------------------------------------
34,541,600
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests 198,591,423
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT(c)
<S> <C> <C>
FOREIGN CONVERTIBLE BONDS - 0.80%(c)
FRANCE - 0.47%
AXA-UAP (Insurance-Multi-Line), Conv. Sr. Deb.,
4.50%, 01/01/99 FRF 3,307,500 986,177
- ------------------------------------------------------------------------------
HONG KONG - 0.13%
New World Infrastructure Ltd. (Services-Commercial
& Consumer), Conv. Bonds, 5.00%, 07/15/01 HKD 280,000 278,600
- ------------------------------------------------------------------------------
JAPAN - 0.20%
Ricoh Co., Ltd. (Office Equipment & Supplies),
Conv. Bonds, 0.35%, 03/31/03 JPY40,000,000 416,328
- ------------------------------------------------------------------------------
Total Foreign Convertible Bonds 1,681,105
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 3.82%(d)
Smith Barney, Inc., 6.75%, 01/02/98(e) $ 8,056,299 8,056,299
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.72% 208,328,827
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.28% 2,693,758
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $211,022,585
==============================================================================
</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 Trustees. The
market value of these securities at December 31 , 1997 was $1,636,293
which represented 0.78% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized $395,097,000 U. S. Government obligations, 0%
to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Abbreviations
ADR - American Depositary Receipt HKD - Hong Kong dollar
Conv.- Convertible JPY - Japanese Yen
Deb. - Debentures Pfd. - Preferred
FRF - French Franc Rts. - Rights
GDR - Global Depositary Receipt Sr. - Senior
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
79
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $168,107,886) $208,328,827
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $1,156,244) 1,138,250
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 125,981
- ----------------------------------------------------------------------
Foreign currency sold 8,691
- ----------------------------------------------------------------------
Investments sold 2,416,689
- ----------------------------------------------------------------------
Dividends and interest 309,815
- ----------------------------------------------------------------------
Organizational costs, net 964
- ----------------------------------------------------------------------
Investment for deferred compensation plan 17,615
- ----------------------------------------------------------------------
Total assets 212,346,832
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 204,927
- ----------------------------------------------------------------------
Foreign currency purchased 667
- ----------------------------------------------------------------------
Investments purchased 918,035
- ----------------------------------------------------------------------
Deferred compensation plan 17,615
- ----------------------------------------------------------------------
Accrued advisory fees 134,159
- ----------------------------------------------------------------------
Accrued administrative services fees 4,547
- ----------------------------------------------------------------------
Accrued directors' fees 1,609
- ----------------------------------------------------------------------
Accrued operating expenses 42,688
- ----------------------------------------------------------------------
Total liabilities 1,324,247
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $211,022,585
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 12,319,556
======================================================================
Net asset value, offering and redemption price per share $17.13
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $404,480 foreign withholding tax) $ 2,884,830
- ----------------------------------------------------------------------------
Interest 366,128
- ----------------------------------------------------------------------------
Total investment income 3,250,958
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,519,323
- ----------------------------------------------------------------------------
Administrative services fees 59,724
- ----------------------------------------------------------------------------
Custodian fees 226,066
- ----------------------------------------------------------------------------
Directors' fees and expenses 8,453
- ----------------------------------------------------------------------------
Organizational costs 2,892
- ----------------------------------------------------------------------------
Other 62,939
- ----------------------------------------------------------------------------
Total expenses 1,879,397
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,205)
- ----------------------------------------------------------------------------
Net expenses 1,878,192
- ----------------------------------------------------------------------------
Net investment income 1,372,766
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities (523,791)
- ----------------------------------------------------------------------------
Foreign currency transactions (219,642)
- ----------------------------------------------------------------------------
(743,433)
- ----------------------------------------------------------------------------
NET UNREALIZED APPRECIATION (DEPRECIATION) OF:
Investment securities 11,912,209
- ----------------------------------------------------------------------------
Foreign currency transactions (33,863)
- ----------------------------------------------------------------------------
11,878,346
- ----------------------------------------------------------------------------
Net gain on investment securities and foreign currencies 11,134,913
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $12,507,679
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
80
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,372,766 $ 962,870
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment
securities and foreign currency transactions (743,433) 4,388,374
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currency transactions 11,878,346 17,071,573
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 12,507,679 22,422,817
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (955,397) (377,734)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (3,362,028) --
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 37,094,253 61,436,140
- ------------------------------------------------------------------------------
Net increase in net assets 45,284,507 83,481,223
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 165,738,078 82,256,855
- ------------------------------------------------------------------------------
End of year $211,022,585 $165,738,078
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $170,283,064 $133,188,811
- ------------------------------------------------------------------------------
Undistributed net investment income 1,134,854 937,128
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currency
transactions (580,780) 3,305,038
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currency transactions 40,185,447 28,307,101
- ------------------------------------------------------------------------------
$211,022,585 $165,738,078
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to AIM V.I. International Equity Fund (the "Fund"). The Fund's investment
objective is to seek to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by AIM to have strong earnings momentum. Currently, shares of
the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in
AIM V.I. INTERNATIONAL EQUITY FUND
81
<PAGE>
foreign securities is substantially completed each day at various times prior
to the close of the New York Stock Exchange. The values of such securities
used in computing the net asset value of the Fund's shares are determined as
of such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New York
Stock Exchange which will not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997
undistributed net investment income was decreased and undistributed net
realized gain (loss) increased by $219,643 in order to comply with the
requirements of the American Institute of Certified Public Accountants
Statement of Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
F. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $59,724 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,684 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolio trades to brokers who paid a portion of the
Fund's expenses related to pricing services used by the Fund which reduced the
Fund's expenses by $715 during the year ended December 31, 1997. The Fund also
received reductions in custodian fees of $490 under an expense offset
arrangement. The effect of the above arrangements resulted in a reduction of
the Fund's total expenses of $1,205 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1997 was $145,204,122 and $110,775,339, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $48,320,669
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (8,100,740)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $40,219,929
==========================================================================
</TABLE>
Cost of investments for tax purposes is $168,108,898.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ ----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ --------- -----------
<S> <C> <C> <C> <C>
Sold 2,963,552 $ 50,938,182 4,432,824 $66,189,679
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions 257,449 4,317,425 23,877 377,734
- ----------------------------------------------------------------------------
Reacquired (1,031,143) (18,161,354) (347,543) (5,131,273)
- ----------------------------------------------------------------------------
2,189,858 $ 37,094,253 4,109,158 $61,436,140
============================================================================
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
82
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
--------------------------------- -------------------
1997 1996 1995 1995 1994
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 16.36 $ 13.66 $ 11.03 $ 12.49 $ 10.00
- --------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.10 0.07 0.07 0.06 --
- --------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 1.03 2.67 2.58 (1.49) 2.49
- --------------------------------------------------------------------------------------------
Total from investment
operations 1.13 2.74 2.65 (1.43) 2.49
- --------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.08) (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------------------
Distributions from net
realized capital gains (0.28) -- -- -- --
- --------------------------------------------------------------------------------------------
Total distributions (0.36) (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------------------
Net asset value, end of
period $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
============================================================================================
Total return(a) 6.94% 20.05% 24.04% (11.48)% 24.90%
============================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $211,023 $165,738 $82,257 $55,019 $23,533
============================================================================================
Ratio of expenses to
average net assets 0.93%(b)(c) 0.96% 1.15%(d) 1.27%(e) 1.98%(d)(e)
============================================================================================
Ratio of net investment
income to average net
assets 0.68%(b) 0.78% 0.75%(d) 0.60%(f) (0.15)%(d)(f)
============================================================================================
Portfolio turnover rate 57% 59% 67% 64% 26%
============================================================================================
Average brokerage
commission rate paid(g) $ 0.0173 $ 0.0209 N/A N/A N/A
============================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $202,576,375.
(c) Includes expenses paid indirectly. Excluding expenses paid indirectly, the
ratio of expenses to average net assets would have remained the same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.28% and 3.06% (annualized), for January 1995 and 1994 respectively.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.59% and (1.23)% (annualized), for January 1995 and
1994 respectively.
(g) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. INTERNATIONAL EQUITY FUND
83
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. International Equity Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1997, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the two years in the period
then ended, the eleven month period ended December 31, 1995, the year ended
January 31, 1995, and the period May 5, 1993 (commencement of operations)
through January 31, 1994. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1997, by correspondence with the custodian and brokers. Where
brokers did not reply to our confirmation requests, we carried out other
appropriate auditing procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. International Equity Fund, as of December 31, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the two years in the period then ended, the eleven month period ended December
31, 1995, the year ended January 31, 1995 and the period May 5, 1993
(commencement of operations) through January 31, 1994 in conformity with
generally accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. INTERNATIONAL EQUITY FUND
84
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND PRODUCES COMPETITIVE YIELDS IN 1997'S UNCERTAIN MARKETS
A roundtable discussion with the Fund management team for AIM V.I. Money Market Fund about the
fiscal year ended December 31, 1997.
- -----------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID THE AIM V.I. MONEY rates a second time during 1997. ------------
MARKET FUND PERFORM DURING THE In the fourth quarter of 1997, the U.S. By year end,
FISCAL YEAR? market began to focus on the Far East.
The Asian crisis, caused by debt default there was a 180-degree turn
A. In a year that witnessed unusual vola- worries in that region, brought marked
tility and uncertainty in the markets, the uncertainty to markets worldwide late in in market expectations
management team maintained a weighted the fiscal year. In the U.S., rumored for-
average maturity (WAM) in the 13- to 27- eign selling in the Treasury and govern- about interest rates.
day range. As the fiscal year ended, the ment markets, coupled with year-end ------------
WAM stood at 19 days, and the seven-day technical pressures, caused rates to rise in
yield was 5.29%. In comparison, similar December. By year end, there was a 180- was extremely flat as the fiscal year
money funds produced an average seven- degree turn in market expectations about closed, with the 30-year Treasury bond
day compound yield of 5.12%, according interest rates. Most market participants yielding only 60 basis points more than
to IBC's money fund report. agreed that the Fed would either lower the three-month Treasury bill. (A basis
rates or leave them unchanged in re- point is one one-hundredth of a percent-
Q. WHY WAS THERE SO MUCH sponse to the Asian crisis. age point.)
UNCERTAINTY ABOUT INTEREST RATES
IN 1997? Q. WHAT IS THE MARKET OUTLOOK Q. HOW WILL THE FUND RESPOND
A. In March, the Federal Reserve Board FOR 1998? TO ANY MOVE BY THE FEDERAL
(the Fed) raised the federal funds rate A. In the U.S., economic fundamentals are RESERVE?
target from 5.25% to 5.50%. For much of sound: inflation is low, corporate profits A. AIM V.I. Money Market Fund's short
the second and third quarters of the year, are strong, and growth is healthy. For weighted average maturity renders it
markets anticipated additional rate hikes. 1997 as a whole, the rise in the core CPI, capable of responding quickly to any
Interest rate volatility was increased by which excludes the volatile food and en- change in rates. It can take advantage of
wide swings in the reported numbers on ergy sectors, was a mere 2.2%--the any backup in interest rates to provide
gross domestic product growth, unem- smallest increase since 1965. Continued competitive yield to the portfolio while
ployment rate and trend, and the Con- turmoil in Asia could have a slowing effect maintaining a conservative position with
sumer Price Index (CPI). Despite overall on the U.S. economy, so interest rates are respect to interest rate market risk.
growth in the economy, the CPI and other not likely to go up.
inflation measures remained at acceptable In fact, many market watchers consider
levels. Therefore, the Fed was able to a monetary easing likely. The yield curve
adhere to its steady policy and not raise
The Consumer Price Index (CPI) is a measure of change in consumer prices as determined by the U.S. Bureau of Labor Statistics.
An investment in the Fund is neither insured nor guaranteed by the U.S. government, and there can be no assurance that the Fund
will be able to maintain a stable net asset value of $1.00 per share
AIM V.I. MONEY MARKET FUND
85
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
COMMERCIAL PAPER - 53.34%(a)
ASSET-BACKED SECURITIES - 15.35%
Ciesco, L.P.,
5.67%, 02/09/98 $1,000 $ 993,858
- -----------------------------------------------------------------------
Clipper Receivables Corp.,
6.00%, 01/28/98 1,067 1,062,198
- -----------------------------------------------------------------------
Fleet Funding Corp.,
5.83%, 01/30/98 2,900 2,886,380
- -----------------------------------------------------------------------
Preferred Receivables Funding Corp.,
5.64%, 01/06/98 1,075 1,074,158
- -----------------------------------------------------------------------
Sheffield Receivables Corp.,
5.81%, 02/02/98 3,000 2,984,507
- -----------------------------------------------------------------------
9,001,101
- -----------------------------------------------------------------------
AUTOMOBILE - 1.68%
Daimler-Benz North America Corp.,
5.75%, 03/26/98 1,000 986,583
- -----------------------------------------------------------------------
BROADCAST MEDIA - 1.67%
Scripps (E. W.) Co.,
5.74%, 03/12/98 992 980,928
- -----------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 5.10%
International Business Machines Corp.,
6.25%, 01/15/98 3,000 2,992,708
- -----------------------------------------------------------------------
DRUGS - 4.09%
Novartis Finance Corp.,
6.35%, 01/06/98 2,400 2,397,883
- -----------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.55%
Hitachi America, Ltd.,
5.95%, 01/29/98 1,500 1,493,058
- -----------------------------------------------------------------------
FINANCE (BUSINESS CREDIT) - 7.71%
General Electric Capital Corp.,
5.70%, 02/27/98 1,000 990,975
- -----------------------------------------------------------------------
5.68%, 03/03/98 1,548 1,533,101
- -----------------------------------------------------------------------
National Rural Utilities Cooperative Finance Corp.,
5.54%, 01/14/98 2,000 1,995,999
- -----------------------------------------------------------------------
4,520,075
- -----------------------------------------------------------------------
FINANCE (MISCELLANEOUS) - 1.70%
USAA Capital Corp.,
6.50%, 01/16/98 1,000 997,292
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
FINANCE (PERSONAL CREDIT) - 2.97%
Associates Corp. of North America,
5.68%, 02/11/98 $1,750 $ 1,738,679
- -----------------------------------------------------------------------
FOOD PROCESSING - 3.39%
Cargill Financial Services Corp.,
5.57%, 02/20/98 2,000 1,984,527
- -----------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 1.68%
MetLife Funding Inc.,
5.71%, 03/20/98 1,000 987,628
- -----------------------------------------------------------------------
MACHINERY - 1.70%
Dover Corp.,
6.50%, 01/16/98 1,000 997,292
- -----------------------------------------------------------------------
METAL MINING - 2.04%
RTZ America, Inc.,
5.57%, 01/07/98 1,200 1,198,886
- -----------------------------------------------------------------------
OIL & GAS (INTEGRATED) - 1.71%
Shell Martinez Refining Co.,
5.81%, 03/11/98(b) 1,000 1,000,000
- -----------------------------------------------------------------------
Total Commercial Paper 31,276,640
- -----------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.33%(C)
Goldman, Sachs & Co.,
5.6875%, 04/20/98(d) 2,060 2,060,000
- -----------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.,
7.05%, 08/17/98(e) 3,000 3,000,000
- -----------------------------------------------------------------------
Morgan (J.P.) Securities, Inc.,
6.82%, 04/06/98(f) 2,100 2,100,000
- -----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.,
6.85%, 05/26/98(g) 3,000 3,000,000
- -----------------------------------------------------------------------
Total Master Note Agreements 10,160,000
- -----------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 4.26%
Federal National Mortgage Association,
5.504%, 06/02/99(h) 2,000 2,000,000
- -----------------------------------------------------------------------
Student Loan Marketing Association,
5.619%, 08/20/98(h) 500 499,973
- -----------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,973
- -----------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 43,936,613
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. MONEY MARKET FUND
86
<PAGE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
REPURCHASE AGREEMENTS - 25.15%(i)
Goldman, Sachs & Co.,
6.53%, 01/02/98(j) $4,744 $ 4,744,154
- ----------------------------------------------------------------
Smith Barney, Inc.,
6.75%, 01/02/98(k) 10,000 10,000,000
- ----------------------------------------------------------------
Total Repurchase Agreements 14,744,154
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 100.08% 58,680,767(/1/)
- ----------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.08%) (46,146)
- ----------------------------------------------------------------
NET ASSETS - 100.00% $58,634,621
================================================================
</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) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the Fund to receive interest. The Fund
has the right, upon seven calendar days' notice to the trustee, to put its
certificates to the trust at par value plus accrued interest. Because trust
certificates involve a trust and a third party put feature, they involve
complexities and potential risks that may not be present where the debt
obligation is owned directly. Rate shown is the rate in effect on 12/31/97.
(c) The investments in master note agreements are through participation in
joint accounts with other mutual funds, private accounts, and certain
nonregistered investment companies managed by the investment advisor or its
affiliates.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on 12/31/97.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 2 days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 12/31/97.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 7 days' notice to the issuer. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 12/31/97.
(g) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 3 business days' written notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown is
the rate in effect on 12/31/97.
(h) Interest rates are redetermined weekly. Rate shown is the rate in effect on
12/31/97.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$900,326,500. Collateralized by $856,643,000 U.S. Treasury obligations, 0%
to 14% due 01/08/98 to 08/15/23 with an aggregate market value at 12/31/97
of $918,902,583.
(k) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
(l) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
87
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at
value (amortized cost) $ 43,936,613
- ----------------------------------------------------------------------
Repurchase agreements 14,744,154
- ----------------------------------------------------------------------
Interest receivable 69,211
- ----------------------------------------------------------------------
Organizational costs, net 964
- ----------------------------------------------------------------------
Investment for deferred compensation plan 17,151
- ----------------------------------------------------------------------
Other assets 11,335
- ----------------------------------------------------------------------
Total assets 58,779,428
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 89,207
- ----------------------------------------------------------------------
Deferred compensation plan 17,151
- ----------------------------------------------------------------------
Accrued advisory fees 20,245
- ----------------------------------------------------------------------
Accrued administrative service fees 2,858
- ----------------------------------------------------------------------
Accrued directors' fees 1,843
- ----------------------------------------------------------------------
Accrued operating expenses 13,503
- ----------------------------------------------------------------------
Total liabilities 144,807
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 58,634,621
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 58,634,564
======================================================================
Net asset value, offering and redemption price per share $ 1.00
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,562,612
- -----------------------------------------------------------------
EXPENSES:
Advisory fees 254,546
- -----------------------------------------------------------------
Administrative service fees 38,289
- -----------------------------------------------------------------
Custodian fees 25,713
- -----------------------------------------------------------------
Directors' fees and expenses 7,904
- -----------------------------------------------------------------
Legal fees 18,787
- -----------------------------------------------------------------
Organizational costs 2,892
- -----------------------------------------------------------------
Other 24,587
- -----------------------------------------------------------------
Total expenses 372,718
- -----------------------------------------------------------------
Less: Expenses paid indirectly (160)
- -----------------------------------------------------------------
Net expenses 372,558
- -----------------------------------------------------------------
Net investment income 3,190,054
- -----------------------------------------------------------------
Net increase in net assets resulting from operations $3,190,054
=================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
88
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,190,054 $ 3,207,475
- ----------------------------------------------------------------------------
Net realized gain on sales of investment
securities -- 16,294
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,190,054 3,223,769
- ----------------------------------------------------------------------------
Distributions to shareholders from net investment
income (3,190,054) (3,207,475)
- ----------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (4,894,872) (1,992,555)
- ----------------------------------------------------------------------------
Net increase (decrease) in net assets (4,894,872) (1,976,261)
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 63,529,493 65,505,754
- ----------------------------------------------------------------------------
End of year $58,634,621 $63,529,493
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $58,634,564 $63,529,436
- ----------------------------------------------------------------------------
Undistributed net realized gain on sales of
investment securities 57 57
- ----------------------------------------------------------------------------
$58,634,621 $63,529,493
============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Money Market Fund (the "Fund"). The Fund's investment
objective is to seek to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Currently, shares
of the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Distributions to shareholders are declared and
paid daily.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements. The Fund has a
capital loss carryforward (which may be carried forward to offset future
taxable gains, if any) of $846 which expires, if not previously utilized,
in the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
D. Organizational Costs - Organizational costs of $14,461 are being amortized
over five years.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.40% of
the first $250 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. MONEY MARKET FUND
89
<PAGE>
Pursuant to a master administrative services agreement between the Company and
AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the year ended December 31, 1997, AIM was reimbursed $38,289 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$4,396 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $160 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of the
Fund's total expenses of $160 during the year ended December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold 88,948,357 $ 88,948,357 76,145,573 $ 76,145,573
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 3,190,054 3,190,054 3,207,475 3,207,475
- ---------------------- ----------- ------------ ----------- ------------
Reacquired (97,033,283) (97,033,283) (81,345,603) (81,345,603)
- ---------------------- ----------- ------------ ----------- ------------
(4,894,872) $ (4,894,872) (1,992,555) $ (1,992,555)
=========== ============ =========== ============
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995 and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
------------------------------- -------------------
1997 1996 1995 1995 1994
<S> <C> <C> <C> <C> <C>
------- ------- ------- ------- -------
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- --------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.04 0.02
- --------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.04) (0.02)
- --------------------------------------------------------------------------------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
================================================================================
Total return 5.14% 4.97% 5.69%(a) 3.98% 2.27%(a)
================================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of
period (000s omitted) $58,635 $63,529 $65,506 $31,017 $13,891
================================================================================
Ratio of expenses to
average net assets 0.59%(b)(c) 0.55% 0.53%(a) 0.63%(d) 0.95%(a)(e)
================================================================================
Ratio of net investment
income to average net
assets 5.01%(b) 4.84% 5.40%(a) 4.14%(d) 2.29%(a)(e)
================================================================================
</TABLE>
(a) Annualized.
(b) Ratios are based on average net assets of $63,641,415.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements the ratios of expenses and net investment
income to average net assets were 0.70% and 4.07%, respectively.
(e) After fee waivers and/or expense reimbursements. Prior to fee waivers
and/or expense reimbursements the annualized ratios of expenses and net
investment income to average net assets were 1.53% and 1.70%, respectively.
AIM V.I. MONEY MARKET FUND
90
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Money Market Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1997, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the two years in the
period then ended, the eleven month period ended December 31, 1995, the year
ended January 31, 1995, and the period May 5, 1993 (commencement of
operations) through January 31, 1994. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial
highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Money Market Fund, as of December 31, 1997, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
two years in the period then ended, the eleven month period ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement
of operations), through January 31, 1994, in conformity with generally
accepted accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. MONEY MARKET FUND
91
<PAGE>
The Managers' Overview
FUND RESULTS SOLID IN HIGH-PRICED,
HIGH-VOLATILITY MARKET
<TABLE>
<CAPTION>
A roundtable discussion with the fund management team for AIM V.I. Value Fund about the fiscal
year ended December 31, 1997.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. STOCK PRICES REMAINED HIGH IN the S&P 500 stocks rose almost 3% in --------------
1997. HOW DID AIM V.I. VALUE FUND value, while NASDAQ small-company We took advantage
PERFORM IN THIS ENVIRONMENT? stocks declined almost 7%.
A. The Fund did very well despite market of the market break
volatility and continuing high valuations. Q. DID THE OCTOBER MARKET DECLINE
Total return for the fiscal year was MAKE STOCK PRICE VALUATIONS MORE to buy some stocks
23.69%, besting the Fund's average REASONABLE?
annual total return of 19.76% since its A. From our perspective as V.I. Value at very good prices.
inception in 1993. Fund managers, not really--or at least ---------------
not sufficiently. Just after the October
decline, the price-earnings ratio for A. Approximately 12% of the portfolio
Q. HOW WOULD YOU DESCRIBE the S&P 500 fell slightly. By year end, was in foreign holdings at fiscal year end.
ECONOMIC CONDITIONS DURING THE though, it had risen to its previous These holdings are almost exclusively
FISCAL YEAR? level. So bargains are still difficult to European, and European markets did
A. Market expectations shifted 180 de- find. well in 1997. Morgan Stanley's MSCI
grees. As the year opened, many expected We had about a 10% cash position in Europe Index was up more than 20%.
the Federal Reserve Board (the Fed) to the Fund in late October so we took ad- European stocks are relatively cheap
raise interest rates to slow a robust, vantage of the market break to buy some compared to U.S. stocks. More impor-
possibly inflationary economic expansion. stocks at very good prices. We continued
In contrast, by fiscal year end, deflation to have a fairly high cash position
was a much-discussed topic and the through the end of the fiscal year,
consensus was that the Fed would either managing the portfolio conservatively in
do nothing or lower rates. The Asian this volatile environment.
financial crisis, triggered by debt
default worries in that region, accounted Q. NEVERTHELESS, TOTAL RETURN WAS
for much of this change in sentiment. WELL ABOVE 20%. ARE THERE CERTAIN
HOLDINGS THAT HELP EXPLAIN THIS Top 10 Common Stock Holdings
Q. WHAT EFFECT DID THIS CHANGE GOOD PERFORMANCE? As of 12/31/97, based on total net assets
AND UNCERTAINTY HAVE ON EQUITIES A. For most of the fiscal year, we enjoyed
MARKETS? excellent results from our large position 1. Royal Bank of Canada 3.82%
A. The net result was that for the year as in financial stocks like banks, insurers, 2. Allstate Corp. 3.61
a whole, large-capitalization stocks again and brokerage houses. With a growing 3. Worldcom, Inc. 3.06
dominated the markets. For a while, economy and stable interest rates, finan- 4. American International Group, Inc. 2.60
especially during the second and third cial institutions have prospered. the sec- 5. MCI Communications Corp. 1.95
calendar quarters of 1997, investors tor also is experiencing a wave of mergers 6. Citicorp 1.78
began to look beyond these stocks be- and acquisitions. 7. SmithKline Beecham PLC ADR 1.77
cause of concern about high valuations. Near the fiscal year end, we began to 8. Computer Associates
However, Southeast Asia's economic pare our financial holdings as concerns International, Inc. 1.76
crisis and the dramatic 554-point drop in arose about the exposure of some multi- 9. BankAmerica Corp. 1.75
the DJIA on October 27, 1997, changed national banks to the Asian loan situation. 10. Fannie Mae 1.71
all that. Investors fled to perceived Please keep in mind that the Fund's
quality, seeking the large, liquid blue Q. AS OF YOUR LAST SHAREHOLDER portfolio composition is subject to change
chips. For example, during the last REPORT IN JUNE, THE FUND HAD SIZ- and there is no assurance the Fund will
quarter of 1997, ABLE FOREIGN HOLDINGS. IS THAT STILL continue to hold any particular security.
SO?
</TABLE>
AIM V.I. VALUE FUND
92
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
tantly, earnings growth in Europe was some cases it may have been for the wrong more for a company if we are confident it
quite strong. reason. A lot of tech companies source will make its earnings projections, but we
parts from Southeast Asia and the currency intend to maintain our investment stan-
Q. WHAT OTHER HOLDINGS DID WELL? devaluations there may actually be shrink- dards in terms of the price we are willing
A. After financials, our next two largest ing their costs rather than their markets. to pay for a stock.
sector weightings were in health care and Nevertheless, we expect that finding
technology. good values will continue to be a chal- AVERAGE ANNUAL TOTAL RETURNS
The medical instruments/products lenge. We remain willing to pay a little As of 12/31/97
industry and the pharmaceutical industry
have done well. The FDA's streamlined 1 Year 23.69%
approval process for drugs and medical
devices is expected to reduce costs for Inception (5/5/93) 19.76
these industries. Watson Pharmaceuticals,
Inc., a new holding since our last share-
holder report, recently reported record
earnings. Growth of a $10,000 Investment
In technology, we raised our holdings From 5/5/93 - 12/ 31/97
in the Computer Software/Services indus-
try. One of our larger holdings, Computer AIM V.I. VALUE FUND S&P 500 LIPPER GROWTH
Associates International, Inc., is a STOCK INDEX FUND INDEX
leading vendor of software dedicated to
solving the "millennium" problem--the need 5/5/93 $10,000 $10,000 $10,000
to reprogram older computers to recognize 7/31/93 10,690 10,155 10,417
the year 2000. 10/31/93 11,370 10,675 11,111
We also found good valuations in tele- 1/31/94 12,193 11,062 11,564
communications-long distance stocks 4/30/94 11,793 10,430 10,930
such as AT&T Corp. and Spring Corp. We 7/31/94 11,592 10,681 10,906
added both of these holdings since our 10/31/94 12,163 11,088 11,338
June report to shareholders, and both did 1/31/95 11,945 11,123 11,042
very well. 4/30/95 13,400 12,247 12,131
7/31/95 15,833 13,462 13,691
Q. WHAT DO YOU FORESEE IN THE 10/31/95 16,146 14,011 14,057
ECONOMY AND MARKETS IN THE NEXT 1/31/96 16,346 15,412 14,946
FEW MONTHS? 4/30/96 16,750 15,937 15,634
A. In the U.S., the economic fundamen- 7/31/96 16,387 15,678 14,904
tals are sound: inflation is low, corporate 10/31/96 17,862 17,376 16,437
profits are strong, and the economy is 1/31/97 19,342 19,468 18,044
growing at a healthy pace. However, we 4/30/97 19,331 19,939 17,838
expect stock returns may gravitate to 7/31/97 23,304 23,848 21,425
their more historic levels of 10% to 12% 10/31/97 22,705 22,955 21,108
annually. 12/31/97 23,155 24,455 21,958
Continuing problems in Asia could slow
economic growth worldwide, reducing Past performance cannot guarantee comparable future results.
corporate profits and stock returns. In
such a volatile environment, investors The performance figures shown represent the AIM V.I Value Fund and are not intended to
would be well advised to focus on their reflect actual annuity values, and do not reflect charges at the separate account
long-term financial goals rather than on level which, if applied, would lower the performance results. The Fund's performance
transitory fluctuations in the markets. figures are historical and reflect reinvestment of all distributions and changes in
the net asset value. The Fund's investment return and principal value will fluctuate
Q. WHAT IS YOUR OUTLOOK FOR THE so that Fund shares, when redeemed, may be worth more or less than their original
FUND? cost. Source: Towers Data Systems HYPO--Registered Trademark--.
A. For the immediate future, we think The Standard & Poor's Composite Index 500 Stocks (S&P 500) is a group of unmanaged
we may find some good valuations in the securities widely regarded by investors to be representative of the stock market in
technology sector. Many tech stocks took a general.
beating because of the turmoil in Asia, The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the performance
but in of 30 large-company stocks.
Lipper Analytical Services, Inc., is an independent mutual fund performance monitor.
The unmanaged Lipper Growth Fund Index represents an average of the performance of the
30 largest growth mutual funds.
The NASDAQ (National Association of Securities Dealers Automated Quotation system)
Composite Index is a group of more than 4,500 unmanaged over-the-counter securities
widely regarded by investors to be representative of the small- and medium-sized
company stock universe.
The MSCI Europe Index is a group of unmanaged Europe securities. The index is
compiled by Morgan Stanley Capital International.
An investment cannot be made in any indexes listed. Index results include
reinvested dividends.
</TABLE>
AIM V.I. VALUE FUND
93
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1997
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 65.86%
AEROSPACE/DEFENSE - 0.69%
Boeing Co. (The) 33,000 $ 1,614,937
- -----------------------------------------------------------
Lockheed Martin Corp. 1,800 177,300
- -----------------------------------------------------------
Orbital Sciences Corp.(a) 20,100 597,975
- -----------------------------------------------------------
Precision Castparts Corp. 38,800 2,340,125
- -----------------------------------------------------------
4,730,337
- -----------------------------------------------------------
AIR FREIGHT - 0.26%
Airborne Freight Corp. 18,200 1,130,675
- -----------------------------------------------------------
Federal Express Corp.(a) 11,400 696,112
- -----------------------------------------------------------
1,826,787
- -----------------------------------------------------------
AIRLINES - 0.66%
Continental Airlines, Inc.(a) 94,000 4,523,750
- -----------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.86%
Banc One Corp. 103,000 5,594,185
- -----------------------------------------------------------
Wachovia Corp. 4,600 373,175
- -----------------------------------------------------------
5,967,360
- -----------------------------------------------------------
BANKS (MONEY CENTER) - 5.00%
BankAmerica Corp.(b) 166,000 12,118,000
- -----------------------------------------------------------
Chase Manhattan Corp. 92,600 10,139,700
- -----------------------------------------------------------
Citicorp(b) 97,000 12,264,438
- -----------------------------------------------------------
34,522,138
- -----------------------------------------------------------
BROADCASTING (TELEVISION, RADIO &
CABLE) - 0.33%
US West Media Group(a) 78,300 2,260,912
- -----------------------------------------------------------
BUILDING MATERIALS - 0.18%
Masco Corp. 25,000 1,271,875
- -----------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.39%
Cytec Industries Inc.(a) 58,000 2,722,375
- -----------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.30%
Comverse Technology, Inc.(a) 54,000 2,106,000
- -----------------------------------------------------------
COMPUTERS (HARDWARE) - 1.71%
Compaq Computer Corp. 52,000 2,934,750
- -----------------------------------------------------------
Stratus Computer, Inc.(a) 37,000 1,399,063
- -----------------------------------------------------------
Sun Microsystems, Inc.(a) 187,000 7,456,625
- -----------------------------------------------------------
11,790,438
- -----------------------------------------------------------
COMPUTERS (NETWORKING) - 0.31%
Bay Networks, Inc.(a) 84,000 2,147,250
- -----------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.95%
Adaptec, Inc.(a) 50,000 1,856,250
- -----------------------------------------------------------
Quantum Corp.(a)(b) 234,000 4,694,625
- -----------------------------------------------------------
6,550,875
- -----------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 3.27%
America Online, Inc.(a) 13,000 $ 1,159,438
- -----------------------------------------------------------------
American Management Systems, Inc.(a) 41,000 799,500
- -----------------------------------------------------------------
Autodesk, Inc. 10,000 370,000
- -----------------------------------------------------------------
Computer Associates International, Inc. 230,500 12,187,687
- -----------------------------------------------------------------
Network Associates, Inc.(a) 42,168 2,229,622
- -----------------------------------------------------------------
Sybase, Inc.(a) 150,000 1,996,875
- -----------------------------------------------------------------
Unisys Corp.(a) 275,000 3,815,625
- -----------------------------------------------------------------
22,558,747
- -----------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.30%
American Greetings Corp.-Class A 53,000 2,073,625
- -----------------------------------------------------------------
CONSUMER FINANCE - 1.19%
Household International, Inc. 24,500 3,125,281
- -----------------------------------------------------------------
MBNA Corp. 89,000 2,430,812
- -----------------------------------------------------------------
SLM Holding Corp. 19,000 2,643,375
- -----------------------------------------------------------------
8,199,468
- -----------------------------------------------------------------
ELECTRIC COMPANIES - 0.34%
Allegheny Energy, Inc. 37,200 1,209,000
- -----------------------------------------------------------------
Carolina Power & Light Co. 13,700 581,394
- -----------------------------------------------------------------
Wisconsin Energy Corp. 18,700 537,625
- -----------------------------------------------------------------
2,328,019
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.82%
American Power Conversion Corp.(a) 125,000 2,953,124
- -----------------------------------------------------------------
AVX Corp. 9,700 178,844
- -----------------------------------------------------------------
SCI Systems, Inc.(a) 45,000 1,960,313
- -----------------------------------------------------------------
Symbol Technologies, Inc. 14,800 558,700
- -----------------------------------------------------------------
5,650,981
- -----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.12%
Waters Corp.(a) 21,900 823,988
- -----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.67%
Maxim Integrated Products, Inc.(a) 65,000 2,242,500
- -----------------------------------------------------------------
Microchip Technology, Inc.(a) 37,000 1,110,000
- -----------------------------------------------------------------
National Semiconductor Corp.(a) 50,000 1,296,875
- -----------------------------------------------------------------
4,649,375
- -----------------------------------------------------------------
ENTERTAINMENT - 0.54%
Viacom, Inc.-Class B(a) 89,700 3,716,944
- -----------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 4.99%
Ambac Financial Group, Inc. 63,000 2,898,000
- -----------------------------------------------------------------
Fannie Mae 207,000 11,811,937
- -----------------------------------------------------------------
Freddie Mac 254,000 10,652,125
- -----------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
94
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FINANCIAL (DIVERSIFIED) - (CONTINUED)
MBIA, Inc. 57,400 $ 3,835,038
- ---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 89,000 5,262,125
- ---------------------------------------------------------------------
34,459,225
- ---------------------------------------------------------------------
FOODS - 0.19%
Interstate Bakeries Corp. 34,400 1,285,700
- ---------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 0.75%
Bristol-Myers Squibb Co. 55,000 5,204,375
- ---------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.90%
ICN Pharmaceuticals, Inc. 85,060 4,151,991
- ---------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 64,200 2,082,488
- ---------------------------------------------------------------------
6,234,479
- ---------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.67%
Quorum Health Group, Inc.(a) 138,050 3,606,556
- ---------------------------------------------------------------------
Tenet Healthcare Corp.(a)(b) 31,000 1,026,875
- ---------------------------------------------------------------------
4,633,431
- ---------------------------------------------------------------------
HEALTH CARE (LONG-TERM CARE) - 0.46%
Genesis Health Ventures, Inc.(a) 62,500 1,648,438
- ---------------------------------------------------------------------
Health Care and Retirement Corp.(a) 38,400 1,545,600
- ---------------------------------------------------------------------
3,194,038
- ---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 2.12%
MedPartners, Inc.(a) 462,030 10,337,921
- ---------------------------------------------------------------------
PhyCor, Inc.(a) 160,000 4,320,000
- ---------------------------------------------------------------------
14,657,921
- ---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.61%
Allegiance Corp. 26,500 939,094
- ---------------------------------------------------------------------
Baxter International Inc. 91,000 4,589,813
- ---------------------------------------------------------------------
Becton, Dickinson & Co. 42,000 2,100,000
- ---------------------------------------------------------------------
Sybron International Corp.(a) 74,800 3,510,924
- ---------------------------------------------------------------------
11,139,831
- ---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.25%
FPA Medical Management, Inc.(a) 10,500 195,563
- ---------------------------------------------------------------------
Omnicare, Inc. 50,000 1,550,000
- ---------------------------------------------------------------------
1,745,563
- ---------------------------------------------------------------------
HOMEBUILDING - 0.08%
Clayton Homes, Inc. 30,000 540,000
- ---------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.45%
Colgate-Palmolive Co. 42,000 3,087,000
- ---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.42%
Conseco, Inc. 122,000 5,543,375
- ---------------------------------------------------------------------
Equitable Companies, Inc. 21,000 1,044,750
- ---------------------------------------------------------------------
Provident Companies, Inc. 84,000 3,244,500
- ---------------------------------------------------------------------
9,832,625
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INSURANCE (MULTI-LINE) - 5.11%
Ace, Ltd. 68,000 $ 6,562,000
- ----------------------------------------------------------------------
American International Group, Inc.(b) 165,000 17,943,750
- ----------------------------------------------------------------------
CIGNA Corp. 8,400 1,453,725
- ----------------------------------------------------------------------
Hartford Financial Services Group Inc. (The) 67,000 6,268,688
- ----------------------------------------------------------------------
Travelers Group, Inc. 57,000 3,070,875
- ----------------------------------------------------------------------
35,299,038
- ----------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 5.58%
Allstate Corp. 274,100 24,908,838
- ----------------------------------------------------------------------
Chubb Corp. 12,000 907,500
- ----------------------------------------------------------------------
Exel Ltd. 110,000 6,971,250
- ----------------------------------------------------------------------
Progressive Corp. 32,000 3,836,000
- ----------------------------------------------------------------------
Transatlantic Holdings, Inc. 27,050 1,934,075
- ----------------------------------------------------------------------
38,557,663
- ----------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.10%
Merrill Lynch & Co., Inc. 104,000 7,585,500
- ----------------------------------------------------------------------
LODGING (HOTELS) - 2.06%
Carnival Corp.-Class A 150,000 8,306,250
- ----------------------------------------------------------------------
Host Marriott Corp.(a) 34,000 667,250
- ----------------------------------------------------------------------
Promus Hotel Corp.(a) 58,100 2,440,200
- ----------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 52,100 2,777,581
- ----------------------------------------------------------------------
14,191,281
- ----------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.63%
Eaton Corp. 17,800 1,588,650
- ----------------------------------------------------------------------
Hillenbrand Industries, Inc. 22,000 1,126,125
- ----------------------------------------------------------------------
Tyco International Ltd. 36,200 1,631,263
- ----------------------------------------------------------------------
4,346,038
- ----------------------------------------------------------------------
NATURAL GAS - 1.00%
El Paso Natural Gas Co. 71,500 4,754,750
- ----------------------------------------------------------------------
Williams Companies, Inc. (The) 76,000 2,156,500
- ----------------------------------------------------------------------
6,911,250
- ----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.14%
Wallace Computer Services, Inc. 25,400 987,425
- ----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.80%
Baker Hughes, Inc. 26,000 1,134,250
- ----------------------------------------------------------------------
BJ Services Co.(a) 30,000 2,158,125
- ----------------------------------------------------------------------
Cooper Cameron Corp.(a) 20,000 1,220,000
- ----------------------------------------------------------------------
Noble Drilling Corp.(a) 32,000 980,000
- ----------------------------------------------------------------------
5,492,375
- ----------------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.52%
Tosco Corp. 95,280 3,602,775
- ----------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 1.19%
Xerox Corp. 111,000 8,193,188
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
95
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PUBLISHING - 0.04%
Meredith Corp. 7,100 $ 253,381
- --------------------------------------------------------------------
RAILROADS - 0.25%
Kansas City Southern Industries, Inc. 55,000 1,746,250
- --------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 0.30%
Cali Realty Corp. 50,000 2,050,000
- --------------------------------------------------------------------
RESTAURANTS - 0.36%
Cracker Barrel Old Country Store, Inc. 61,800 2,062,575
- --------------------------------------------------------------------
Papa John's International, Inc.(a) 11,700 408,038
- --------------------------------------------------------------------
2,470,613
- --------------------------------------------------------------------
RETAIL (COMPUTER & ELECTRONICS) - 0.43%
CompUSA, Inc.(a) 39,000 1,209,000
- --------------------------------------------------------------------
Ingram Micro, Inc.-Class A(a) 54,000 1,572,750
- --------------------------------------------------------------------
Tech Data Corp.(a)(b) 5,200 202,150
- --------------------------------------------------------------------
2,983,900
- --------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.84%
Kroger Co.(a) 72,500 2,677,969
- --------------------------------------------------------------------
Safeway, Inc.(a) 49,900 3,156,175
- --------------------------------------------------------------------
5,834,144
- --------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.43%
Dayton-Hudson Corp. 44,000 2,970,000
- --------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.50%
Corporate Express, Inc.(a) 270,000 3,476,250
- --------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.86%
Charter One Financial, Inc. 19,950 1,259,344
- --------------------------------------------------------------------
Washington Mutual, Inc. 72,820 4,646,826
- --------------------------------------------------------------------
5,906,170
- --------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.89%
Cendant Corp.(a) 50,465 1,734,738
- --------------------------------------------------------------------
Service Corp. International 170,000 6,279,375
- --------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 108,000 5,035,500
- --------------------------------------------------------------------
13,049,613
- --------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.15%
National Data Corp. 29,000 1,047,625
- --------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.31%
AccuStaff, Inc.(a) 93,000 2,139,000
- --------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.17%
Nextel Communications, Inc.(a) 46,200 1,201,200
- --------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 6.36%
AT&T Corp.(b) 69,700 4,269,125
- --------------------------------------------------------------------
LCI International, Inc.(a) 73,800 2,269,350
- --------------------------------------------------------------------
MCI Communications Corp. 315,000 13,485,937
- --------------------------------------------------------------------
Sprint Corp. 48,100 2,819,862
- --------------------------------------------------------------------
WorldCom, Inc.(a) 698,019 21,115,075
- --------------------------------------------------------------------
43,959,349
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO-1.57%
Philip Morris Companies, Inc.(b) 240,000 $ 10,875,000
- -------------------------------------------------------------------------------
WASTE MANAGEMENT - 0.49%
USA Waste Services, Inc.(a) 86,000 3,375,500
- -------------------------------------------------------------------------------
Total Domestic Common Stocks 454,939,960
- -------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 11.79%
BRAZIL - 0.34%
Uniao de Bancos Brasileiros S.A.-GDR (Banks-
Regional)(a) 73,000 2,349,688
- -------------------------------------------------------------------------------
CANADA - 4.56%
Bank of Montreal (Banks-Money Center) 42,000 1,861,866
- -------------------------------------------------------------------------------
Canadian National Railway Co.-ADR (Railroads) 35,000 1,653,750
- -------------------------------------------------------------------------------
Philip Services Corp.-ADR (Waste Management)(a) 113,000 1,624,375
- -------------------------------------------------------------------------------
Royal Bank of Canada (Banks-Major Regional) 498,200 26,355,915
- -------------------------------------------------------------------------------
31,495,906
- -------------------------------------------------------------------------------
DENMARK-0.27%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 13,000 1,859,338
- -------------------------------------------------------------------------------
FINLAND - 0.73%
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 72,000 5,040,000
- -------------------------------------------------------------------------------
ITALY - 1.11%
Credito Italiano S.p.A. (Banks-Major Regional) 1,200,000 3,711,928
- -------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 185,000 2,193,332
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 280,083 1,791,645
- -------------------------------------------------------------------------------
7,696,905
- -------------------------------------------------------------------------------
NETHERLANDS - 0.29%
Akzo Nobel N.V. (Chemicals-Diversified) 11,500 1,982,788
- -------------------------------------------------------------------------------
PHILIPPINES - 0.01%
Metro Pacific Corp. (Manufacturing-Diversified) 1,145,130 31,668
- -------------------------------------------------------------------------------
PORTUGAL - 0.07%
Portugal Telecom S.A. (Telephone) 10,700 496,485
- -------------------------------------------------------------------------------
SPAIN - 0.14%
Endesa S.A. (Electric Companies) 21,400 379,961
- -------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 19,900 568,198
- -------------------------------------------------------------------------------
948,159
- -------------------------------------------------------------------------------
SWEDEN - 1.27%
Nordbanken Holding AB (Banks-Major Regional) 665,000 3,760,564
- -------------------------------------------------------------------------------
Sparbanken Sverige A.B.-Class A (Banks-Major
Regional) 189,150 4,300,000
- -------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 20,000 746,250
- -------------------------------------------------------------------------------
8,806,814
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
96
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SWITZERLAND - 0.59%
Novartis A.G. (Health Care-Diversified) 2,520 $ 4,086,486
- ------------------------------------------------------------------------------
UNITED KINGDOM - 2.41%
Danka Business Systems PLC-ADR (Office Equipment &
Supplies) 64,700 1,031,156
- ------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time-Products) 250,000 1,083,951
- ------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 142,900 2,269,470
- ------------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceutical)(b) 237,100 12,195,831
- ------------------------------------------------------------------------------
Standard Chartered PLC (Banks-Major Regional) 9,666 103,190
- ------------------------------------------------------------------------------
16,683,598
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other
Equity Interests 81,477,835
- ------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.38%
HEALTH CARE (MANAGED CARE) - 0.14%
Medpartners Inc. - $1.44 Conv. Pfd. 43,000 946,000
- ------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.08%
Conseco Inc.-$4.278 Conv. PRIDES 3,600 561,600
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.16%
WorldCom, Inc.-$2.68 Conv. Pfd. 10,400 1,092,000
- ------------------------------------------------------------------------------
Total Convertible Preferred Stocks 2,599,600
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES - 0.94%
U.S. TREASURY BILLS(c) - 0.94%
5.31%, 01/08/98 6,500,000 6,497,985
- ------------------------------------------------------------------------------
Total Investments, excluding repurchase agreements 545,515,380
- ------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 24.67%(d)
SBC Warburg, Inc.
6.55%, 01/02/98(e) 68,385,924 68,385,924
- ------------------------------------------------------------------------------
Smith Barney, Inc.
6.75%, 01/02/98(f) 102,063,243 102,063,243
- ------------------------------------------------------------------------------
Total Repurchase Agreements 170,449,167
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.64% 715,964,547
==============================================================================
LIABILITIES LESS OTHER ASSETS - (3.64%) (25,123,054)
==============================================================================
NET ASSETS - 100.00% $690,841,493
==============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See Note 7.
(c) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$500,181,944. Collateralized by $601,835,000 U.S. Government obligations,
0% to 10.75% due 05/21/98 to 08/15/23 with an aggregate market value at
12/31/97 of $510,077,411.
(f) Joint repurchase agreement entered into 12/31/97 with a maturing value of
$400,150,000. Collateralized by $395,097,000 U.S. Government obligations,
0% to 13.875% due 01/07/98 to 12/15/43 with an aggregate market value at
12/31/97 of $408,000,323.
Investment Abbreviations:
ADR - American Depositary Receipt
GDR - Global Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
PRIDES - Preferred Redemption Increase Dividend Equity Security
See Notes to Financial Statements.
AIM V.I. VALUE FUND
97
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1997
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements at market
value (cost $444,423,441) $545,515,380
- ----------------------------------------------------------------------
Repurchase agreements (cost $170,449,167) 170,449,167
- ----------------------------------------------------------------------
Cash 21,147
- ----------------------------------------------------------------------
Foreign currencies, at market value (cost $401,576) 395,713
- ----------------------------------------------------------------------
Receivables for:
Investments sold 3,513,484
- ----------------------------------------------------------------------
Capital stock sold 896,072
- ----------------------------------------------------------------------
Dividends and interest 645,292
- ----------------------------------------------------------------------
Options written 15,614
- ----------------------------------------------------------------------
Investment for deferred compensation plan 19,336
- ----------------------------------------------------------------------
Organizational costs, net 964
- ----------------------------------------------------------------------
Other assets 21,828
- ----------------------------------------------------------------------
Total assets 721,493,997
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 29,455,924
- ----------------------------------------------------------------------
Capital stock reacquired 2,277
- ----------------------------------------------------------------------
Options written 719,781
- ----------------------------------------------------------------------
Deferred compensation 19,336
- ----------------------------------------------------------------------
Accrued advisory fees 354,260
- ----------------------------------------------------------------------
Accrued directors' fees 2,624
- ----------------------------------------------------------------------
Accrued administrative service fees 4,212
- ----------------------------------------------------------------------
Accrued operating expenses 94,090
- ----------------------------------------------------------------------
Total liabilities 30,652,504
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $690,841,493
======================================================================
CAPITAL SHARES, $.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 33,161,794
======================================================================
Net asset value, offering and redemption price per share $20.83
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31 , 1997
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $195,995 foreign withholding tax) $ 6,123,798
- --------------------------------------------------------------------------
Interest 3,138,907
- --------------------------------------------------------------------------
Total investment income 9,262,705
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,303,799
- --------------------------------------------------------------------------
Administrative service fees 53,632
- --------------------------------------------------------------------------
Custodian fees 174,624
- --------------------------------------------------------------------------
Directors' fees and expenses 10,946
- --------------------------------------------------------------------------
Organizational costs 2,892
- --------------------------------------------------------------------------
Other 141,677
- --------------------------------------------------------------------------
Total expenses 3,687,570
- --------------------------------------------------------------------------
Less: Expenses paid indirectly (3,824)
- --------------------------------------------------------------------------
Net expenses 3,683,746
- --------------------------------------------------------------------------
Net investment income 5,578,959
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN ON INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 46,384,362
- --------------------------------------------------------------------------
Foreign currencies 10,509
- --------------------------------------------------------------------------
Option contracts 1,476,233
- --------------------------------------------------------------------------
47,871,104
- --------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 51,082,762
- --------------------------------------------------------------------------
Foreign currencies 33,204
- --------------------------------------------------------------------------
Option contracts 370,110
- --------------------------------------------------------------------------
51,486,076
- --------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
option contracts 99,357,180
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $104,936,139
==========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
98
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1997 and 1996
<TABLE>
<CAPTION>
1997 1996
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 5,578,959 $ 6,092,474
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 47,871,104 19,315,881
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and option
contracts 51,486,076 19,921,129
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 104,936,139 45,329,484
- ------------------------------------------------------------------------------
Distributions to shareholders from net investment
income (6,026,082) (1,864,217)
- ------------------------------------------------------------------------------
Distributions to shareholders from realized
capital gains (18,500,854) (18,073,097)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 240,697,144 87,131,189
- ------------------------------------------------------------------------------
Net increase in net assets 321,106,347 112,523,359
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 369,735,146 257,211,787
- ------------------------------------------------------------------------------
End of year $690,841,493 $369,735,146
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $536,384,006 $295,686,862
- ------------------------------------------------------------------------------
Undistributed net investment income 5,579,627 6,016,241
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 47,575,497 18,215,756
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 101,302,363 49,816,287
- ------------------------------------------------------------------------------
$690,841,493 $369,735,146
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1997
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of nine portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Value Fund (the "Fund"). The Fund's investment objective is to
achieve long-term growth of capital by investing primarily in equity securities
judged by AIM to be undervalued relative to the current or projected earnings
of the companies issuing the securities or relative to current market values of
assets owned by the companies issuing the securities or relative to the equity
market generally. Income is a secondary objective. Currently, shares of the
Fund are sold only to insurance company separate accounts to fund the benefits
of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date, or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations are either not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at
AIM V.I. VALUE FUND
99
<PAGE>
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date. On December 31, 1997,
undistributed net investment income was increased and undistributed net
realized gains reduced by $10,509 in order to comply with the requirements
of the American Institute of Certified Public Accountants Statement of
Position 93-2. Net assets of the Fund were unaffected by the
reclassifications discussed above.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Organizational Costs - Organizational costs for the Fund of $14,461 are
being amortized over five years.
E. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contract may not correlate with changes in the securities being hedged.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
H. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "market-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to
AIM V.I. VALUE FUND
100
<PAGE>
reimburse certain administrative costs incurred in providing accounting
services to the Fund. During the year ended December 31, 1997, AIM was
reimbursed $53,632 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1997, the Fund incurred legal fees of
$5,309 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
AIM has directed certain portfolios trades to brokers who paid a portion of
the Fund's expenses related to pricing services used by the Fund which reduced
the Fund's expenses by $2,218 during the year ended December 31, 1997. The
Fund also received reductions in custodian fees of $1,606 under an expense
offset arrangement. The effect of the above arrangements resulted in a
reduction of the Fund's total expenses of $3,824 during the year ended
December 31, 1997.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the year ended December 31, 1997 was
$715,432,710 and $593,497,504, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of December 31, 1997 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $109,556,705
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (10,333,119)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 99,223,586
===========================================================================
</TABLE>
Cost of investments for tax purposes is $446,291,794.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1997
and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 12,245,239 $244,753,656 5,143,694 $86,219,671
- -----------------------------------------------------------------------------
Issued as reinvestment of
distributions 1,188,320 24,526,936 1,179,025 19,937,315
- -----------------------------------------------------------------------------
Reacquired (1,424,104) (28,583,448) (1,140,219) (19,025,797)
- -----------------------------------------------------------------------------
12,009,455 $240,697,144 5,182,500 $87,131,189
=============================================================================
</TABLE>
NOTE 7 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1997
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of year 3,487 $1,119,905
Written 7,780 3,228,715
Closed (1,470) (675,031)
Exercised (3,000) (1,220,728)
Expired (4,695) (1,511,273)
------ ----------
End of year 2,102 $ 941,588
====== ==========
</TABLE>
Open call options written at December 31, 1997 were as follows:
<TABLE>
<CAPTION>
UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM DECEMBER 31, 1997 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
----- -------- ------ --------- -------- ----------------- --------------
<S> <C> <C> <C> <C> <C> <C>
AT&T Corp. Apr.98 60 200 $119,898 $103,750 $ 16,148
AT&T Corp. Apr.98 65 100 36,761 31,250 5,511
American International
Group, Inc. Feb.98 100 250 161,495 262,500 (101,005)
BankAmerica Corp. Apr.98 80 150 84,397 45,000 39,397
Citicorp Apr.98 135 250 255,836 168,750 87,087
Philip Morris Companies,
Inc. Jan.98 45 250 39,874 27,344 12,530
Quantum Corp. Feb.98 27.5 428 137,811 16,050 121,761
SmithKline Beecham PLC Jan.98 50 200 60,648 44,375 16,273
Tech Data Corp. Jan.98 45 24 4,978 450 4,528
Tenet Healthcare Corp. Feb.98 35 250 39,890 20,312 19,577
----- -------- -------- ---------
2,102 $941,588 $719,781 $ 221,807
===== ======== ======== =========
</TABLE>
AIM V.I. VALUE FUND
101
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the two-year period ended December 31, 1997, the
eleven months ended December 31, 1995, the year ended January 31, 1995, and the
period May 5, 1993 (date operations commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
---------------------------------- ------------------
1997 1996 1995 1995 1994
-------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 17.48 $ 16.11 $ 11.83 $ 12.17 $ 10.00
- ------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.30 0.11 0.10 0.02
- ------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 4.05 2.09 4.18 (0.35) 2.17
- ------------------------------------------------------------------------------------
Total from investment
operations 4.13 2.39 4.29 (0.25) 2.19
- ------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.19) (0.10) (0.01) (0.09) (0.02)
- ------------------------------------------------------------------------------------
Distributions from
realized capital gains (0.59) (0.92) -- -- --
- ------------------------------------------------------------------------------------
Total distributions (0.78) (1.02) (0.01) (0.09) (0.02)
- ------------------------------------------------------------------------------------
Net asset value, end of
period $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
====================================================================================
Total return(a) 23.69% 15.02% 36.25% (2.03)% 21.94%
====================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $690,841 $369,735 $257,212 $109,257 $38,255
====================================================================================
Ratio of expenses to
average net assets 0.70%(b)(c) 0.73% 0.75%(d) 0.82% 1.00%(d)(e)
====================================================================================
Ratio of net investment
income to average net
assets 1.05%(b) 2.00% 1.11%(d) 1.17% 0.51%(d)(e)
====================================================================================
Portfolio turnover rate 127% 129% 145% 143% 87%
====================================================================================
Average brokerage
commission rate paid(f) $ 0.0487 $ 0.0429 N/A N/A N/A
====================================================================================
</TABLE>
(a) Total returns for periods less than one year are not annualized.
(b) Ratios are based on average net assets of $529,874,605.
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been the
same.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Annualized ratios of
expenses and net investment income to average net assets prior to fee
waivers and/or expense reimbursements were 1.35% and 0.16%, respectively.
(f) The average commission rate paid is the total brokerage commissions paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold, which is required to be
disclosed for fiscal years beginning September 1, 1995 and thereafter.
AIM V.I. VALUE FUND
102
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1997, the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the two years in the period then ended,
the eleven month period ended December 31, 1995, the year ended January 31,
1995, and the period May 5, 1993 (commencement of operations) through January
31, 1994. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included confirmation of securities
owned as of December 31, 1997, by correspondence with the custodian and
brokers. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Value Fund, as of December 31, 1997, the results of its operations for
the year then ended, the changes in its net assets for each of the two years
in the period then ended and the financial highlights for each of the two
years in the period then ended, the eleven month period ended December 31,
1995, the year ended January 31, 1995 and the period May 5, 1993 (commencement
of operations) through January 31, 1994 in conformity with generally accepted
accounting principles.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 1998
AIM V.I. VALUE FUND
103
<PAGE>
<TABLE>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; John J. Arthur
Formerly Director, President and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Treasurer 11 Greenway Plaza
COMSAT Corporation Suite 100
Carol F. Relihan Houston, TX 77046
Owen Daly II Senior Vice President and
Director Secretary TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc.
Gary T. Crum State Street Bank & Trust Company
Jack Fields Senior Vice President 225 Franklin Street
Chief Executive Officer Boston, MA 02110
Texana Global Inc.; Dana R. Sutton
Formerly, Member of the Vice President and COUNSEL TO THE FUNDS
U.S. House of Representatives Assistant Treasurer
Freedman, Levy, Kroll &
Carl Frischling Robert G. Alley Simonds
Partner Vice President 1050 Conn. Avenue, N.W.
Kramer, Levin, Naftalis & Frankel Washington, D.C. 20036
Stuart W. Coco
Robert H. Graham Vice President COUNSEL TO THE DIRECTORS
President and Chief Executive Officer
A I M Management Group Inc. Melville B. Cox Kramer, Levin, Naftalis & Frankel
Vice President 919 Third Avenue
John F. Kroeger New York, NY 10022
Formerly, Consultant Karen Dunn Kelley
Wendell & Stockel Associates, Inc. Vice President DISTRIBUTOR
Lewis F. Pennock Jonathan C. Schoolar A I M Distributors, Inc.
Attorney Vice President 11 Greenway Plaza
Suite 100
Ian W. Robinson P. Michelle Grace Houston, TX 77046
Consultant; Formerly, Executive Assistant Secretary
Vice President and Chief INDEPENDENT AUDITORS
Financial Officer Bell Nancy L. Martin
Atlantic Management Services, Inc. Assistant Secretary Tait, Weller & Baker
8 Penn Center Plaza
Louis S. Sklar Ofelia M. Mayo Suite 800
Executive Vice President Assistant Secretary Philadelphia, PA 19103
Hines Interests
Limited Partnership Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
104
