<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
AIM Variable Insurance Funds, Inc.
AIM V.I. Aggressive Growth Fund........................................... 1
AIM V.I. Balanced Fund.................................................... 10
AIM V.I. Capital Appreciation Fund........................................ 17
AIM V.I. Capital Development Fund......................................... 30
AIM V.I. Diversified Income Fund.......................................... 39
AIM V.I. Global Utilities Fund............................................ 51
AIM V.I. Government Securities Fund....................................... 62
AIM V.I. Growth Fund...................................................... 70
AIM V.I. Growth and Income Fund........................................... 81
AIM V.I. High Yield Fund.................................................. 93
AIM V.I. International Equity Fund........................................ 101
AIM V.I. Money Market Fund................................................ 111
AIM V.I. Value Fund....................................................... 117
Directors and Officers of the Funds....................................... 128
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND DEBUTS IN DIFFICULT MARKET
ENVIRONMENT FOR SMALL-CAP STOCKS
A roundtable discussion with the Fund management team for AIM V.I. Aggressive Growth Fund
for the two-month period ended June 30, 1998.
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE STOCK MARKET WAS QUITE very largest companies--the so-called "mega
VOLATILE DURING THE REPORTING caps"--were the undisputed market
PERIOD. HOW DID THIS NEW FUND kings. With the Asian crisis looming in ---------------------------------------
PERFORM IN SUCH CONDITIONS? the background, investors were attracted
A. The Fund, which commenced sales on to the stocks of large, well-known com- The Fund targets
May 1, 1998, debuted just prior to the panies with more predictable earnings.
beginning of a difficult market environ- Interestingly, while smaller-company the stocks of small companies
ment for small-cap stocks. This was stocks, like those targeted by the Fund,
reflected in the Fund's -3.00% total return typically reported strong earnings that are
for the period ended June 30, 1998. throughout the first half of the year, many
However, the Russell 2000 index, a large companies saw earnings disap- expected to experience
benchmark from which most funds with pointments. Still, the perceived safety
small-cap orientations are measured, and liquidity of larger-company stocks rapid earnings growth.
produced a total return of -5.19% for the apparently proved more attractive to
same two-month period. Please keep in investors than the solid profits of some ---------------------------------------
mind, two months is a very short period smaller companies.
for measuring performance of the Fund.
Q. WHAT CRITERIA DO YOU USE IN
Q. WHAT WERE SOME OF THE MAJOR SELECTING STOCKS FOR THE PORTFOLIO?
THEMES IN THE STOCK MARKET A. In general, the Fund targets the stocks concerns over Asia. As a result, they sig-
DURING THIS PERIOD? of small companies that are expected to nificantly underperformed large-cap
A. When the Fund commenced sales, the experience rapid earnings growth. Small stocks during the first half of 1998.
stock market was in the midst of a strong companies are generally defined as Despite this setback in the early stages
rally that began during the first quarter those with less than $1 billion in market of the Fund's inception, it is important
of 1998. By early May, the Dow Jones capitalization. We endeavor to construct to realize that a two-month period is not
Industrial Average (DJIA), an unmanaged a diversified portfolio with a significant a reasonable indicator of a Fund's overall
composite of the performance of 30 number of holdings spread across a merit. We believe that we are invested in
large-company stocks, had climbed to wide variety of industry sectors. It is solid companies with strong long-term
record highs, reaching the 9200 mark for also important to note that our stock- growth potential. While investors have
the first time. However, the rally lost selection process is not based on overall targeted the larger, more liquid names
some of its momentum when concerns resur- market forecasts, but instead is more since the Fund's inception, we believe
faced about the ongoing economic prob- concerned with the individual strength of that the smaller, faster growing companies
lems in Asia. As a result, the DJIA ended each company. in the Fund's portfolio should perform
the reporting period slightly below its well over the long-term.
record level. Q. OVERALL, HOW DID SMALL CAP
Throughout the period, large-cap STOCKS FARE SINCE THE FUND'S
stocks, particularly the equities of the INITIAL OPENING IN MAY?
A. Through the months of May and June,
small-cap stocks were hurt by renewed
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND 1
<PAGE>
<TABLE>
<S> <C>
PORTFOLIO COMPOSITION
As of 6/30/98, based on total net assets
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
1. Saville Systems Ireland 1. Computers (Software & Services) 4.05%
PLC-ADR (Ireland) 0.52% 2. Retail (Specialty) 2.93%
2. CDW Computer Centers, Inc. 0.52 3. Services (Data Processing) 2.52%
3. CSG Systems International, Inc. 0.49 4. Health Care (Specialized Services) 1.92%
4. American Disposal Services, Inc. 0.49 5. Services (Computer Systems) 1.56%
5. Henry Schein, Inc. 0.48 6. Office Equipment & Supplies 1.33%
6. SFX Entertainment, Inc. 0.48 7. Electronics (Semiconductors) 1.26%
7. Heftel Broadcasting Corp. 0.47 8. Waste Management 1.26%
8. Helen of Troy Ltd. 0.46 9. Electrical Equipment 1.16%
9. Flextronics International Ltd. 0.45 10. Retail (Specialty-Apparel) 1.10%
10. Sanmina Corp. 0.45
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.
Q. WHAT IS YOUR OUTLOOK FOR tic about small-cap stocks. The valuations
THE FUTURE? of small-cap stocks relative to large-cap
A. In the U.S., the economic conditions stocks remain compelling. And while
are favorable for stocks. If inflation profits for the largest companies
remains low, the Federal Reserve Board appear to be gravitating toward the single-
(the Fed), which has left monetary policy digit level, profits remain robust for
unchanged for more than a year, will be smaller companies.
less likely to raise interest rates. However, We believe that if these trends con-
Fed Chairman Alan Greenspan, speaking tinue, it could make small-cap stocks
to Congress in July, warned that the tight increasingly more attractive and vault
labor market could eventually accelerate them into a position of market leadership.
inflation. That could cause the Fed to Such a development would be highly
tighten monetary policy and adversely favorable for the Fund.
affect stocks.
Despite the current market preference
for large-cap equities, we remain optimis-
</TABLE>
2 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 35.52%
AEROSPACE/DEFENSE - 0.53%
AAR Corp. 200 $ 5,913
- --------------------------------------------------------------------
Aviation Sales Co.(a) 100 3,962
- --------------------------------------------------------------------
9,875
- --------------------------------------------------------------------
AIR FREIGHT - 0.18%
Eagle USA Airfreight, Inc.(a) 100 3,468
- --------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.47%
Heftel Broadcasting Corp.(a) 200 8,950
- --------------------------------------------------------------------
BUILDING MATERIALS - 0.20%
Group Maintenance America Corp.(a) 100 1,800
- --------------------------------------------------------------------
Pameco Corp.(a) 100 2,000
- --------------------------------------------------------------------
3,800
- --------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.63%
Brightpoint, Inc.(a) 400 5,800
- --------------------------------------------------------------------
Comverse Technology, Inc.(a) 100 5,187
- --------------------------------------------------------------------
Glenayre Technologies, Inc.(a) 100 1,075
- --------------------------------------------------------------------
12,062
- --------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.24%
IDX Systems Corp.(a) 100 4,606
- --------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.38%
Broadcom Corp.(a) 100 7,362
- --------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 4.05%
Applied Voice Technology, Inc.(a) 200 4,600
- --------------------------------------------------------------------
Citrix Systems, Inc.(a) 100 6,837
- --------------------------------------------------------------------
Concord EFS, Inc.(a) 300 7,838
- --------------------------------------------------------------------
EarthLink Network, Inc.(a) 100 7,675
- --------------------------------------------------------------------
Engineering Animation, Inc.(a) 100 6,100
- --------------------------------------------------------------------
HNC Software Inc.(a) 100 4,081
- --------------------------------------------------------------------
Jack Henry & Associates 100 3,438
- --------------------------------------------------------------------
Legato Systems, Inc.(a) 200 7,800
- --------------------------------------------------------------------
Medical Manager Corp.(a) 100 2,763
- --------------------------------------------------------------------
Mobius Management Systems, Inc.(a) 100 1,500
- --------------------------------------------------------------------
PC Connection, Inc.(a) 100 1,525
- --------------------------------------------------------------------
Peerless Systems Corp.(a) 300 6,225
- --------------------------------------------------------------------
Rational Software Corp.(a) 200 3,050
- --------------------------------------------------------------------
ScanSource, Inc.(a) 100 1,925
- --------------------------------------------------------------------
Technisource, Inc.(a) 100 1,100
- --------------------------------------------------------------------
Veritas Software Corp.(a) 150 6,206
- --------------------------------------------------------------------
Visio Corp.(a) 100 4,775
- --------------------------------------------------------------------
77,438
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.68%
Action Performance Companies, Inc.(a) 200 $ 6,437
- -------------------------------------------------------------------
Blyth Industries, Inc.(a) 200 6,650
- -------------------------------------------------------------------
13,087
- -------------------------------------------------------------------
CONSUMER FINANCE - 0.37%
AmeriCredit Corp.(a) 100 3,568
- -------------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 100 3,600
- -------------------------------------------------------------------
7,168
- -------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.16%
Sanmina Corp.(a) 200 8,675
- -------------------------------------------------------------------
Symbol Technologies, Inc. 100 3,775
- -------------------------------------------------------------------
Uniphase Corp.(a) 100 6,278
- -------------------------------------------------------------------
Watsco, Inc. 100 3,518
- -------------------------------------------------------------------
22,246
- -------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.31%
Waters Corp.(a) 100 5,894
- -------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.26%
Applied Micro Circuits Corp.(a) 100 2,587
- -------------------------------------------------------------------
Artisan Components, Inc.(a) 200 2,700
- -------------------------------------------------------------------
Flextronics International Ltd.(a) 200 8,700
- -------------------------------------------------------------------
Microchip Technology, Inc.(a) 100 2,613
- -------------------------------------------------------------------
Transwitch Corp.(a) 100 1,375
- -------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 200 6,175
- -------------------------------------------------------------------
24,150
- -------------------------------------------------------------------
ENTERTAINMENT - 0.48%
SFX Entertainment, Inc. - Class A(a) 200 9,175
- -------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTORS) - 0.23%
Photronics, Inc.(a) 200 4,413
- -------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.12%
NCO Group, Inc.(a) 100 2,200
- -------------------------------------------------------------------
FOODS - 0.25%
Ralcorp Holdings, Inc.(a) 100 1,888
- -------------------------------------------------------------------
United Natural Foods, Inc.(a) 100 2,850
- -------------------------------------------------------------------
4,738
- -------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.19%
Medicis Pharmaceutical Corp.(a) 100 3,650
- -------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.93%
Health Management Associates, Inc. - Class A(a) 200 6,688
- -------------------------------------------------------------------
Quorum Health Group, Inc.(a) 200 5,300
- -------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 100 5,837
- -------------------------------------------------------------------
17,825
- -------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
3
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (LONG TERM CARE) - 0.48%
Assisted Living Concepts, Inc.(a) 300 $ 5,175
- ---------------------------------------------------------------------
Health Care and Retirement Corp.(a) 100 3,944
- ---------------------------------------------------------------------
9,119
- ---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.27%
Concentra Managed Care, Inc.(a) 200 5,200
- ---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.61%
Henry Schein, Inc.(a) 200 9,225
- ---------------------------------------------------------------------
Sybron International Corp.(a) 100 2,525
- ---------------------------------------------------------------------
11,750
- ---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.92%
Advance Paradigm, Inc.(a) 100 3,675
- ---------------------------------------------------------------------
Boron, LePore & Associates, Inc.(a) 200 7,600
- ---------------------------------------------------------------------
Hooper Holmes, Inc. 100 2,100
- ---------------------------------------------------------------------
Ocular Sciences, Inc.(a) 100 3,250
- ---------------------------------------------------------------------
Omnicare, Inc. 200 7,625
- ---------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 300 6,281
- ---------------------------------------------------------------------
Superior Consultant Holdings Corp.(a) 100 4,313
- ---------------------------------------------------------------------
Veterinary Centers of America, Inc.(a) 100 1,881
- ---------------------------------------------------------------------
36,725
- ---------------------------------------------------------------------
HOMEBUILDING - 0.38%
American Homestar Corp.(a) 300 7,181
- ---------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCE - 0.06%
International Comfort Products Corp. (Canada)(a) 100 1,213
- ---------------------------------------------------------------------
HOUSEWARES - 0.83%
Helen of Troy Ltd.(a) 400 8,800
- ---------------------------------------------------------------------
Windmere-Durable Holdings Inc.(a) 200 7,163
- ---------------------------------------------------------------------
15,963
- ---------------------------------------------------------------------
INSURANCE (LIFE & HEALTH) - 0.16%
Penn Treaty American Corp.(a) 100 3,150
- ---------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.32%
CMAC Investment Corp. 100 6,150
- ---------------------------------------------------------------------
LODGING - HOTELS - 0.42%
Royal Caribbean Cruises Ltd. 100 7,950
- ---------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.18%
Applied Power, Inc. - Class A 100 3,438
- ---------------------------------------------------------------------
MANUFACTURING - SPECIALIZED - 0.32%
Coflexip S.A. - ADR (France) 100 6,113
- ---------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 1.33%
Daisytek International Corp.(a) 300 7,631
- ---------------------------------------------------------------------
Herman Miller, Inc. 200 4,863
- ---------------------------------------------------------------------
Mail-Well, Inc.(a) 300 6,506
- ---------------------------------------------------------------------
United Stationers, Inc.(a) 100 6,475
- ---------------------------------------------------------------------
25,475
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT) - 0.74%
Cal Dive International, Inc.(a) 100 $ 2,756
- ------------------------------------------------------------
EVI Weatherford, Inc.(a) 100 3,713
- ------------------------------------------------------------
National-Oilwell, Inc.(a) 100 2,681
- ------------------------------------------------------------
Veritas DGC, Inc.(a) 100 4,994
- ------------------------------------------------------------
14,144
- ------------------------------------------------------------
PERSONAL CARE - 0.60%
Rexall Sundown, Inc.(a) 200 7,050
- ------------------------------------------------------------
Twinlab Corp.(a) 100 4,369
- ------------------------------------------------------------
11,419
- ------------------------------------------------------------
RESTAURANTS - 0.21%
Showbiz Pizza Time, Inc.(a) 100 4,031
- ------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.52%
CDW Computer Centers, Inc.(a) 200 10,000
- ------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.59%
Ames Department Stores, Inc.(a) 200 5,262
- ------------------------------------------------------------
Dollar Tree Stores, Inc.(a) 150 6,094
- ------------------------------------------------------------
11,356
- ------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.22%
Fred Meyer, Inc.(a) 100 4,250
- ------------------------------------------------------------
RETAIL (SPECIALTY) - 2.93%
Finish Line, Inc. (The) - Class A(a) 200 5,625
- ------------------------------------------------------------
Footstar, Inc.(a) 100 4,800
- ------------------------------------------------------------
Inacom Corp.(a) 200 6,350
- ------------------------------------------------------------
Just for Feet, Inc.(a) 200 5,700
- ------------------------------------------------------------
Linens 'N Things, Inc.(a) 200 6,112
- ------------------------------------------------------------
Michaels Stores, Inc.(a) 200 7,056
- ------------------------------------------------------------
Party City Corp.(a) 100 2,937
- ------------------------------------------------------------
Pier 1 Imports, Inc. 100 2,388
- ------------------------------------------------------------
Renters Choice, Inc.(a) 300 8,512
- ------------------------------------------------------------
Sunglass Hut International, Inc.(a) 200 2,213
- ------------------------------------------------------------
Trans World Entertainment Corp.(a) 100 4,313
- ------------------------------------------------------------
56,006
- ------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 1.10%
Abercrombie & Fitch Co. - Class A(a) 138 6,072
- ------------------------------------------------------------
Buckle, Inc. (The)(a) 50 1,475
- ------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 150 4,950
- ------------------------------------------------------------
Pacific Sunwear of California(a) 150 5,250
- ------------------------------------------------------------
Wet Seal, Inc. - Class A(a) 100 3,200
- ------------------------------------------------------------
20,947
- ------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.17%
Bay View Capital Corp. 100 3,175
- ------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
4
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING) - 0.45%
Market Facts, Inc.(a) 100 $ 2,175
- -----------------------------------------------------------------
Metris Companies Inc. 100 6,375
- -----------------------------------------------------------------
8,550
- -----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.71%
Cerner Corp.(a) 200 5,662
- -----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 300 7,988
- -----------------------------------------------------------------
13,650
- -----------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.56%
Analysts International Corp. 200 5,675
- -----------------------------------------------------------------
Computer Task Group, Inc. 200 6,700
- -----------------------------------------------------------------
Insight Enterprises, Inc.(a) 200 8,000
- -----------------------------------------------------------------
InterVoice, Inc.(a) 100 1,775
- -----------------------------------------------------------------
SunGard Data Systems Inc.(a) 200 7,675
- -----------------------------------------------------------------
29,825
- -----------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.52%
Affiliated Computer Services, Inc.(a) 200 7,700
- -----------------------------------------------------------------
Billing Information Concepts Corp.(a) 300 4,650
- -----------------------------------------------------------------
Computer Horizons Corp.(a) 100 3,706
- -----------------------------------------------------------------
CSG Systems International, Inc.(a) 200 9,375
- -----------------------------------------------------------------
Envoy Corp.(a) 100 4,738
- -----------------------------------------------------------------
Hyperion Software Corp.(a) 200 5,700
- -----------------------------------------------------------------
National Computer Systems, Inc. 100 2,400
- -----------------------------------------------------------------
Saville Systems Ireland PLC-ADR (Ireland)(a) 200 10,025
- -----------------------------------------------------------------
48,294
- -----------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.39%
Robert Half International, Inc.(a) 100 5,588
- -----------------------------------------------------------------
Vincam Group, Inc. (The)(a) 100 1,962
- -----------------------------------------------------------------
7,550
- -----------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.22%
Cornell Corrections, Inc.(a) 200 4,200
- -----------------------------------------------------------------
TEXTILES (APPAREL) - 0.31%
Quicksilver, Inc.(a) 100 1,993
- -----------------------------------------------------------------
St. John Knits, Inc. 100 3,863
- -----------------------------------------------------------------
5,856
- -----------------------------------------------------------------
TEXTILES (HOME FURNISHINGS) - 0.68%
Mohawk Industries, Inc.(a) 200 6,338
- -----------------------------------------------------------------
WestPoint Stevens, Inc.(a) 200 6,600
- -----------------------------------------------------------------
12,938
- -----------------------------------------------------------------
TRUCKS & PARTS - 0.40%
Wabash National Corp. 300 7,725
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
WASTE MANAGEMENT - 1.26%
Allied Waste Industries, Inc.(a) 200 $ 4,800
- -----------------------------------------------------------------------------
American Disposal Services, Inc.(a) 200 9,375
- -----------------------------------------------------------------------------
Eastern Environmental Services, Inc.(a) 100 3,400
- -----------------------------------------------------------------------------
KTI, Inc.(a) 300 6,488
- -----------------------------------------------------------------------------
24,063
- -----------------------------------------------------------------------------
Total Common Stocks (Cost $661,235) 679,513
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY BILLS(b) - 29.46%
5.00%, 09/24/1998 (Cost $563,440) $570,000(c) 563,553
- -----------------------------------------------------------------------------
Total Investments, excluding repurchase agreements
(Cost $1,224,675) 1,243,066
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS(d) - 35.73%
Dean Witter Reynolds, Inc., 6.10% 07/01/98(e) 400,000 400,000
- -----------------------------------------------------------------------------
SBC Capital Markets, Inc., 5.85% 07/01/98(f) 283,282 283,282
- -----------------------------------------------------------------------------
Total Repurchase Agreements (Cost $683,282) 683,282
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.71% 1,926,348
- -----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.71)% (13,576)
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $1,912,772
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover
margin requirements for open future contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
(f) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0% due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
Investment Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
5
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at market
value (cost $1,224,675) $ 1,243,066
- ---------------------------------------------------------------------
Repurchase agreements (cost $683,282) 683,282
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 2,964
- ---------------------------------------------------------------------
Investments sold 4,569
- ---------------------------------------------------------------------
Dividends and interest 116
- ---------------------------------------------------------------------
Variation margin 4,700
- ---------------------------------------------------------------------
Reimbursement from advisor 14,345
- ---------------------------------------------------------------------
Total assets 1,953,042
- ---------------------------------------------------------------------
LIABILITIES:
Payables for investments purchased 26,229
- ---------------------------------------------------------------------
Accrued advisory fees 948
- ---------------------------------------------------------------------
Accrued directors' fees 1,383
- ---------------------------------------------------------------------
Accrued administrative services fees 7,600
- ---------------------------------------------------------------------
Accrued operating expenses 4,110
- ---------------------------------------------------------------------
Total liabilities 40,270
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $ 1,912,772
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 197,246
=====================================================================
Net asset value, offering and redemption price per share $9.70
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 7,485
- --------------------------------------------------------------------------
Dividends 24
- --------------------------------------------------------------------------
Total investment income 7,509
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,609
- --------------------------------------------------------------------------
Administrative services fees 7,600
- --------------------------------------------------------------------------
Custodian fees 3,719
- --------------------------------------------------------------------------
Directors' fees and expenses 1,383
- --------------------------------------------------------------------------
Legal fees 1,333
- --------------------------------------------------------------------------
Other 1,056
- --------------------------------------------------------------------------
Total expenses 16,700
- --------------------------------------------------------------------------
Less: Fees waived and reimbursed by advisor (14,345)
- --------------------------------------------------------------------------
Expenses paid indirectly (51)
- --------------------------------------------------------------------------
Net expenses 2,304
- --------------------------------------------------------------------------
Net investment income 5,205
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (235)
- --------------------------------------------------------------------------
Futures contracts (41,290)
- --------------------------------------------------------------------------
(41,525)
- --------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 18,391
- --------------------------------------------------------------------------
Futures contracts 13,425
- --------------------------------------------------------------------------
31,816
- --------------------------------------------------------------------------
Net gain (loss) from investment securities and futures contracts (9,709)
- --------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(4,504)
==========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
6
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 5,205
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (41,525)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 31,816
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (4,504)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,917,276
- ------------------------------------------------------------------------------
Net increase in net assets 1,912,772
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $1,912,272
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,917,276
- ------------------------------------------------------------------------------
Undistributed net investment income 5,205
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (41,525)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 31,816
- ------------------------------------------------------------------------------
$1,912,772
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Aggressive Growth Fund (the "Fund"). The Fund's investment
objective is to achieve long-term growth of capital. The Fund commenced
operations on May 1, 1998. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If no mean is
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New
York Stock Exchange which
AIM V.I. AGGRESSIVE GROWTH FUND 7
<PAGE>
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
G. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.80% of
the first $150 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $150 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
reimbursed expenses of $14,345.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $51 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $51 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
AIM V.I. AGGRESSIVE GROWTH FUND
8
<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 a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $694,990 and $33,535, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 44,147
- -----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (25,756)
- -----------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 18,391
=======================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 197,931 $1,923,755
- --------------------------------
Reacquired (685) (6,479)
- --------------------------------
197,246 $1,917,276
================================
</TABLE>
NOTE 7- FUTURES CONTRACTS
On June 30, 1998, $42,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACTS COMMITMENT APPRECIATION
CONTRACT --------- ---------------- ------------
<S> <C> <C> <C>
Russell 2000 Index 4 September 98/Buy $13,425
=========================================================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C>
Net asset value, beginning of period $ 10.00
- ----------------------------------------------------------------- -------
Income from investment operations:
Net investment income 0.03
- ----------------------------------------------------------------- -------
Net gains (losses) on securities (both realized and unrealized) (0.33)
- ----------------------------------------------------------------- -------
Total from investment operations (0.30)
- ----------------------------------------------------------------- -------
Net asset value, end of period $ 9.70
================================================================= =======
Total return(a) (3.00)%
================================================================= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 1,913
================================================================= =======
Ratio of expenses to average net assets(b) 1.17%(c)
================================================================= =======
Ratio of net investment income to average net assets(d) 2.59%(c)
================================================================= =======
Portfolio turnover rate 8%
================================================================= =======
Average brokerage commission rate paid(e) $0.0408
================================================================= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
8.30% (annualized).
(c) Ratios are annualized and based on average net assets of $1,203,280.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (4.54)% (annualized).
(e) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold.
AIM V.I. AGGRESSIVE GROWTH FUND
9
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
AIM V.I. BALANCED FUND
WILL SEEK TOTAL RETURN THROUGH
DIVERSIFIED PORTFOLIO
A roundtable discussion with the Fund management team for AIM V.I. Balanced Fund
for the two-month period ended June 30, 1998.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE FUND COMMENCED OPERA- the 60%/40% balance in the Fund's
TIONS ON MAY 1, 1998. HOW DID portfolio. Because of diversification
THE FUND PERFORM? requirements and the current level of net ---------------------------------------
A. For the two months the Fund has assets in this new Fund, the Fund's
been in operation, it has produced cumu- portfolio holds largely debt instruments at The Fund
lative total return of 1.50%. It is important this time. At the close of the reporting
to keep in mind that it is a relatively period, actual holdings in the Fund were will use AIM's
new Fund and that two months is not 91% fixed income and 9% cash equiva-
a sufficient amount of time to evaluate a lents. Our equity exposure will be limited relatively aggressive, earnings-driven
Fund's performance. to futures until net assets grow. In the
coming months, the Fund's assets will growth-oriented approach
Q. HOW DO YOU MANAGE THE AIM hopefully increase in size and allow us to
V.I. BALANCED FUND PORTFOLIO? attain the equity/fixed-income balance we to selecting equity securities.
A. AIM V.I. Balanced Fund has a target strive for.
asset allocation of 60% equities and --------------------------------------
40% fixed-income securities. The equity Q. WILL YOU EVER CHANGE THE ASSET
side of the portfolio seeks capital growth; ALLOCATION IN RESPONSE TO CHANG-
the fixed-income side seeks income and ING MARKETS? Q. WILL THE FUND TARGET SMALL- OR
tries to moderate the potential volatility A. Typically, we will not adjust the pro- LARGE-COMPANY STOCKS?
of equities. portion of stocks and bonds in the portfolio A. The equity side of the Fund will
The targeted 60%/40% stock-to-bond as predictions about the market change. invest in all market capitalizations. A
allocation is based on classic studies, The portfolio will be rebalanced regularly shareholder will not be tied to large-
published during the 1950s, by Harry to stay within the 60/40 target range. The capitalization or small-capitalization
Markowitz of the University of Chicago. Fund is not an asset-allocation fund or a stocks, which often perform differently
His studies showed that historically, for vehicle for market timing. from each other. The Fund will have the
portfolios including both stocks and In general, the Fund will use AIM's ability to move into that equity market
bonds, this 60/40 mix is squarely within relatively aggressive, earnings-driven, sector that is doing best at any one
the range of portfolio composition that, growth-oriented approach to selecting time, and the Fund could typically be
over the long term, can be expected to equity securities; it will use AIM's rela- expected to have holdings in large,
produce an optimal risk/return tradeoff. tively conservative approach to fixed- medium-sized, and small companies,
However, as this is a relatively new income investing, stressing thorough though the proportions would change
fund, we are still working toward attaining research on securities and investment- over time.
objective-oriented portfolio construction.
</TABLE>
10 AIM V.I. BALANCED FUND
<PAGE>
<TABLE>
<S> <C>
Q. WILL YOUR BOND HOLDINGS ALSO were in Asia, especially the seemingly
BE SO DIVERSIFIED? intractable economic slump in Japan.
A. The Fund's bond holdings will be a Concern was increasing about the contrac-
blend of government securities and high- tion of Asian economies becoming a signifi-
quality corporate bonds. They will typi- cant drag on economic activity worldwide.
cally be intermediate in maturity so the Markets lost much of their upward momen-
value of these bonds will not fluctuate tum late in the reporting period.
excessively as interest rates change. As we
said, we will manage the bond side of the Q. AND WHAT DO YOU FORESEE FOR
portfolio to help moderate the naturally THE FUND?
higher volatility of the equity side. A. Our emphasis on the equity side will be
Another strategy we will use is invest- on growth, and on the fixed-income side, it
ments in convertible securities, especially will be on steady income with lower volatil-
convertibles issued by smaller companies. ity. Once net assets grow, we also will
These securities can provide some in- begin to take advantage of our ability to
come and allow the Fund to participate in move about among the market capitaliza-
the potential growth of a small firm with tion sectors as corporate earnings and
less volatility than a small-company stock stock valuations warrant.
might provide.
Q. WHAT IS YOUR MARKET OUTLOOK?
A. Domestically, inflation seems likely to ---------------------------------------
remain contained as global competition
and lower energy costs offset the inflation- We will manage
ary potential of tight labor markets. The
Federal Reserve Board has left rates un- the bond side of the portfolio
changed for more than a year, and the flat
yield curve, in which yields on 30-year to help moderate
Treasuries are only slightly higher than
yields on much shorter-term issues, the naturally higher volatility
means investors do not anticipate a surge
in inflation. This is an excellent environ- of the equity side.
ment for fixed-income securities.
In equities, earnings growth has ---------------------------------------
slowed, but earnings disappointments
have tended to be company specific and
not widespread. The worst storm clouds
looming at the end of the reporting period
</TABLE>
AIM V.I. BALANCED FUND 11
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS - 4.18%
TELEPHONE - 4.18%
SBC Communications, Inc., Deb., 7.375%, 07/15/43 $ 70,000 $ 74,157
- -------------------------------------------------------------------------------
Total Corporate Bonds (Cost $74,025) 74,157
- -------------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 30.85%
Fannie Mae, Notes, 6.18%, 03/15/01 300,000 303,690
- -------------------------------------------------------------------------------
Private Export Funding, Sec. Deb., 8.35%, 01/31/01 230,000 244,283
- -------------------------------------------------------------------------------
Total U.S. Government Agency Securities (Cost $547,569) 547,973
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 58.61%
Bills, 5.00%, 09/24/98(a) 440,000 435,023
- -------------------------------------------------------------------------------
Notes, 5.75%, 04/30/03 600,000 605,934
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $1,039,906) 1,040,957
- -------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 9.64%(b)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(c)
(Cost $171,279) 171,279 171,279
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 103.28% 1,834,366
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (3.28)% (58,201)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $1,776,165
===============================================================================
</TABLE>
(a) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See note 7.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000. U.S. Government obligations,
0% to 9.375%, due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
Deb. - Debentures
Sec. - Secured
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
12
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,832,779) $ 1,834,366
- ---------------------------------------------------------------------
Receivables for:
Reimbursement from advisor 13,306
- ---------------------------------------------------------------------
Capital stock sold 3,196
- ---------------------------------------------------------------------
Dividends and interest 21,737
- ---------------------------------------------------------------------
Total assets 1,872,605
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 76,406
- ---------------------------------------------------------------------
Variation margin 6,375
- ---------------------------------------------------------------------
Accrued advisory fees 888
- ---------------------------------------------------------------------
Accrued directors' fees 1,383
- ---------------------------------------------------------------------
Accrued administrative services fees 7,600
- ---------------------------------------------------------------------
Accrued operating expenses 3,788
- ---------------------------------------------------------------------
Total liabilities 96,440
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $ 1,776,165
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 174,947
=====================================================================
Net asset value, offering and redemption price per share $10.15
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $10,788
- ----------------------------------------------------------------------------
Total investment income 10,788
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,528
- ----------------------------------------------------------------------------
Administrative services fees 7,600
- ----------------------------------------------------------------------------
Custodian fees 2,831
- ----------------------------------------------------------------------------
Directors' fees and expenses 1,383
- ----------------------------------------------------------------------------
Legal fees 1,333
- ----------------------------------------------------------------------------
Other 1,050
- ----------------------------------------------------------------------------
Total expenses 15,725
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (20)
- ----------------------------------------------------------------------------
Fees waived and reimbursed by advisor (13,306)
- ----------------------------------------------------------------------------
Net expenses 2,399
- ----------------------------------------------------------------------------
Net investment income 8,389
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES AND
FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (37)
- ----------------------------------------------------------------------------
Futures contracts 3
- ----------------------------------------------------------------------------
(34)
- ----------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 1,587
- ----------------------------------------------------------------------------
Futures contracts 17,950
- ----------------------------------------------------------------------------
19,537
- ----------------------------------------------------------------------------
Net gain from investment securities and futures contracts 19,503
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $27,892
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
13
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 8,389
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (34)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 19,537
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations 27,892
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,748,273
- ------------------------------------------------------------------------------
Net increase in net assets 1,776,165
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $1,776,165
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,748,273
- ------------------------------------------------------------------------------
Undistributed net investment income 8,389
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (34)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 19,537
- ------------------------------------------------------------------------------
$1,776,165
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Balanced Fund (the "Fund"). The Fund's investment objective is
to achieve as high a total return to investors as possible, consistent with
preservation of capital. The Fund commenced operations on May 1, 1998.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors. Short-term
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities
is substantially completed each day at various times prior to the close of
the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of
such times. Foreign currency exchange rates are also generally determined
prior to the close of the New York Stock Exchange. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the New
York Stock Exchange which
14 AIM V.I. BALANCED FUND
<PAGE>
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Bond Premiums - It is the policy of the Fund not to amortize market
premiums on bonds for financial reporting purposes.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
H. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $150 million of the Fund's average daily net assets, plus 0.50% of
the Fund's average daily net assets in excess of $150 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
voluntarily reimbursed expenses of $13,306.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $20 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $20 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
AIM V.I. BALANCED FUND
15
<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 a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased during the period May 1, 1998 (date operations commenced)
through June 30, 1998 was $1,226,610.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $1,587
- --------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities --
- --------------------------------------------------------------------
Net unrealized appreciation of investment securities $1,587
====================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 182,647 $1,825,825
- --------------------------------
Reacquired (7,700) (77,552)
- --------------------------------
174,947 $1,748,273
================================
</TABLE>
NOTE 7 - OPEN FUTURES CONTRACTS
On June 30, 1998, $36,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NUMBER OF UNREALIZED
CONTRACTS MONTH/COMMITMENT APPRECIATION
--------- ---------------- ------------
<S> <C> <C> <C>
S&P 500 Index 3 Sep 98/Buy $17,950
======================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C>
Net asset value, beginning of period $10.00
- -------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.05
- -------------------------------------------------------- ------
Net gains on securities (both realized and unrealized) 0.10
- -------------------------------------------------------- ------
Total from investment operations 0.15
- -------------------------------------------------------- ------
Net asset value, end of period $10.15
======================================================== ======
Total return(a) 1.50%
======================================================== ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $1,776
======================================================== ======
Ratio of expenses to average net assets(b) 1.19%(c)
======================================================== ======
Ratio of net investment income to average net assets(d) 4.12%(c)
======================================================== ======
Portfolio turnover rate 0%
======================================================== ======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
7.72% (annualized).
(c) Ratios are annualized and based on average net assets of $1,219,104.
(d) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (2.41)% (annualized).
AIM V.I. BALANCED FUND
16
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND BRINGS SOLID RETURNS
DESPITE MARKET VOLATILITY
A roundtable discussion with the Fund management team for AIM V.I. Capital Appreciation Fund
for the six-month period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW WAS THE FUND'S PERFOR- rates did not change, however, and as a the best performing sector in the S&P 500.
MANCE OVER THE LAST SIX MONTHS? whole, the economy remained strong. Personal computer sales were up 16%
A. The Fund performed well, posting Retail stocks performed extremely well in the U.S. during the first quarter of 1998.
a 12.83% total return for the first and technology stocks finished the second And while the sector did struggle some-
six months of 1998. This was despite quarter with strong numbers. what during the second quarter, a late
the difficult investing environment the rally led by Internet stocks like portfolio
Fund faced, especially during the Q. DID YOU ALTER THE PORTFOLIO AS holding America Online, Inc. resulted in
second half of the reporting period. MARKET CONDITIONS CHANGED? solid returns for the sector by the
The Fund outperformed both the A. We maintained our focus on companies quarter's conclusion.
total return of 8.63% for the Standard with solid earnings history. While The sector can be volatile, though, and
& Poors Mid-Cap 400 Index, and the liquidity-focused markets bid up the stocks we have trimmed our holdings somewhat as a
Lipper Mid-Cap Index of comparable of the very largest companies--the so- result. We also compensate for the sector's
mutual funds which had a total return called "mega-caps"--to extremely high volatility by targeting some technology
of 12.20%. The Fund's long-term valuations, we stayed true to our companies that we believe will show
performance remains excellent, as investment discipline. The Fund invests consistent growth in a variety of market
shown on the following page. in small- and mid-cap stocks. In the short conditions. For example, the Fund owns
run, this has sometimes been a drawback. securities issued by several firms known
Q. WHAT SHAPED MARKET CONDITIONS Nevertheless, we believe there is greater for their expertise in solving the Year
DURING THE REPORTING PERIOD? growth potential in smaller and mid-cap 2000 problem, as demand for companies
A. As the new year unfolded, the companies, especially now, after a two- capable of reprogramming computers to
markets shrugged off the difficulties year bear market in these stocks. recognize this date has grown substantially
that resulted from concerns about We modified the portfolio, but did in recent years.
Asian currency during the previous make drastic changes. We trimmed our
months. A much-anticipated slowdown in holdings of energy stocks, which slumped
the U.S. economy, predicted to result badly because of Asian turmoil and reduced
from the troubles in Asia, never some of our technological stocks in such TOP 10 EQUITY HOLDINGS
materialized. U.S. gross domestic industries as electronics, computers, and As of 6/30/98, based on total net assets
output rose at a 4.8% annual rate computer software. To compensate for this,
during the first quarter of 1998. we increased our holdings in the health- 1. America Online, Inc. 1.24%
Inflation, widely believed to result care sector and financial sectors, as well 2. BMC Software, Inc. 1.14
from such robust economic expansion, as in consumer cyclicals, especially 3. HBO & Co. 1.10
never developed. The Commerce Depart- retailers. 4. Health Management
ment's overall price index rose an Associates, Inc. 1.08
annualized 0.9% during the first Q. YOU SAY TECHNOLOGY IS YOUR 5. Safeway, Inc. 0.92
quarter--its slowest rate in 34 years. LARGEST WEIGHTING. HASN'T THAT SECTOR 6. Service Corp. International 0.91
During the second half of the BEEN VOLATILE? 7. Staples, Inc. 0.91
reporting period, however, Asia's A. This sector is usually volatile, and it 8. HEALTHSOUTH Corp. 0.88
currency and market crises returned was not generally in favor for much of the 9. Household International Inc. 0.83
to dampen stock market performance reporting period, partly because a few 10. USA Waste Services, Inc. 0.83
dramatically. Investors gravitated leading companies reported disappointing
toward the perceived safety and earnings and partly due to complications Please keep in mind that the Fund's portfolio
liquidity of widely traded blue-chip resulting from the situation in Asia. composition is subject to change and there is
stocks. Consequently, mid- and small- But overall, the technology sector is no assurance the Fund will continue to hold
size stocks were hit hard by this shift still doing well. For the first six months any particular security.
of market focus. of 1998, the technology sector finished as
Concerns about inflation and
unemployment also proved stumbling
blocks for the bull market, as investors
worried about a possible raise in
interest rates by the Federal Reserve
Board (the Fed). Interest
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND 17
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Q. AND WHY IS THE RETAIL INDUSTRY Q. YOU ALSO MENTIONED HEALTH CARE. that patient information, for example, can
ATTRACTIVE? ARE THERE PARTICULAR HOLDINGS IN THE move seamlessly among doctors' offices,
A. Consumer cyclicals, including retailers HEALTH-CARE SECTOR THAT PERFORMED hospitals and other providers, and insur-
are doing very well in the current economy. WELL FOR THE FUND? ance companies. HBO typifies the way good
Personal earnings are up, and The Confer- A. Though reduced slightly over the information technology can improve pro-
ence Board reported consumer confidence six-month reporting period, our health- ductivity and efficiency.
at a 29-year high earlier this year. Good care holdings are still quite large: Another positive development in the
times are buoying both discounters like TJX, about 13% of assets. Consolidation and health-care arena has been the FDA's
owner of the T.J. Maxx apparel chain, and cost cutting in the health-care sector gradual streamlining of filing and approval
sellers of popular high-profile brands like have been benefiting profit margins for systems, which has been welcomed by phar-
Tommy Hilfiger. Electronics-oriented stores service providers, and a number of maceutical firms, especially those with new
like Best Buy are boosted by the arrival of HMOs and other care providers were able products or drug delivery systems.
sub-$1,000 personal computers and digital to raise premiums recently for the
video disks, among other new products. The first time in years. Q. WHAT DO YOU FORESEE FOR THE
Fund's retail holdings were among its best Underlying the improved profit FUND IN THE NEXT FEW MONTHS?
performers early in 1998. More than 12.5% picture of many health-care providers A. We are cautious. Asian woes and global
of assets were invested in retail stocks at are systems improvements such as those unrest caused investors to flock toward
the close of the reporting period. provided by HBO & Company. HBO produces more liquid blue-chip stocks at the end of
software that integrates health-care the reporting period. However, values in
information so the mid-cap sector are simply more attrac-
GROWTH OF $10,000 INVESTMENT tive than in the large-cap sector. Earnings
From 5/5/93-6/30/98 AVERAGE ANNUAL TOTAL RETURN of mid-cap and smaller companies are
Lipper As of 6/30/98 growing in the double digits, whereas earn-
Capital 1 Year 18.21% ings growth for the large companies in the
AIM V.I. Capital S&P 500 Appreciation 5 Years 19.66 S&P 500 has been in the low single digits.
Appreciation Fund Stock Index Fund Index Inception (5/5/93) 19.48 You simply get more earnings for your
(In thousands) investment in smaller and mid-cap stocks,
5/5/93 $10,000 $10,000 $10,000 especially in view of the ultra-high price/
7/31/93 10,390 10,254 10,542 earnings ratios of many blue-chip stocks.
10/31/93 11,440 10,778 11,449 Eventually, anxieties over the foreign
1/31/94 12,590 11,169 11,866 economic crises should diminish, and
4/30/94 11,939 10,532 11,100 investors return to the more attractive and
7/31/94 11,379 10,783 10,929 faster growing mid- and small-cap compa-
10/31/94 12,620 11,193 11,547 nies that we keep in the portfolio.
1/31/95 12,097 11,227 11,312
4/30/95 13,623 12,365 12,242 Q. AND FOR THE ECONOMY AND
7/31/95 16,534 13,591 13,937 MARKETS IN GENERAL? WHAT'S YOUR
10/31/95 16,886 14,147 14,175 OUTLOOK THERE?
1/31/96 16,769 15,561 15,086 A. Inflation continues to be low in the
4/30/96 18,727 16,093 16,281 U.S. and other developed countries. If
7/31/96 17,000 15,835 15,114 inflation remains contained, the Fed, which
10/31/96 19,028 17,550 16,491 has left monetary policy unchanged for more
1/31/97 20,395 19,659 17,717 than a year, will be less likely to raise
4/30/97 18,685 20,133 16,568 interest rates. However, the ongoing econo-
7/31/97 23,341 24,081 20,106 mic problems in Asia and Russia remain a
10/31/97 22,637 23,181 20,069 threat to corporate profits and to the
12/31/97 22,179 24,945 20,398 performance of stocks in general.
4/30/98 25,207 28,393 23,221 If consumer spending remains high, the
6/30/98 25,024 29,029 23,416 retail sector should continue its strong
run through 1998. The increasing demand for
Past performance cannot guarantee comparable future results. housing and business needs like computers
could propel stocks ahead this summer as
The performance figures shown represent the AIM V.I. Capital Appreciation Fund and are well. We will continue to invest in mid-
not intended to reflect actual annuity values, and do not reflect charges at the and small-cap companies with promising
separate account level which, if applied, would lower the performance results. The earnings growth potential.
Fund's performance 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 so that Fund shares, when redeemed, may be worth more or less than
their original cost. Source: Towers Data Systems HYPO/REGISTERED TRADEMARK/.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of
unmanaged securities widely regarded by investors to be representative of the stock
market in general. The unmanaged Lipper Capital Appreciation Fund Index represents an
average of the performance of the 30 largest capital appreciation mutual funds.
Results shown are for the period 4/30/93 through 6/30/98. Source: Towers Data
Systems HYPO/REGISTERED TRADEMARK/.
The Standard & Poor's 400 Mid-Cap Index is an unmanaged index comprising common stocks of
approximately 400 mid-capitalization companies.
The unmanaged Lipper Mid-Cap Fund Index represents an average of the performance of middle-
capitalization growth funds.
An investment cannot be made in the indexes listed. Index results include reinvested dividends.
</TABLE>
18 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 90.09%
AEROSPACE/DEFENSE - 0.94%
AAR Corp. 50,000 $ 1,478,125
- ---------------------------------------------------------------------
BE Aerospace, Inc.(a) 20,000 582,500
- ---------------------------------------------------------------------
Gulfstream Aerospace Corp.(a) 40,000 1,860,000
- ---------------------------------------------------------------------
Precision Castparts Corp. 9,300 496,388
- ---------------------------------------------------------------------
Sundstrand Corp. 22,900 1,311,025
- ---------------------------------------------------------------------
5,728,038
- ---------------------------------------------------------------------
AIR FREIGHT - 0.04%
AirNet Systems, Inc.(a) 16,000 258,000
- ---------------------------------------------------------------------
AIRLINES - 0.50%
Continental Airlines, Inc.(a) 40,000 2,435,000
- ---------------------------------------------------------------------
Southwest Airlines Co. 20,000 592,500
- ---------------------------------------------------------------------
3,027,500
- ---------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.04%
Danaher Corp. 5,800 212,787
- ---------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.16%
Summit Bancorp 20,000 950,000
- ---------------------------------------------------------------------
BANKS (REGIONAL) - 1.48%
AmSouth Bancorporation 30,000 1,179,375
- ---------------------------------------------------------------------
Crestar Financial Corp. 20,200 1,102,162
- ---------------------------------------------------------------------
Golden State Bancorp, Inc.(a) 40,000 1,190,000
- ---------------------------------------------------------------------
National Commerce Bancorporation 15,000 628,125
- ---------------------------------------------------------------------
North Fork Bancorporation, Inc. 60,000 1,466,250
- ---------------------------------------------------------------------
Star Banc Corp. 25,000 1,596,875
- ---------------------------------------------------------------------
TCF Financial Corp. 40,000 1,180,000
- ---------------------------------------------------------------------
Zions Bancorp. 11,600 616,250
- ---------------------------------------------------------------------
8,959,037
- ---------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.26%
Coca-Cola Enterprises Inc. 40,000 1,570,000
- ---------------------------------------------------------------------
BIOTECHNOLOGY - 0.39%
Biogen, Inc.(a) 31,000 1,519,000
- ---------------------------------------------------------------------
Curative Health Services, Inc.(a) 29,700 846,500
- ---------------------------------------------------------------------
2,365,500
- ---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.79%
CanWest Global Communications Corp. (Canada) 57,600 925,200
- ---------------------------------------------------------------------
Chancellor Media Corp.(a) 7,272 361,100
- ---------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 16,600 1,811,475
- ---------------------------------------------------------------------
Comcast Corp. - Class A 55,000 2,232,656
- ---------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 28,000 1,356,250
- ---------------------------------------------------------------------
Heftel Broadcasting Corp. 22,100 988,975
- ---------------------------------------------------------------------
Jacor Communications, Inc.(a) 27,500 1,622,500
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - (CONTINUED)
Liberty Media Group(a) 40,000 $ 1,552,500
- ----------------------------------------------------------------------------
10,850,656
- ----------------------------------------------------------------------------
CHEMICALS - 0.35%
IMC Global, Inc. 35,000 1,054,375
- ----------------------------------------------------------------------------
NL Industries, Inc. 4,800 96,000
- ----------------------------------------------------------------------------
Potash Corp. of Saskatchewan Inc. (Canada) 12,500 944,531
- ----------------------------------------------------------------------------
2,094,906
- ----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.31%
ADC Telecommunications, Inc.(a) 74,200 2,710,618
- ----------------------------------------------------------------------------
Andrew Corp.(a) 41,000 740,562
- ----------------------------------------------------------------------------
Aspect Telecommunications Corp.(a) 40,000 1,095,000
- ----------------------------------------------------------------------------
Brightpoint, Inc.(a) 67,200 974,400
- ----------------------------------------------------------------------------
Comverse Technology, Inc.(a) 37,100 1,924,562
- ----------------------------------------------------------------------------
ECI Telecommunications Ltd. (Israel) 19,000 719,625
- ----------------------------------------------------------------------------
General Instrument Corp.(a) 35,000 951,562
- ----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A (Finland) 8,600 635,520
- ----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A - ADR (Finland) 60,400 4,382,775
- ----------------------------------------------------------------------------
REMEC, Inc.(a) 27,500 312,812
- ----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - Class B (Sweden) 33,400 975,824
- ----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 64,600 1,849,175
- ----------------------------------------------------------------------------
Tellabs, Inc.(a) 39,800 2,850,675
- ----------------------------------------------------------------------------
20,123,110
- ----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.63%
Apple Computer, Inc.(a) 40,000 1,147,500
- ----------------------------------------------------------------------------
Comdisco, Inc. 165,200 3,138,800
- ----------------------------------------------------------------------------
Dell Computer Corp.(a) 51,000 4,733,437
- ----------------------------------------------------------------------------
IDX Systems Corp.(a) 19,000 875,187
- ----------------------------------------------------------------------------
9,894,924
- ----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.03%
Ascend Communications, Inc.(a) 100,000 4,956,250
- ----------------------------------------------------------------------------
Cisco Systems, Inc.(a) 19,850 1,827,440
- ----------------------------------------------------------------------------
FORE Systems, Inc.(a) 117,000 3,100,500
- ----------------------------------------------------------------------------
Newbridge Networks Corp. (Canada)(a) 38,500 921,593
- ----------------------------------------------------------------------------
3Com Corp.(a) 50,000 1,534,375
- ----------------------------------------------------------------------------
12,340,158
- ----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.62%
EMC Corp.(a) 111,200 4,983,150
- ----------------------------------------------------------------------------
Lexmark International Group, Inc.(a) 40,200 2,452,200
- ----------------------------------------------------------------------------
Storage Technology Corp.(a) 55,800 2,420,325
- ----------------------------------------------------------------------------
9,855,675
- ----------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
19
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 11.27%
Advanced Fibre Communications, Inc.(a) 30,000 $ 1,201,875
- -------------------------------------------------------------
America Online, Inc. 71,000 7,526,000
- -------------------------------------------------------------
Aspect Development, Inc.(a) 20,000 1,512,500
- -------------------------------------------------------------
BMC Software, Inc.(a) 133,400 6,928,462
- -------------------------------------------------------------
Cadence Design Systems, Inc.(a) 135,900 4,246,875
- -------------------------------------------------------------
CBT Group PLC - ADR (Ireland)(a) 1,800 96,300
- -------------------------------------------------------------
Citrix Systems, Inc.(a) 28,700 1,962,362
- -------------------------------------------------------------
Computer Associates International, Inc. 29,950 1,664,096
- -------------------------------------------------------------
Computer Sciences Corp.(a) 50,800 3,251,200
- -------------------------------------------------------------
Compuware Corp.(a) 93,300 4,769,962
- -------------------------------------------------------------
Concord EFS, Inc.(a) 177,300 4,631,962
- -------------------------------------------------------------
Electronic Arts, Inc.(a) 39,000 2,106,000
- -------------------------------------------------------------
Gemstar International Group Ltd.(a) 25,000 935,937
- -------------------------------------------------------------
HBO & Co. 189,376 6,675,504
- -------------------------------------------------------------
HNC Software Inc.(a) 25,000 1,020,312
- -------------------------------------------------------------
Intuit, Inc.(a) 27,000 1,653,750
- -------------------------------------------------------------
J.D. Edwards & Co.(a) 40,000 1,717,500
- -------------------------------------------------------------
Microsoft Corp.(a) 17,600 1,907,400
- -------------------------------------------------------------
Parametric Technology Co.(a) 117,100 3,176,337
- -------------------------------------------------------------
Platinum Technology(a) 45,800 1,308,162
- -------------------------------------------------------------
Sterling Commerce Inc.(a) 75,055 3,640,167
- -------------------------------------------------------------
Sterling Software, Inc.(a) 63,600 1,880,175
- -------------------------------------------------------------
Symantec Corp.(a) 20,000 522,500
- -------------------------------------------------------------
Synopsys, Inc.(a) 51,000 2,333,250
- -------------------------------------------------------------
Tecnomatix Technologies Ltd. (Israel)(a) 16,900 338,000
- -------------------------------------------------------------
Wind River Systems(a) 40,000 1,435,000
- -------------------------------------------------------------
68,441,588
- -------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.25%
Action Performance Companies, Inc.(a) 16,000 515,000
- -------------------------------------------------------------
Blyth Industries, Inc.(a) 30,400 1,010,800
- -------------------------------------------------------------
1,525,800
- -------------------------------------------------------------
CONSUMER FINANCE - 3.23%
Capital One Financial Corp. 39,100 4,855,731
- -------------------------------------------------------------
Countrywide Credit Industries, Inc. 23,400 1,187,550
- -------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 51,300 1,846,800
- -------------------------------------------------------------
Household International, Inc. 101,400 5,044,650
- -------------------------------------------------------------
IMC Mortgage Co.(a) 52,000 549,250
- -------------------------------------------------------------
MBNA Corp. 78,987 2,606,571
- -------------------------------------------------------------
Providian Financial Corp. 20,000 1,571,250
- -------------------------------------------------------------
SLM Holding Corp. 40,050 1,962,450
- -------------------------------------------------------------
19,624,252
- -------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.75%
Bergen Brunswig Corp. - Class A 37,700 1,748,337
- -------------------------------------------------------------
Cardinal Health, Inc. 48,625 4,558,593
- -------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DISTRIBUTORS (FOOD & HEALTH) - (CONTINUED)
McKesson Corp. 53,200 $ 4,322,500
- --------------------------------------------------------------
10,629,430
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.74%
American Power Conversion Corp.(a) 49,800 1,494,000
- --------------------------------------------------------------
Avid Technology, Inc.(a) 18,700 626,450
- --------------------------------------------------------------
Berg Electronics Corp.(a) 27,200 532,100
- --------------------------------------------------------------
Molex, Inc. 4,300 107,500
- --------------------------------------------------------------
Sanmina Corp.(a) 42,600 1,847,775
- --------------------------------------------------------------
SCI Systems, Inc.(a) 59,400 2,234,925
- --------------------------------------------------------------
Solectron Corp.(a) 49,200 2,069,475
- --------------------------------------------------------------
Symbol Technologies, Inc. 44,250 1,670,437
- --------------------------------------------------------------
10,582,662
- --------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.13%
Arrow Electronics, Inc.(a) 37,300 811,275
- --------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.09%
General Motors Corp. - Class H(a) 12,300 579,637
- --------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.36%
Perkin-Elmer Corp. 16,200 1,007,437
- --------------------------------------------------------------
Waters Corp.(a) 20,000 1,178,750
- --------------------------------------------------------------
2,186,187
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 2.52%
Advanced Micro Devices, Inc.(a) 40,000 682,500
- --------------------------------------------------------------
Altera Corp.(a) 30,900 913,481
- --------------------------------------------------------------
Burr-Brown Corp.(a) 41,550 872,550
- --------------------------------------------------------------
Linear Technology Corp. 40,000 2,412,500
- --------------------------------------------------------------
LSI Logic Corp.(a) 30,600 705,712
- --------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 92,800 2,940,600
- --------------------------------------------------------------
Microchip Technology, Inc.(a) 75,500 1,972,437
- --------------------------------------------------------------
PMC-Sierra, Inc.(a) 39,500 1,851,562
- --------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 56,000 1,729,000
- --------------------------------------------------------------
Xilinx, Inc.(a) 36,300 1,234,200
- --------------------------------------------------------------
15,314,542
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.18%
KLA-Tencor Corp.(a) 40,000 1,107,500
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.58%
FINOVA Group, Inc. 40,000 2,265,000
- --------------------------------------------------------------
MGIC Investment Corp. 53,100 3,030,018
- --------------------------------------------------------------
Newcourt Credit Group, Inc. (Canada) 41,600 2,046,200
- --------------------------------------------------------------
SunAmerica, Inc. 38,800 2,228,575
- --------------------------------------------------------------
9,569,793
- --------------------------------------------------------------
FOODS - 0.25%
Suiza Foods Corp.(a) 25,500 1,522,031
- --------------------------------------------------------------
FOOTWEAR - 0.33%
Adidas Salomon A.G. (Germany) 7,000 1,220,817
- --------------------------------------------------------------
Wolverine World Wide, Inc. 37,900 821,956
- --------------------------------------------------------------
2,042,773
- --------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
20
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.20%
International Game Technology 50,000 $ 1,212,500
- --------------------------------------------------------------------
GOLD & PRECIOUS METALS MINING - 0.17%
Barrick Gold Corp. (Canada) 28,000 537,250
- --------------------------------------------------------------------
Battle Mountain Gold Co. 85,000 504,687
- --------------------------------------------------------------------
1,041,937
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.25%
Alpharma, Inc. 12,750 280,500
- --------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 10,000 320,000
- --------------------------------------------------------------------
Columbia Laboratories, Inc.(a) 20,000 115,000
- --------------------------------------------------------------------
Dura Pharmaceuticals, Inc.(a) 35,000 783,125
- --------------------------------------------------------------------
Elan Corp. PLC-ADR (Ireland)(a) 49,100 3,157,743
- --------------------------------------------------------------------
Forest Laboratories, Inc.(a) 42,400 1,515,800
- --------------------------------------------------------------------
Jones Medical Industries, Inc. 62,500 2,070,312
- --------------------------------------------------------------------
Mylan Laboratories, Inc. 84,000 2,525,250
- --------------------------------------------------------------------
Parexel International Corp.(a) 13,300 483,787
- --------------------------------------------------------------------
R.P. Scherer Corp.(a) 6,100 540,612
- --------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 40,000 1,867,500
- --------------------------------------------------------------------
13,659,629
- --------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 2.30%
Health Management Associates, Inc. - Class A(a) 194,668 6,509,211
- --------------------------------------------------------------------
Quorum Health Group, Inc.(a) 69,500 1,841,750
- --------------------------------------------------------------------
Tenet Healthcare Corp.(a) 52,065 1,627,031
- --------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 68,400 3,992,850
- --------------------------------------------------------------------
13,970,842
- --------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 1.33%
Beverly Enterprises, Inc.(a) 57,200 790,075
- --------------------------------------------------------------------
Health Care and Retirement Corp.(a) 49,900 1,967,931
- --------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 199,500 5,324,156
- --------------------------------------------------------------------
8,082,162
- --------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 1.28%
Concentra Managed Care, Inc.(a) 53,500 1,391,000
- --------------------------------------------------------------------
Express Scripts, Inc. - Class A(a) 21,800 1,757,625
- --------------------------------------------------------------------
First Health Group Corporation(a) 40,000 1,140,000
- --------------------------------------------------------------------
PacifiCare Health Systems, Inc. - Class B(a) 27,500 2,430,312
- --------------------------------------------------------------------
Trigon Healthcare, Inc.(a) 28,500 1,031,343
- --------------------------------------------------------------------
7,750,280
- --------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.82%
Alza Corp.(a) 40,000 1,730,000
- --------------------------------------------------------------------
Covance, Inc.(a) 82,525 1,856,812
- --------------------------------------------------------------------
Lincare Holdings, Inc.(a) 78,400 3,297,700
- --------------------------------------------------------------------
Omnicare, Inc. 130,400 4,971,500
- --------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 15,000 314,062
- --------------------------------------------------------------------
Quintiles Transnational Corp.(a) 35,600 1,751,075
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES) - (CONTINUED)
Total Renal Care Holdings, Inc.(a) 92,333 $ 3,185,488
- ---------------------------------------------------------------
Transition Systems, Inc.(a) 600 6,375
- ---------------------------------------------------------------
17,113,012
- ---------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 3.19%
Allegiance Corp. 40,000 2,050,000
- ---------------------------------------------------------------
Arterial Vascular Engineering, Inc.(a) 37,400 1,337,050
- ---------------------------------------------------------------
Becton, Dickinson & Co. 35,500 2,755,685
- ---------------------------------------------------------------
Biomet, Inc. 50,900 1,682,881
- ---------------------------------------------------------------
Boston Scientific Corp.(a) 25,000 1,790,625
- ---------------------------------------------------------------
Guidant Corp. 47,300 3,373,081
- ---------------------------------------------------------------
Henry Schein, Inc.(a) 34,985 1,613,683
- ---------------------------------------------------------------
Sofamor Danek Group, Inc.(a) 12,000 1,038,750
- ---------------------------------------------------------------
St. Jude Medical, Inc.(a) 32,000 1,178,000
- ---------------------------------------------------------------
Stryker Corp. 14,200 544,925
- ---------------------------------------------------------------
Sybron International Corp.(a) 79,400 2,004,850
- ---------------------------------------------------------------
19,369,530
- ---------------------------------------------------------------
HOMEBUILDING - 0.59%
Clayton Homes, Inc. 117,300 2,228,700
- ---------------------------------------------------------------
Fleetwood Enterprises, Inc. 14,000 560,000
- ---------------------------------------------------------------
Kaufman and Broad Home Corporation 24,600 781,050
- ---------------------------------------------------------------
3,569,750
- ---------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.29%
Leggett & Platt, Inc. 70,000 1,750,000
- ---------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.23%
Fort James Corp. 31,400 1,397,300
- ---------------------------------------------------------------
HOUSEWARES - 0.27%
Central Garden and Pet Co.(a) 10,000 311,250
- ---------------------------------------------------------------
Rubbermaid, Inc. 40,000 1,327,500
- ---------------------------------------------------------------
1,638,750
- ---------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.83%
AFLAC Inc. 50,000 1,515,625
- ---------------------------------------------------------------
Provident Companies, Inc. 60,000 2,070,000
- ---------------------------------------------------------------
ReliaStar Financial Corp. 30,000 1,440,000
- ---------------------------------------------------------------
5,025,625
- ---------------------------------------------------------------
INSURANCE (MULTI-LINE) - 0.18%
Allmerica Financial Corp. 17,000 1,105,000
- ---------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.76%
Executive Risk Inc. 17,900 1,320,125
- ---------------------------------------------------------------
Mercury General Corp. 33,200 2,135,175
- ---------------------------------------------------------------
Progressive Corp. 8,200 1,156,200
- ---------------------------------------------------------------
4,611,500
- ---------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.39%
Edwards (A.G.), Inc. 25,000 1,067,187
- ---------------------------------------------------------------
Paine Webber Group Inc. 30,000 1,286,250
- ---------------------------------------------------------------
2,353,437
- ---------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
21
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.62%
Franklin Resources, Inc. 37,600 $ 2,030,400
- ------------------------------------------------------------
T. Rowe Price Associates, Inc. 46,800 1,757,925
- ------------------------------------------------------------
3,788,325
- ------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.59%
Harley-Davidson, Inc. 74,000 2,867,500
- ------------------------------------------------------------
North Face, Inc. (The)(a) 12,500 300,000
- ------------------------------------------------------------
Speedway Motorsports, Inc.(a) 15,900 406,443
- ------------------------------------------------------------
3,573,943
- ------------------------------------------------------------
LODGING-HOTELS - 0.27%
Promus Hotel Corp.(a) 42,543 1,637,905
- ------------------------------------------------------------
Sunburst Hospitality Corp. (a) 3,700 25,669
- ------------------------------------------------------------
1,663,574
- ------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.74%
AMETEK, Inc. 9,000 263,812
- ------------------------------------------------------------
Crane Co. 11,600 563,325
- ------------------------------------------------------------
Hillenbrand Industries, Inc. 21,500 1,290,000
- ------------------------------------------------------------
Pentair, Inc. 14,500 616,250
- ------------------------------------------------------------
Tyco International Ltd. 27,936 1,759,968
- ------------------------------------------------------------
4,493,355
- ------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.66%
Avery Dennison Corp. 22,000 1,182,500
- ------------------------------------------------------------
Coflexip S.A. (France) 17,600 1,075,800
- ------------------------------------------------------------
US Filter Corp.(a) 63,100 1,770,743
- ------------------------------------------------------------
4,029,043
- ------------------------------------------------------------
METAL FABRICATORS - 0.17%
Kennametal, Inc. 25,000 1,043,750
- ------------------------------------------------------------
NATURAL GAS - 0.61%
Equitable Resources, Inc. 30,100 918,050
- ------------------------------------------------------------
KN Energy, Inc. 51,000 2,763,562
- ------------------------------------------------------------
3,681,612
- ------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.17%
Herman Miller, Inc. 28,000 680,750
- ------------------------------------------------------------
HON INDUSTRIES, Inc. 9,800 333,200
- ------------------------------------------------------------
1,013,950
- ------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.42%
Baker Hughes, Inc. 20,100 694,706
- ------------------------------------------------------------
BJ Services Co.(a) 64,700 1,880,343
- ------------------------------------------------------------
Cooper Cameron Corp.(a) 44,000 2,244,000
- ------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 30,200 653,075
- ------------------------------------------------------------
EVI Weatherford, Inc.(a) 29,100 1,080,337
- ------------------------------------------------------------
Global Industries Ltd.(a) 95,000 1,603,125
- ------------------------------------------------------------
Input/Output, Inc.(a) 58,500 1,042,031
- ------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT) - (CONTINUED)
Marine Drilling Companies, Inc.(a) 62,000 $ 992,000
- --------------------------------------------------------------------
National-Oilwell, Inc.(a) 36,600 981,337
- --------------------------------------------------------------------
Noble Drilling Corp.(a) 35,200 847,000
- --------------------------------------------------------------------
Patterson Energy, Inc.(a) 50,000 489,062
- --------------------------------------------------------------------
Precision Drilling Corp. (Canada)(a) 60,000 1,177,500
- --------------------------------------------------------------------
Pride International, Inc.(a) 73,000 1,236,437
- --------------------------------------------------------------------
R&B Falcon Corporation(a) 36,000 814,500
- --------------------------------------------------------------------
Smith International, Inc.(a) 35,300 1,228,881
- --------------------------------------------------------------------
Varco International, Inc.(a) 100,000 1,981,250
- --------------------------------------------------------------------
Veritas DGC, Inc.(a) 35,800 1,787,762
- --------------------------------------------------------------------
20,733,346
- --------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.89%
Apache Corp. 30,000 945,000
- --------------------------------------------------------------------
Burlington Resources, Inc. 29,100 1,253,118
- --------------------------------------------------------------------
Ocean Energy, Inc.(a) 60,840 1,190,182
- --------------------------------------------------------------------
Santa Fe Energy Resources, Inc.(a) 80,000 860,000
- --------------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 40,000 775,000
- --------------------------------------------------------------------
Stolt Comex Seaway, S.A.-ADR (United Kingdom)(a) 20,000 350,000
- --------------------------------------------------------------------
5,373,300
- --------------------------------------------------------------------
PERSONAL CARE - 0.40%
Rexall Sundown, Inc.(a) 68,400 2,411,100
- --------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.35%
AES Corp.(a) 40,000 2,102,500
- --------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.16%
A.H. Belo Corp. 40,000 975,000
- --------------------------------------------------------------------
RESTAURANTS - 1.02%
Brinker International, Inc.(a) 55,000 1,058,750
- --------------------------------------------------------------------
CKE Restaurants, Inc. 54,490 2,247,712
- --------------------------------------------------------------------
Cracker Barrel Old Country Store, Inc. 29,500 936,625
- --------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 21,000 819,000
- --------------------------------------------------------------------
Starbucks Corp.(a) 20,700 1,106,156
- --------------------------------------------------------------------
6,168,243
- --------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.52%
Lowe's Companies, Inc. 77,200 3,131,425
- --------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.52%
Best Buy Co., Inc.(a) 30,000 1,083,750
- --------------------------------------------------------------------
CDW Computer Centers, Inc.(a) 38,500 1,925,000
- --------------------------------------------------------------------
Circuit City Stores - Circuit City Group 28,000 1,312,500
- --------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 35,400 1,566,450
- --------------------------------------------------------------------
Tandy Corp. 25,000 1,326,562
- --------------------------------------------------------------------
Tech Data Corp.(a) 46,800 2,006,550
- --------------------------------------------------------------------
9,220,812
- --------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
22
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DEPARTMENT STORES) - 0.54%
Kohl's Corp.(a) 36,800 $ 1,909,000
- ---------------------------------------------------------
Proffitt's, Inc.(a) 34,200 1,380,825
- ---------------------------------------------------------
3,289,825
- ---------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.92%
Dollar General Corp. 30,002 1,186,954
- ---------------------------------------------------------
Dollar Tree Stores, Inc.(a) 56,475 2,294,296
- ---------------------------------------------------------
Family Dollar Stores, Inc. 66,000 1,221,000
- ---------------------------------------------------------
Ross Stores, Inc. 20,000 860,000
- ---------------------------------------------------------
5,562,250
- ---------------------------------------------------------
RETAIL (DRUG STORES) - 0.89%
CVS Corp. 37,546 1,461,947
- ---------------------------------------------------------
Rite Aid Corp. 104,560 3,927,535
- ---------------------------------------------------------
5,389,482
- ---------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.64%
Kroger Co.(a) 101,700 4,360,387
- ---------------------------------------------------------
Safeway, Inc.(a) 137,400 5,590,462
- ---------------------------------------------------------
9,950,849
- ---------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.97%
Costco Companies, Inc.(a) 23,400 1,475,662
- ---------------------------------------------------------
Dayton Hudson Corp. 40,400 1,959,400
- ---------------------------------------------------------
Fred Meyer, Inc.(a) 57,820 2,457,350
- ---------------------------------------------------------
5,892,412
- ---------------------------------------------------------
RETAIL (SPECIALTY) - 3.24%
AutoZone, Inc.(a) 55,000 1,756,562
- ---------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 35,500 1,839,343
- ---------------------------------------------------------
Finish Line, Inc. (The) - Class A(a) 19,100 537,187
- ---------------------------------------------------------
General Nutrition Companies, Inc.(a) 26,200 815,475
- ---------------------------------------------------------
Hollywood Entertainment Corp.(a) 67,800 919,537
- ---------------------------------------------------------
Inacom Corp.(a) 20,600 654,050
- ---------------------------------------------------------
Michaels Stores, Inc.(a) 48,500 1,711,140
- ---------------------------------------------------------
Office Depot, Inc.(a) 84,400 2,663,875
- ---------------------------------------------------------
OfficeMax, Inc.(a) 50,000 825,000
- ---------------------------------------------------------
PETsMART, Inc.(a) 119,400 1,194,000
- ---------------------------------------------------------
Staples, Inc.(a) 190,087 5,500,642
- ---------------------------------------------------------
Williams-Sonoma, Inc.(a) 40,000 1,272,500
- ---------------------------------------------------------
19,689,311
- ---------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 1.68%
Abercrombie & Fitch Co. - Class A(a) 30,100 1,324,400
- ---------------------------------------------------------
Gap, Inc. (The) 49,050 3,022,706
- ---------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 83,625 2,759,625
- ---------------------------------------------------------
Stage Stores, Inc.(a) 13,200 597,300
- ---------------------------------------------------------
TJX Companies, Inc. 103,000 2,484,875
- ---------------------------------------------------------
10,188,906
- ---------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SAVINGS & LOAN COMPANIES - 0.44%
Charter One Financial, Inc. 36,000 $1,212,750
- -----------------------------------------------------------------
Dime Bancorp, Inc. 48,000 1,437,000
- -----------------------------------------------------------------
2,649,750
- -----------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 1.35%
Cognizant Corp. 25,000 1,575,000
- -----------------------------------------------------------------
Omnicom Group, Inc. 61,300 3,057,337
- -----------------------------------------------------------------
Outdoor Systems, Inc.(a) 57,000 1,596,000
- -----------------------------------------------------------------
Snyder Communications, Inc.(a) 45,000 1,980,000
- -----------------------------------------------------------------
8,208,337
- -----------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.01%
ChoicePoint, Inc.(a) 12,500 632,812
- -----------------------------------------------------------------
Cintas Corp. 33,000 1,683,000
- -----------------------------------------------------------------
Equity Corp. International(a) 32,800 787,200
- -----------------------------------------------------------------
Service Corp. International 129,000 5,530,875
- -----------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 107,500 2,862,187
- -----------------------------------------------------------------
Viad Corp. 25,000 693,750
- -----------------------------------------------------------------
12,189,824
- -----------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.37%
Cambridge Technology Partners, Inc.(a) 24,200 1,321,925
- -----------------------------------------------------------------
Gartner Group, Inc. - Class A(a) 40,000 1,400,000
- -----------------------------------------------------------------
Shared Medical Systems Corp. 37,000 2,717,188
- -----------------------------------------------------------------
SunGard Data Systems Inc.(a) 75,200 2,885,800
- -----------------------------------------------------------------
8,324,913
- -----------------------------------------------------------------
SERVICES (DATA PROCESSING) - 3.19%
Affiliated Computer Services, Inc.(a) 30,500 1,174,250
- -----------------------------------------------------------------
Billing Concepts Corp.(a) 62,000 961,000
- -----------------------------------------------------------------
Ceridian Corp.(a) 37,700 2,214,875
- -----------------------------------------------------------------
CSG Systems International, Inc.(a) 34,900 1,635,937
- -----------------------------------------------------------------
DST Systems, Inc.(a) 30,300 1,696,800
- -----------------------------------------------------------------
Equifax, Inc. 14,000 508,375
- -----------------------------------------------------------------
Fiserv, Inc.(a) 77,850 3,306,192
- -----------------------------------------------------------------
National Data Corp. 48,000 2,100,000
- -----------------------------------------------------------------
Paychex, Inc. 72,975 2,969,170
- -----------------------------------------------------------------
PMT Services, Inc.(a) 50,500 1,284,593
- -----------------------------------------------------------------
Saville Systems Ireland PLC-ADR (Ireland)(a) 30,000 1,503,750
- -----------------------------------------------------------------
19,354,942
- -----------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.10%
AccuStaff, Inc.(a) 20,000 625,000
- -----------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.15%
Corrections Corp. of America(a) 40,000 940,000
- -----------------------------------------------------------------
SPECIALTY PRINTING - 0.22%
Valassis Communications, Inc.(a) 35,000 1,349,687
- -----------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
23
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS - 0.00%
ITC Deltacom, Inc. 100 $ 4,273
- -----------------------------------------------------------------
TELEPHONE - 0.45%
Century Telephone Enterprises 35,800 1,642,325
- -----------------------------------------------------------------
Cincinnati Bell, Inc. 37,800 1,082,025
- -----------------------------------------------------------------
2,724,350
- -----------------------------------------------------------------
TEXTILES (APPAREL) - 2.02%
Fruit of The Loom, Inc. - Class A(a) 20,000 663,750
- -----------------------------------------------------------------
Jones Apparel Group, Inc.(a) 83,800 3,063,937
- -----------------------------------------------------------------
Liz Claiborne, Inc. 24,100 1,259,225
- -----------------------------------------------------------------
Nautica Enterprises, Inc.(a) 39,000 1,045,687
- -----------------------------------------------------------------
St. John Knits, Inc. 26,700 1,031,287
- -----------------------------------------------------------------
Tommy Hilfiger Corp.(a) 57,100 3,568,750
- -----------------------------------------------------------------
Warnaco Group, Inc. (The) 38,000 1,612,625
- -----------------------------------------------------------------
12,245,261
- -----------------------------------------------------------------
TEXTILES (HOME FURNISHINGS) - 0.10%
Shaw Industries, Inc. 35,000 616,875
- -----------------------------------------------------------------
TRUCKERS - 0.08%
J.B. Hunt Transport Services, Inc. 13,500 480,938
- -----------------------------------------------------------------
WASTE MANAGEMENT - 1.32%
American Disposal Services, Inc.(a) 39,800 1,865,625
- -----------------------------------------------------------------
Republic Services, Inc. 34,300 823,200
- -----------------------------------------------------------------
Thermo Instrument Systems Inc.(a) 13,200 346,500
- -----------------------------------------------------------------
USA Waste Services, Inc.(a) 101,675 5,020,203
- -----------------------------------------------------------------
8,055,528
- -----------------------------------------------------------------
Total Common Stocks (Cost $376,313,593) 546,955,006
- -----------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 0.06%
FINANCIAL (DIVERSIFIED) - 0.06%
MGIC Investment Corp. - $3.12 Conv. Pfd. 3,500 334,687
- -----------------------------------------------------------------
Total Convertible Preferred Stocks
(Cost $234,028) 334,687
- -----------------------------------------------------------------
WARRANTS - 0.03%
BANKS (REGIONAL) - 0.03%
Golden State Bancorp, Litigation Wts.,
expiring 01/01/01(a) (Cost $227,318) 40,000 212,500
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 0.27%
COMPUTERS (PERIPHERALS) - 0.18%
EMC Corp., Conv. Sub. Notes, 3.25%, 03/15/02 $ 550,000 $ 1,130,822
- -----------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.09%
Alza Corp., Conv. LYON, 5.25%, 07/14/14(b) 900,000 528,201
- -----------------------------------------------------------------------------
Total Convertible Corporate Bonds
(Cost $1,300,637) 1,659,023
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 9.63%(c)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(d) 29,346,225 29,346,225
- -----------------------------------------------------------------------------
Dresdner Kleinwort Benson North America LLC, 5.58%,
07/01/98(e) 29,090,936 29,090,936
- -----------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $58,437,161) 58,437,161
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.08% 607,598,377
- -----------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.08%) (481,275)
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $607,117,102
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
(e) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
LYON - Liquid Yield Option Notes
Pfd. - Preferred
Sub. - Subordinated
Wts. - Warrants
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
24
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $436,512,737) $607,598,377
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $2,733) 2,696
- ----------------------------------------------------------------------
Receivables for:
Investments sold 1,437,335
- ----------------------------------------------------------------------
Capital stock sold 623,479
- ----------------------------------------------------------------------
Dividends and interest 150,805
- ----------------------------------------------------------------------
Investment for deferred compensation plan 20,527
- ----------------------------------------------------------------------
Other assets 769
- ----------------------------------------------------------------------
Total assets 609,833,988
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,147,933
- ----------------------------------------------------------------------
Capital stock reacquired 203,776
- ----------------------------------------------------------------------
Deferred compensation plan 20,527
- ----------------------------------------------------------------------
Accrued advisory fees 299,013
- ----------------------------------------------------------------------
Accrued directors' fees 2,484
- ----------------------------------------------------------------------
Accrued administrative services fees 3,506
- ----------------------------------------------------------------------
Accrued operating expenses 39,647
- ----------------------------------------------------------------------
Total liabilities 2,716,886
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $607,117,102
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 24,738,893
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 24.54
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 1,397,812
- -----------------------------------------------------------------------------
Dividends (net of $14,565 foreign withholding tax) 745,863
- -----------------------------------------------------------------------------
Total investment income 2,143,675
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,756,898
- -----------------------------------------------------------------------------
Administrative services fees 21,036
- -----------------------------------------------------------------------------
Custodian fees 62,162
- -----------------------------------------------------------------------------
Directors' fees and expenses 5,394
- -----------------------------------------------------------------------------
Organizational costs 965
- -----------------------------------------------------------------------------
Other 52,858
- -----------------------------------------------------------------------------
Total expenses 1,899,313
- -----------------------------------------------------------------------------
Less: Expenses paid indirectly (750)
- -----------------------------------------------------------------------------
Net expenses 1,898,563
- -----------------------------------------------------------------------------
Net investment income 245,112
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 8,483,731
- -----------------------------------------------------------------------------
Foreign currencies 1,259
- -----------------------------------------------------------------------------
Option contracts (255)
- -----------------------------------------------------------------------------
8,484,735
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 59,303,550
- -----------------------------------------------------------------------------
Foreign currencies (51)
- -----------------------------------------------------------------------------
59,303,499
- -----------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 67,788,234
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $68,033,346
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
25
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 245,112 $ 914,009
- ----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and option contracts 8,484,735 16,155,941
- ----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities 59,303,499 35,953,703
- ----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 68,033,346 53,023,653
- ----------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (536,874)
- ----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (6,902,664)
- ----------------------------------------------------------------------------
Net increase from capital stock transactions 16,303,678 107,132,798
- ----------------------------------------------------------------------------
Net increase in net assets 84,337,024 152,716,913
- ----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 522,780,078 370,063,165
- ----------------------------------------------------------------------------
End of period $607,117,102 $522,780,078
============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $410,712,399 $394,408,721
- ----------------------------------------------------------------------------
Undistributed net investment income 1,121,655 876,543
- ----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 24,197,459 15,712,724
- ----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and futures contracts 171,085,589 111,782,090
- ----------------------------------------------------------------------------
$607,117,102 $522,780,078
============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Appreciation Fund (the "Fund"). The Fund's investment
objective is to seek capital appreciation through investments in common
stocks, with emphasis on medium-sized and smaller emerging growth companies.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
The following is a summary of the significant accounting policies followed by
the Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market quotations are not readily available or are questionable are valued
at fair value as determined in good faith by or under the supervision of
the Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the New York Stock Exchange. The
values of such securities used in computing the net asset value of the
Fund's shares are determined as of such times. Foreign currency exchange
rates are also generally
AIM V.I. CAPITAL APPRECIATION FUND
26
<PAGE>
determined prior to the close of the New York Stock Exchange. Occasionally,
events affecting the values of such securities and such exchange rates may
occur between the times at which they are determined and the close of the New
York Stock Exchange which will not be reflected in the computation of the
Fund's net asset value. If events materially affecting the value of such
securities occur during such period, then these securities will be valued at
their fair value as determined in good faith by or under the supervision of
the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contract is open, changes in the value of the
contract are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contract at the
end of each day's trading. Variation margin payments are made or received
depending upon whether unrealized gains or losses are incurred. When the
contracts are closed, the Fund recognizes a realized gain or loss equal to
the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $21,036 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,723 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $750 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $750 during the six months ended June 30, 1998.
AIM V.I. CAPITAL APPRECIATION FUND
27
<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 director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$185,658,989 and $200,827,179, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $181,424,235
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (10,546,510)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $170,877,725
===========================================================================
</TABLE>
Cost of investments for tax purposes is $436,720,652.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ -------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -------------
<S> <C> <C> <C> <C>
Sold 2,431,492 $ 56,512,750 9,656,144 $202,278,514
- -------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 357,327 7,439,538
- -------------------------------------------------------------------------------
Reacquired (1,723,989) (40,209,072) (5,025,910) (102,585,254)
- -------------------------------------------------------------------------------
707,503 $ 16,303,678 4,987,561 $ 107,132,798
===============================================================================
</TABLE>
NOTE 7 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period -- $ --
- ----------------------------------------
Written 684 196,009
- ----------------------------------------
Closed (326) (88,187)
- ----------------------------------------
Expired (188) (11,648)
- ----------------------------------------
Exercised (170) (96,174)
- ----------------------------------------
End of period -- $ --
========================================
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
28
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58 $ 10.00
- ------------------------ -------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.01 0.03 0.02 0.04 0.05 --
- ------------------------ -------- -------- -------- -------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 2.78 2.58 2.89 4.46 (0.54) 2.59
- ------------------------ -------- -------- -------- -------- ------- -------
Total from investment
operations 2.79 2.61 2.91 4.50 (0.49) 2.59
- ------------------------ -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income -- (0.02) (0.03) -- (0.04) (0.01)
- ------------------------ -------- -------- -------- -------- ------- -------
Dividends from net
realized gains -- (0.27) -- -- -- --
- ------------------------ -------- -------- -------- -------- ------- -------
Total distributions -- (0.29) (0.03) -- (0.04) (0.01)
- ------------------------ -------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 24.54 $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
======================== ======== ======== ======== ======== ======= =======
Total return(a) 12.83% 13.51% 17.58% 37.38% (3.91)% 25.90%
======================== ======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $607,117 $522,642 $370,063 $212,152 $88,177 $35,354
======================== ======== ======== ======== ======== ======= =======
Ratio of expenses to
average net assets 0.67%(b) 0.68% 0.73% 0.75%(c) 0.84% 1.06%(c)
======================== ======== ======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.09%(b) 0.18% 0.18% 0.39%(c) 0.46% 0.07%(c)
======================== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 36% 65% 59% 37% 81% 34%
======================== ======== ======== ======== ======== ======= =======
Average brokerage
commission rate(d) $ 0.0560 $ 0.0577 $ 0.0592 N/A N/A N/A
======================== ======== ======== ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $569,652,555.
(c) Annualized.
(d) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold, which is required
to be disclosed for fiscal years beginning September 1, 1995 and
thereafter.
AIM V.I. CAPITAL APPRECIATION FUND
29
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
NEW FUND CONTENDS WITH CHALLENGING
MARKET FOR SMALL-CAP STOCKS
A roundtable discussion with the Fund management team for AIM V.I. Capital Development Fund
for the two-month period ended June 30, 1998.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE FUND COMMENCED SALES minds, and the DJIA ended the reporting ---------------
ON MAY 1, 1998. HOW DID THE period slightly below its record level.
FUND PERFORM? We remain optimistic
A. The Fund debuted just as the market Q. HOW DID SMALL-CAP STOCKS FARE?
began a difficult turn against small-cap A. As mentioned, the concerns about the about the future of
stocks. As a result, the Fund produced a Asian economy caused investors to favor
- -4.70% total return for the period ended large company stocks. Consequently, mid- the small-cap market.
June 30, 1998. Similarly, the Russell 2000 and small-size stocks, like those targeted
Index, the benchmark for most small-cap by the Fund, were hit hard by this shift of ---------------
funds, produced a return of -5.19% for market focus.
the same two-month period. While both In addition to concerns about Asia,
the Fund and the small-cap arena in gen- May and June saw an increase in the issu-
eral struggled during the reporting period, ance of stock by small-and mid-size companies within that market niche that
it is important to keep in mind that two companies. This resulted in a surplus of are expected to experience rapid earnings
months is a very short period to measure stock at a time of diminishing demand. growth. We also look for growth stocks
the potential of any investment. Overall, This hurt the performance of small-cap that are reasonably priced relative to
we believe that the Fund owns stocks in stocks as well. the underlying value of the company, its
good companies with strong fundamentals Regardless, we remain optimistic about industry, or the overall market. Ulti-
and should produce favorable returns in the future of the small-cap market. The mately, our goal is to create a diversified
the long run. popularity of large-cap stocks has caused portfolio of small company stocks from a
their prices to escalate and we believe wide variety of industries and sectors. This
many large-cap stocks are overvalued. diversification helps reduce the negative
Q. WHAT WERE SOME OF THE MAJOR While the Asian crisis benefited large-cap impact an event like the Asian crisis can
THEMES IN THE STOCK MARKET? stocks in the short-term, we believe the have on the portfolio.
A. The Fund commenced sales in what market cannot survive on their momen-
appeared to be a promising environment. tum alone. Over time, we believe concerns Q. DO YOU PLAN ON ALTERING THE PORT-
The stock market was in the midst of a about Asia's currency woes will dissipate FOLIO BECAUSE OF THE ASIAN CRISIS?
strong rally and early in May, the Dow and investors will return to the faster A. While the fundamental approach to the
Jones Industrial Average (DJIA), an growing and relatively undervalued stocks market has remained the same, we have
unmanaged composite of the performance owned by the Fund. had to re-evaluate our approach to the
of 30 large-company stocks, climbed to a market as a result of events in Asia. Many
record height of 9200. However, shortly Q. WHAT CRITERIA DO YOU USE IN small stocks have declined or under-
after the DJIA's record rise, new concerns SELECTING SMALL-CAP STOCKS FOR performed due to lack of liquidity. If the
about Asia's currency and market crises THE PORTFOLIO? effects of the Asian crisis on the market
returned to dampen stock market perfor- A. The Fund primarily uses fundamental persist, the Fund will most likely target
mance considerably. Investors shifted analysis and secondarily uses economic the more liquid small-cap names and names
their focus away from small- and mid-cap and market judgments when selecting with high consumer confidence in the
stocks and toward the perceived safety and stocks. Small companies are generally market. In addition, it may be in the Fund's
liquidity of large-cap stocks. At the defined as those with less than $1 billion best interest to increase its focus on
close of the reporting period, the in market capitalization, and we target
"Asian Flu" remained in the forefront of
investors'
</TABLE>
30 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
TOP 10 EQUITY HOLDINGS
As of 6/30/98, based on total net assets
TOP TEN HOLDINGS TOP TEN INDUSTRIES
1. SunGard Data Systems Inc. 0.84% 1. Computers (Software & Services) 6.53%
2. Just For Feet, Inc. 0.78 2. Retail (Specialty) 4.30
3. Linen's 'N Things, Inc. 0.67 3. Services (Commercial & Consumer) 1.17
4. Medical Manager Corp. 0.60 4. Financial (Diversified) 1.13
5. Metals USA, Inc. 0.56 5. Health Care (Specialized Services) 1.09
6. BISYS Group, Inc. 0.56 6. Communications Equipment 1.03
7. Nationwide Financial 7. Services (Computer Services) 1.03
Services, Inc. Class A 0.56 8. Health Care
8. Network Associates, Inc. 0.52 (Medical Products & Supplies) 0.95
9. Best Software, Inc. 0.52 9. Office Equipment & Supplies 0.92
10. Lamar Advertising Co. 0.49 10. Services (Advertising/Marketing) 0.87
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.
successful small-cap names that have a the Fund in the long-term.
relatively limited exposure to Asia. Overall, we believe the Fund owns
Nevertheless, relative valuations of stocks with promising growth potential.
small stocks to large stocks are at historic The valuations of small-cap stocks relative
lows, and we expect that as companies to large-cap stocks remain compelling.
report strong earnings, small-cap prices And while profits for the largest companies
will benefit. appear to be gravitating toward the single-digit
level, profits remain robust for smaller
Q. WHAT IS YOUR OUTLOOK FOR companies. Though the Fund did not outperform
THE FUTURE? large-company stocks in the short-term, we
A. Inflation continues to be low in the believe we are invested in fundamentally
U.S. and other developed countries. If strong small-cap stocks that should perform
inflation remains contained, the Federal well in the long-term.
Reserve Board (the Fed) should leave
monetary policy unchanged, as it has for --------------------
over a year now. However, Fed Chairman
Alan Greenspan, speaking to Congress in While the Asian crisis benefited
July, warned that the tight labor market
could eventually accelerate inflation. That large-cap stocks in the short-term,
could cause the Fed to tighten monetary
policy and adversely affect stocks. we believe the market
Despite some early setbacks, we
believe that it is too soon for discouragement cannot survive on
based on these short-term results. Short-term
performance is not a reasonable indicator their momentum alone.
of the value of the investments. Indeed,
market volatility could create some opportunities --------------------
in certain market sectors that may actually benefit
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND 31
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 31.82%
BEVERAGES (NON-ALCOHOLIC) - 0.24%
Triarc Companies, Inc.(a) 200 $ 4,388
- -----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.03%
Aspect Telecommunications Corp.(a) 200 5,475
- -----------------------------------------------------------------
Comverse Technology, Inc.(a) 100 5,187
- -----------------------------------------------------------------
NICE-Systems Ltd. - ADR (Israel)(a) 100 3,750
- -----------------------------------------------------------------
Tekelec(a) 100 4,475
- -----------------------------------------------------------------
18,887
- -----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.53%
Advanced Fibre Communications, Inc.(a) 200 8,013
- -----------------------------------------------------------------
Best Software, Inc.(a) 450 9,505
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 200 6,250
- -----------------------------------------------------------------
Compuware Corp.(a) 100 5,113
- -----------------------------------------------------------------
DAOU Systems, Inc.(a) 200 4,575
- -----------------------------------------------------------------
Electronic Arts, Inc.(a) 100 5,400
- -----------------------------------------------------------------
Evolving Systems, Inc.(a) 100 1,106
- -----------------------------------------------------------------
Harbinger Corp.(a) 200 4,838
- -----------------------------------------------------------------
Learning Company, Inc. (The)(a) 250 7,406
- -----------------------------------------------------------------
Mastech Corp.(a) 300 8,438
- -----------------------------------------------------------------
Medical Manager Corp.(a) 400 11,050
- -----------------------------------------------------------------
Mercury Interactive Corp.(a) 100 4,463
- -----------------------------------------------------------------
Network Associates, Inc.(a) 200 9,575
- -----------------------------------------------------------------
Platinum Software Corp.(a) 200 4,875
- -----------------------------------------------------------------
Platinum Technology, Inc.(a) 300 8,569
- -----------------------------------------------------------------
Sterling Commerce, Inc.(a) 100 4,850
- -----------------------------------------------------------------
Synopsys, Inc.(a) 100 4,575
- -----------------------------------------------------------------
USWeb Corp.(a) 300 7,105
- -----------------------------------------------------------------
Vantive Corp. (The)(a) 200 4,100
- -----------------------------------------------------------------
119,806
- -----------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.36%
Blyth Industries, Inc.(a) 200 6,650
- -----------------------------------------------------------------
CONSUMER FINANCE - 0.17%
Cash American International, Inc. 200 3,050
- -----------------------------------------------------------------
CONTAINERS (METAL & GLASS) - 0.38%
Silgan Holdings, Inc.(a) 250 7,000
- -----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.64%
AmeriSource Health Corp. - Class A(a) 100 6,568
- -----------------------------------------------------------------
Weider Nutrition International, Inc. 300 5,100
- -----------------------------------------------------------------
11,668
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (INSTRUMENTATION) - 0.81%
CellStar Corp.(a) 500 $ 6,469
- ---------------------------------------------------------------------
EFTC Corp.(a) 200 2,600
- ---------------------------------------------------------------------
Quanta Services, Inc.(a) 400 5,875
- ---------------------------------------------------------------------
14,944
- ---------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.49%
Aspec Technology, Inc.(a) 200 1,300
- ---------------------------------------------------------------------
Celecstica Inc.(a) 100 1,875
- ---------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 100 3,169
- ---------------------------------------------------------------------
Microchip Technology, Inc.(a) 100 2,613
- ---------------------------------------------------------------------
8,957
- ---------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.13%
Amresco, Inc. 300 8,738
- ---------------------------------------------------------------------
FirstCity Financial Corp.(a) 200 5,800
- ---------------------------------------------------------------------
SEI Corp. 100 6,200
- ---------------------------------------------------------------------
20,738
- ---------------------------------------------------------------------
FOODS - 0.55%
American Italian Pasta Co. - Class A(a) 150 5,587
- ---------------------------------------------------------------------
Universal Foods Corp. 200 4,438
- ---------------------------------------------------------------------
10,025
- ---------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.39%
Forest Laboratories, Inc.(a) 200 7,150
- ---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.95%
Cyberonics, Inc.(a) 300 3,188
- ---------------------------------------------------------------------
Henry Schein, Inc.(a) 100 4,613
- ---------------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 200 3,300
- ---------------------------------------------------------------------
Steris Corp.(a) 100 6,359
- ---------------------------------------------------------------------
17,460
- ---------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.09%
Ocular Sciences, Inc.(a) 200 6,500
- ---------------------------------------------------------------------
Summit Holding Southeast Inc.(a) 250 7,969
- ---------------------------------------------------------------------
Ventana Medical Systems, Inc.(a) 200 5,600
- ---------------------------------------------------------------------
20,069
- ---------------------------------------------------------------------
HOMEBUILDING - 0.12%
M/I Schottenstein Homes, Inc. 100 2,163
- ---------------------------------------------------------------------
HOUSEWARES - 0.42%
Central Garden and Pet Co.(a) 250 7,780
- ---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.56%
Nationwide Financial Services, Inc. - Class A 200 10,200
- ---------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.66%
Amerin Corp.(a) 150 4,377
- ---------------------------------------------------------------------
Transatlantic Holdings, Inc. 100 7,731
- ---------------------------------------------------------------------
12,108
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
32
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.46%
Affiliated Managers Group, Inc.(a) 100 $ 3,713
- ----------------------------------------------------------------------
Waddell & Reed Financial, Inc. 200 4,788
- ----------------------------------------------------------------------
8,501
- ----------------------------------------------------------------------
INVESTMENTS - 0.14%
Sirrom Capital Corp. 100 2,600
- ----------------------------------------------------------------------
IRON & STEEL - 0.29%
Texas Industries, Inc. 100 5,300
- ----------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.86%
Alpine Group, Inc. (The)(a) 200 4,150
- ----------------------------------------------------------------------
First Years, Inc. (The) 300 5,700
- ----------------------------------------------------------------------
Mettler-Toledo International Inc.(a) 300 6,018
- ----------------------------------------------------------------------
15,868
- ----------------------------------------------------------------------
METAL FABRICATORS - 0.56%
Metals USA, Inc.(a) 600 10,350
- ----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.92%
Daisytek International Corp.(a) 300 7,631
- ----------------------------------------------------------------------
Knoll, Inc.(a) 200 5,900
- ----------------------------------------------------------------------
School Specialty, Inc.(a) 200 3,275
- ----------------------------------------------------------------------
16,806
- ----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.31%
Atwood Oceanics, Inc.(a) 50 1,991
- ----------------------------------------------------------------------
EVI Weatherford, Inc.(a) 100 3,713
- ----------------------------------------------------------------------
5,704
- ----------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.58%
Forcenergy, Inc.(a) 200 3,563
- ----------------------------------------------------------------------
Stolt Comex Seaway, S.A. (United Kingdom)(a) 250 4,844
- ----------------------------------------------------------------------
Stolt Comex Seaway, S.A. - ADR (United Kingdom)(a) 125 2,188
- ----------------------------------------------------------------------
10,595
- ----------------------------------------------------------------------
PERSONAL CARE - 0.64%
Steiner Leisure Ltd.(a) 100 3,025
- ----------------------------------------------------------------------
Twinlab Corp.(a) 200 8,737
- ----------------------------------------------------------------------
11,762
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUST - 0.11%
AMRESCO Capital Trust Inc.(a) 150 1,941
- ----------------------------------------------------------------------
RESTAURANTS - 0.33%
Showbiz Pizza Time, Inc.(a) 150 6,047
- ----------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.55%
Family Dollar Stores, Inc. 300 5,550
- ----------------------------------------------------------------------
K & G Men's Center, Inc.(a) 200 4,525
- ----------------------------------------------------------------------
10,075
- ----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.41%
Wild Oats Markets Inc.(a) 250 7,594
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (SPECIALTY) - 4.30%
Finish Line, Inc. (The)-Class A(a) 200 $ 5,625
- ------------------------------------------------------------
Just for Feet, Inc.(a) 500 14,250
- ------------------------------------------------------------
Linens 'N Things, Inc.(a) 400 12,225
- ------------------------------------------------------------
Michaels Stores, Inc.(a) 200 7,056
- ------------------------------------------------------------
Musicland Stores Corp.(a) 200 2,800
- ------------------------------------------------------------
Nutraceutical International Corp.(a) 250 2,625
- ------------------------------------------------------------
Petco Animal Supplies, Inc.(a) 200 3,987
- ------------------------------------------------------------
PETsMART, Inc.(a) 800 8,000
- ------------------------------------------------------------
Pier 1 Imports, Inc. 200 4,775
- ------------------------------------------------------------
Polo Ralph Lauren Corp.(a) 200 5,600
- ------------------------------------------------------------
Rainbow Rentals Inc.(a) 200 2,125
- ------------------------------------------------------------
West Marine, Inc.(a) 100 1,800
- ------------------------------------------------------------
Zale Corp.(a) 250 7,952
- ------------------------------------------------------------
78,820
- ------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.37%
Stage Stores, Inc.(a) 150 6,788
- ------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.87%
Hagler Bailly, Inc.(a) 200 5,176
- ------------------------------------------------------------
Information Resources, Inc.(a) 100 1,850
- ------------------------------------------------------------
Lamar Advertising Co.(a) 250 8,969
- ------------------------------------------------------------
15,995
- ------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.17%
American Residential Services, Inc.(a) 200 2,250
- ------------------------------------------------------------
Computer Learning Centers, Inc.(a) 250 6,219
- ------------------------------------------------------------
Metzler Group, Inc.(a) 200 7,324
- ------------------------------------------------------------
Pegasus Systems, Inc.(a) 100 2,563
- ------------------------------------------------------------
Primark Corp.(a) 100 3,131
- ------------------------------------------------------------
21,487
- ------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.03%
Gartner Group, Inc. - Class A(a) 100 3,500
- ------------------------------------------------------------
SunGard Data Systems Inc.(a) 400 15,350
- ------------------------------------------------------------
18,850
- ------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.74%
BISYS Group, Inc.(a) 250 10,250
- ------------------------------------------------------------
CCC Information Services Group(a) 200 3,300
- ------------------------------------------------------------
13,550
- ------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.50%
Syntel, Inc.(a) 200 6,250
- ------------------------------------------------------------
Vincam Group, Inc. (The)(a) 150 2,943
- ------------------------------------------------------------
9,193
- ------------------------------------------------------------
TOBACCO - 0.16%
Schweitzer-Mauduit International, Inc. 100 2,900
- ------------------------------------------------------------
Total Common Stocks (Cost $574,967) 583,769
- ------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
33
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY BILLS(b) - 48.13%
4.995%, 09/24/98 (Cost $882,632) $893,000(c) $ 882,900
- ---------------------------------------------------------------------------
Total Investments, excluding repurchase agreement
(Cost $1,457,599) 1,466,669
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENT(d) - 21.63%
Dean Witter Reynolds Inc., 6.10%
07/01/98(e) (Cost $396,900) 396,900 396,900
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.58% 1,863,569
- ---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.58)% (28,947)
- ---------------------------------------------------------------------------
NET ASSETS - 100.00% $1,834,622
===========================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(c) A portion of the principal balance was pledged as collateral to cover
margin requirements for open future contracts. See Note 7.
(d) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreeements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 6/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
34
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at market
value (cost $1,457,599) $ 1,466,669
- ---------------------------------------------------------------------
Repurchase agreements (cost $396,900) 396,900
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 873
- ---------------------------------------------------------------------
Dividends and interest 88
- ---------------------------------------------------------------------
Variation margin 4,700
- ---------------------------------------------------------------------
Reimbursement from advisor 13,411
- ---------------------------------------------------------------------
Total assets 1,882,641
- ---------------------------------------------------------------------
LIABILITIES:
Payable for investments purchased 34,356
- ---------------------------------------------------------------------
Accrued advisory fees 872
- ---------------------------------------------------------------------
Accrued directors' fees 1,383
- ---------------------------------------------------------------------
Accrued administrative services fees 7,600
- ---------------------------------------------------------------------
Accrued operating expenses 3,808
- ---------------------------------------------------------------------
Total liabilities 48,019
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $ 1,834,622
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 192,504
=====================================================================
Net asset value, offering and redemption price per share $9.53
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 8,299
- ---------------------------------------------------------------------------
Dividends 81
- ---------------------------------------------------------------------------
Total investment income 8,380
- ---------------------------------------------------------------------------
EXPENSES:
Advisory fees 1,490
- ---------------------------------------------------------------------------
Administrative services fees 7,600
- ---------------------------------------------------------------------------
Custodian fees 3,145
- ---------------------------------------------------------------------------
Directors' fees and expenses 1,383
- ---------------------------------------------------------------------------
Legal fees 1,333
- ---------------------------------------------------------------------------
Other 1,025
- ---------------------------------------------------------------------------
Total expenses 15,976
- ---------------------------------------------------------------------------
Less: Fees waived and reimbursed by advisor (13,411)
- ---------------------------------------------------------------------------
Expenses paid indirectly (228)
- ---------------------------------------------------------------------------
Net expenses 2,337
- ---------------------------------------------------------------------------
Net investment income 6,043
- ---------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (638)
- ---------------------------------------------------------------------------
Futures contracts (77,685)
- ---------------------------------------------------------------------------
(78,323)
- ---------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 9,070
- ---------------------------------------------------------------------------
Futures contracts 37,425
- ---------------------------------------------------------------------------
46,495
- ---------------------------------------------------------------------------
Net gain (loss) from investment securities and futures contracts (31,828)
- ---------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(25,785)
===========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
35
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 6,043
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities and futures
contracts (78,323)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment securities and futures
contracts 46,495
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (25,785)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,860,407
- ------------------------------------------------------------------------------
Net increase in net assets 1,834,622
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $1,834,622
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,860,407
- ------------------------------------------------------------------------------
Undistributed net investment income 6,043
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment securities
and futures contracts (78,323)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities and futures
contracts 46,495
- ------------------------------------------------------------------------------
$1,834,622
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Capital Development Fund (the "Fund"). The Fund's investment
objective is long-term capital appreciation. The Fund commenced operations on
May 1, 1998. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If no mean is
available, as is the case in some foreign markets, the closing bid will be
used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or, absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued at
the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations either are not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which
AIM V.I. CAPITAL DEVELOPMENT FUND
36
<PAGE>
will not be reflected in the computation of the Fund's net asset value. If
events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. During the
period May 1, 1998 (date operations commenced) through June 30, 1998, AIM
waived advisory fees and reimbursed expenses of $13,411.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $228 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $228 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $592,324 and $16,716, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $30,930
- ----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (21,860)
- ----------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 9,070
======================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 192,522 $1,860,576
- --------------------------------
Reacquired (18) (169)
- --------------------------------
192,504 $1,860,407
================================
</TABLE>
NOTE 7 - FUTURES CONTRACTS
On June 30, 1998, $30,000 principal amount of U.S. Treasury obligations were
pledged as collateral to cover margin requirements for open futures contracts.
Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACTS COMMITMENT APPRECIATION
CONTRACT --------- ---------------- ------------
<S> <C> <C> <C>
Russell 2000 Index 4 September 98/Buy $37,425
=========================================================================================
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
37
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C>
Net asset value, beginning of period $ 10.00
- ----------------------------------------------------------------- -------
Income from investment operations:
Net investment income 0.03
- ----------------------------------------------------------------- -------
Net gains (losses) on securities (both realized and unrealized) (0.50)
- ----------------------------------------------------------------- -------
Total from investment operations (0.47)
- ----------------------------------------------------------------- -------
Net asset value, end of period $ 9.53
================================================================= =======
Total return(a) (4.70)%
================================================================= =======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $ 1,835
================================================================= =======
Ratio of expenses to average net assets(b) 1.29%(c)(d)
================================================================= =======
Ratio of net investment income to average net assets(e) 3.04%(d)
================================================================= =======
Portfolio turnover rate 5%
================================================================= =======
Average brokerage commission rate paid(f) $0.0381
================================================================= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
8.04% (annualized).
(c) Ratio includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would have been
1.18%.
(d) Ratios are annualized and based on average net assets of $1,188,919.
(e) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement was (3.71)% (annualized).
(f) The average commission rate paid is the total brokerage commission paid on
applicable purchases and sales of securities for the period divided by the
total number of related shares purchased and sold.
AIM V.I. CAPITAL DEVELOPMENT FUND
38
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
DISCIPLINED INVESTMENT STRATEGY
BENEFITS FUND
A roundtable discussion with the Fund management team for AIM V.I. Diversified
Income Fund for the six-month period ended June 30, 1998.
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. IT WAS A CHALLENGING PERIOD concerns that the economic problems in ---------------------
FOR BOND INVESTORS. HOW DID THE Asia would undermine corporate profits.
FUND PERFORM? That concern caused financial markets to The Fund maintained
A. Your Fund's diversified, three-pronged be volatile toward the end of the reporting
investment approach enabled it to post period. Investors, seeking relatively safe a disciplined strategy of
respectable gains, despite weakness in havens for their money, shifted more of
some segments of the bond market. For the their assets into domestic investment- investing in the
six months ended June 30, 1998, cumula- grade bonds, particularly U.S. Treasury
tive total return was 4.16%. The Fund issues and high-quality corporate securi- three major bond classes.
bested the 3.93% total return for the ties. The late rally in the domestic invest-
Lehman Brothers Aggregate Bond Index ment-grade bond market was reflected in ---------------------
and was in line with the 4.02% total return the yield on the benchmark 30-year U.S.
for the Lipper General Bond Index. Treasury bond, which fell from 5.95% on renewed concerns about the Asian
April 30, 1998 to 5.63% at the end of the situation reversed this trend.
Q. WHAT WAS YOUR INVESTMENT STRAT- reporting period.
EGY IN THIS CHALLENGING MARKET? During the four months prior to the Q. WHAT ABOUT HIGH-YIELD BONDS?
A. The Fund maintained a disciplined rally, domestic investment-grade bond
strategy of investing in the three major prices had remained essentially flat. Ear- A. High-yield bonds produced respect-
bond classes: domestic investment-grade lier in the reporting period, investors had able gains, particularly during the
bonds, high-yield securities, and global hoped that the Federal Reserve Board first half of the reporting period,
bonds. These three bond classes often react (the Fed) would lower interest rates to when economic growth was strong and
differently to various market trends. Struc- offset negative pressure from the Asian corporate cash flows were generally
turing the portfolio in this way can reduce crisis. However, inflation remained con- favorable. However, this bond class
the risk associated with investing in a tained, so the Fed left interest rates un- was hurt when concerns about Asia
single bond class. Additionally, it can en- changed. The failure of the Fed to ease resurfaced, causing investors to shift
hance total return by positioning the Fund monetary policy dampened enthusiasm their attention to domestic investment-
to take advantage of a rally in one or more for domestic investment-grade bonds until grade bonds. In May and June, high-
segments of the bond market. yield bonds also were nega-
At the end of the reporting period, PORTFOLIO COMPOSITION
the Fund's total net assets were divided
as follows: domestic investment grade As of 6/30/98, based on total net assets
bonds, 32.75%; domestic high-yield bonds,
29.37%; foreign investment grade and TOP 5 BOND HOLDINGS
high-yield bonds, 34.79%; common stock, COUPON MATURITY %
2.28%; cash and cash equivalents, .81%. 1. LKB Global 6.00% 01/2006 1.80% Pie chart
2. U.S. Treasury Bonds 6.125% 11/2027 1.39%
Q. HOW DID DOMESTIC INVESTMENT- 3. ConAgra Inc. 7.125% 10/2026 1.39% Foreign Bonds 34.79%
GRADE BONDS FARE? 4. Coca-Cola Enterprise, Inc. 7.24% 06/2020 1.21% Domestic Investment-
A. Domestic investment-grade bonds were 5. Niagara Mohawk Power Corp. Grade Bonds 32.75%
the top-performing segment of the portfo- First Mortgage Notes 9.25% 10/2001 1.08% Domestic High-yield
lio. This sector benefited from renewed Bonds 29.37%
Equity Interests 2.28%
Cash Equivalents .81%
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.
AIM V.I. DIVERSIFIED INCOME FUND 39
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
tively affected by some disappointing The lingering effects of the Asian cur- of a strong dollar by selectively
corporate earnings reports which raised rency crisis most adversely affected hedging some of the Fund's currency
concerns about the ability of the issuers emerging-market debt. Since we invest exposure.
of high-yield securities to meet their primarily in developed countries and had
debt obligations. little exposure to Asian markets, the ongo- Q. HOW WAS THE FUND POSITIONED
ing problems in the Far East had little AT THE END OF THE REPORTING PERIOD?
Q. WHAT WERE SOME OF THE TRENDS impact on the Fund's performance. A. There were 187 holdings in the Fund
IN THE GLOBAL-BOND MARKET? Bond markets we liked included Aus- as of June 30, 1998. The weighted aver-
A. Global bonds benefited from the low- tralia, the United Kingdom, and Sweden. age maturity of the portfolio was
inflation, low-interest-rate environment in In local currency terms, most of the for- 11.14 years and its duration was
most developed countries. Corporate re- eign markets where the Fund invests 6.65 years.
structuring overseas and global competi- performed well during the reporting
tion helped keep retail prices from rising period. However, the strength of the U.S. Q. WHAT IS YOUR SHORT-TERM OUT-
significantly. The efforts of foreign govern- dollar relative to most other major cur- LOOK FOR THE FUND?
ments to balance their budgets and reduce rencies diminished returns for U.S. inves- A. The fundamentals for the domestic
their deficits also helped to curtail tors. We continued to mitigate the effect bond market appear to be sound. The
inflation. inflation rate remains low. And rapid
economic growth, a potential source of
inflation, has shown signs of slowing.
PORTFOLIO COMPOSITION The Fed has left interest rates
unchanged for more than a year. Should
As of 6/30/98, based on total net assets inflation remain contained, the Fed
will be less inclined to change
AIM V.I. Diversified Lehman Brothers monetary policy and could even lower
Income Fund Aggregate Bond Index interest rates. Such an environment
(In thousands) would be favorable for domestic invest-
5/5/93 $10,000 $10,000 ment-grade and high-yield bonds.
7/31/93 10,240 10,239 Outside the U.S., there are several
10/31/93 10,622 10,485 factors working to restrain inflation
1/31/94 10,833 10,593 and thus benefit the global bond
4/30/94 10,165 10,070 AVERAGE ANNUAL TOTAL RETURN market. These include corporate
7/31/94 10,176 10,247 As of 6/30/98 restructuring, international competi-
10/31/94 10,230 10,100 tion, and the efforts of governments to
1/31/95 10,146 10,348 1 Year 10.83% balance budgets and reduce deficits.
4/30/95 10,794 10,808 Additionally, with the coming of the
7/31/95 11,281 11,283 5 Years 8.17 economic and monetary union in Europe
10/31/95 11,733 11,681 in 1999, 11 small bond markets will be
1/31/96 12,054 12,101 Inception (5/5/93) 8.25 replaced with one large bond market.
4/30/96 12,006 11,741 We believe this will encourage the
7/31/96 12,258 11,907 expansion of the corporate bond market
10/31/96 12,881 12,362 in Europe, which is not as highly
1/31/97 13,127 12,495 developed as it is in the U.S., and
4/30/97 13,166 12,573 create more investment opportunities
7/31/97 13,945 13,190 for the Fund.
10/31/97 14,239 13,483 Whatever the trends in the market,
12/31/97 14,687 13,836 we will maintain our three-pronged
4/30/98 14,943 13,944 approach of investing in domestic
6/30/98 15,045 14,196 investment-grade, domestic high-yield,
and global bonds in an effort to reduce
Past performance cannot guarantee comparable future results. risk and enhance potential return.
The performance figures shown represent the AIM V.I. Diversified Income Fund and are not
intended to reflect actual annuity values, and do not reflect charges at the separate
account level which, if applied, would lower the performance results. The Fund's
performance 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 so that Fund shares, when redeemed, may be worth more or less than their
original cost. Source: Towers Data Systems HYPO/(REGISTERED TRADEMARK)/.
The Lehman Brothers Aggregate Bond Index is an unmanaged index generally considered
representative of treasury, agency, corporate, and mortgage-backed debt securities.
Results shown are for the period 5/31/93 through 6/30/98.
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 the indexes listed. Index results include reinvested
dividends.
40 AIM V.I. DIVERSIFIED INCOME FUND
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS AND
NOTES - 70.08%
AIR FREIGHT - 0.40%
Atlas Air, Inc., Sr. Notes, 9.25%, 04/15/08 (Acquired
04/07/98; Cost $399,468)(b) $ 400,000 $ 402,000
- -------------------------------------------------------------------------------
AIRLINES - 2.75%
Airlines Pass Thru Trust, Sub. Bonds,
10.875%, 03/15/19 300,000 330,940
- -------------------------------------------------------------------------------
America West Airlines, Inc., Pass Thru Certificates,
6.86%, 07/02/04 882,000 877,299
- -------------------------------------------------------------------------------
Delta Air Lines, Inc., Deb., 9.00%, 05/15/16 825,000 1,011,945
- -------------------------------------------------------------------------------
United Air Lines, Inc., Pass Thru Certificates,
9.56%, 10/19/18 425,000 537,238
- -------------------------------------------------------------------------------
2,757,422
- -------------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.41%
Advance Stores Co., Sr. Sub Notes, 10.25%,
04/15/08 (Acquired 04/07/98; Cost $390,000)(b) 390,000 407,551
- -------------------------------------------------------------------------------
AUTOMOBILES - 0.51%
General Motors Corp., Deb., 8.80%, 03/01/21 400,000 503,009
- -------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 2.33%
Bankers Trust New York Corp., Gtd. Notes,
7.875%, 02/25/27 600,000 633,306
- -------------------------------------------------------------------------------
Deutsche Bank Financial, Gtd. Unsec. Sub. Deb., 6.70%,
12/13/06 750,000 768,735
- -------------------------------------------------------------------------------
First Union Bancorp, Sub. Deb., 7.50%, 04/15/35 800,000 926,200
- -------------------------------------------------------------------------------
2,328,241
- -------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.37%
Mercantile Bank Inc., Sub. Notes, 6.375%, 01/15/04 300,000 302,586
- -------------------------------------------------------------------------------
Mercantile Bancorp Inc., Unsec. Sub. Notes,
7.30%, 06/15/07 1,000,000 1,064,460
- -------------------------------------------------------------------------------
1,367,046
- -------------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.21%
Coca-Cola Enterprises, Inc., Putable Notes,
7.24%, 06/20/20(c) 5,000,000 1,212,150
- -------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.37%
Capstar Broadcasting Partners, Sr. Disc. Notes,
12.75%, 02/01/09(d) 490,000 377,300
- -------------------------------------------------------------------------------
Comcast Cable Communications, Notes,
8.50%, 05/01/27 500,000 607,020
- -------------------------------------------------------------------------------
CSC Holdings, Inc., Sr. Notes, 7.875%, 12/15/07 500,000 530,000
- -------------------------------------------------------------------------------
Diamond Cable Communications PLC (United Kingdom), Sr.
Yankee Disc. Notes, 10.75%, 02/15/07(d) 1,160,000 858,400
- -------------------------------------------------------------------------------
EchoStar DBS Corp., Sr. Sec. Gtd. Notes,
12.50%, 07/01/02 430,000 484,825
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) -
(CONTINUED)
Knology Holdings, Inc., Sr. Disc. Notes,
11.875%, 10/15/07(d) $ 1,000,000 $ 582,500
- -------------------------------------------------------------------------------
TCI Communications Inc., Sr. Notes,
8.00%, 08/01/05 850,000 930,640
- -------------------------------------------------------------------------------
4,370,685
- -------------------------------------------------------------------------------
CHEMICALS - 2.36%
Nova Chemicals Ltd. (Canada), Yankee Deb., 7.00%,
08/15/26 750,000 781,305
- -------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb.,
8.50%, 12/15/12 500,000 597,045
- -------------------------------------------------------------------------------
Solutia Inc., Bonds, 6.72%, 10/15/37 750,000 766,103
- -------------------------------------------------------------------------------
Sterling Chemicals, Inc., Sr. Unsec. Sub. Notes,
11.75%, 08/15/06 220,000 221,100
- -------------------------------------------------------------------------------
2,365,553
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.48%
Dialog Corp. PLC (United Kingdom), Series A Sr. Sub.
Notes, 11.00%, 11/15/07 350,000 385,000
- -------------------------------------------------------------------------------
Northern Telecom (Canada), Yankee Notes, 6.00%,
09/01/03 100,000 100,172
- -------------------------------------------------------------------------------
485,172
- -------------------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.15%
Commemorative Brands, Sr. Sub. Notes,
11.00%, 01/15/07 148,000 151,330
- -------------------------------------------------------------------------------
CONSUMER FINANCE - 1.87%
GMAC, Notes, 9.00%, 10/15/02 750,000 832,185
- -------------------------------------------------------------------------------
Household Finance Corp., Notes,
7.125%, 09/01/05 1,000,000 1,043,090
- -------------------------------------------------------------------------------
1,875,275
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 0.51%
MVE Inc., Sr. Sec. Notes, 12.50%, 02/15/02 190,000 192,850
- -------------------------------------------------------------------------------
Tekni-Plex Inc., Sr. Sub. Notes,
11.25%, 04/01/07 285,000 313,500
- -------------------------------------------------------------------------------
506,350
- -------------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.33%
AmeriServ Food Co., Gtd. Sr. Sub. Notes,
10.125%, 07/15/07 320,000 330,800
- -------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.73%
Commonwealth Edison Co., First Mortgage Notes, 7.50%,
07/01/13 800,000 882,000
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
41
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
ELECTRIC COMPANIES - (CONTINUED)
El Paso Electric Co.,
Series D Sec. First Mortgage Bonds,
8.90%, 02/01/06 $ 500,000 $ 563,965
- ------------------------------------------------------------------------------
Series E Sec. First Mortgage Bonds,
9.40%, 05/01/11 150,000 173,441
- ------------------------------------------------------------------------------
Niagara Mohawk Power Corp.,
First Mortgage Notes, 9.25%, 10/01/01 1,000,000 1,083,740
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.75%, 10/01/08 1,000,000 1,031,280
- ------------------------------------------------------------------------------
3,734,426
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.26%
Electronic Retailing Systems International, Inc., Sr.
Disc. Notes, 13.25%, 02/01/04(d) 590,000 262,550
- ------------------------------------------------------------------------------
ENTERTAINMENT - 2.88%
Ascent Entertainment Group, Sr. Sec. Disc. Notes,
11.875%, 12/15/04(d) 600,000 387,000
- ------------------------------------------------------------------------------
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 500,000 616,980
- ------------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 750,000 835,688
- ------------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 500,000 509,705
- ------------------------------------------------------------------------------
Viacom, Inc., Sr. Notes, 7.75%, 06/01/05 500,000 533,895
- ------------------------------------------------------------------------------
2,883,268
- ------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.64%
Associates Corp. of North America, Series B Sr. Deb.,
7.95%, 02/15/10 750,000 842,828
- ------------------------------------------------------------------------------
Finova Capital Corp., Unsec. Notes,
7.40%, 05/06/06 750,000 802,612
- ------------------------------------------------------------------------------
1,645,440
- ------------------------------------------------------------------------------
FOODS - 1.81%
ConAgra Inc., Sr. Unsec. Notes, 7.125%, 10/01/26 1,300,000 1,388,959
- ------------------------------------------------------------------------------
Del Monte Corp./Foods Co., Sr. Unsec. Sub. Notes,
12.25%, 04/15/07 380,000 427,500
- ------------------------------------------------------------------------------
1,816,459
- ------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.41%
Venetian Casino Resort LLC, Gtd. Mortgage Notes,
12.25%, 11/15/04 400,000 415,000
- ------------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.38%
Global Health Sciences, Sr. Notes, 11.00%, 05/01/08
(Acquired 04/17/98; Cost $368,839)(b) 380,000 378,100
- ------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.77%
Tenet Healthcare Corp., Sr. Notes, 8.00%, 01/15/05 750,000 772,328
- ------------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.47%
Paragon Health Networks Inc., Sr. Unsec. Disc. Sub.
Notes, 10.50%, 11/01/07(d) 700,000 465,500
- ------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.79%
Alaris Medical Systems, Sr. Unsec. Gtd. Sub. Deb.,
9.75%, 01/01/06 300,000 306,000
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - (CONTINUED)
Dade International Inc., Series B Sr. Sub. Notes,
11.125%, 05/01/06 $ 80,000 $ 90,400
- -------------------------------------------------------------------------------
Mediq, Inc., Sr. Unsec. Sub. Notes, 11.00%, 06/01/08
(Acquired 05/21/98; Cost $380,000)(b) 380,000 393,300
- -------------------------------------------------------------------------------
789,700
- -------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.11%
Dynacare Inc. (Canada), Sr. Yankee Notes,
10.75%, 01/15/06 105,000 111,562
- -------------------------------------------------------------------------------
HOUSEWARES - 0.75%
Decora Industries, Inc., Sr. Sec. Notes, 11.00%,
05/01/05 (Acquired 04/24/98; Cost $488,185)(b) 500,000 487,500
- -------------------------------------------------------------------------------
Zeta Consumer Products, Sr. Notes, 11.25%, 11/30/07
(Acquired 11/20/97; Cost $379,000)(b) 379,000 267,195
- -------------------------------------------------------------------------------
754,695
- -------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.89%
Americo Life Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 77,812
- -------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.875%, 05/15/23 750,000 817,177
- -------------------------------------------------------------------------------
894,989
- -------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.42%
Travelcenters of America Inc., Sr. Unsec. Gtd. Sub.
Deb., 10.25%, 04/01/07 400,000 420,000
- -------------------------------------------------------------------------------
IRON & STEEL - 0.77%
ACME Metal, Inc., Sr. Unsec. Gtd. Deb.,
10.875%, 12/15/07 458,000 391,590
- -------------------------------------------------------------------------------
GS Industries, Inc., Sr. Gtd. Notes, 12.00%, 09/01/04 350,000 380,625
- -------------------------------------------------------------------------------
772,215
- -------------------------------------------------------------------------------
LODGING - HOTELS - 1.91%
Booth Creek Ski Holdings, Sr. Notes,
12.50%, 03/15/07 390,000 422,175
- -------------------------------------------------------------------------------
Coast Hotels & Casinos Inc., Series B Sec. First
Mortgage Gtd. Notes, 13.00%, 12/15/02 180,000 207,900
- -------------------------------------------------------------------------------
ITT Corp., Unsec. Gtd. Deb., 7.375%, 11/15/15 750,000 707,670
- -------------------------------------------------------------------------------
John Q. Hammons Hotels Inc., Sec. First Mortgage Notes,
9.75%, 10/01/05 550,000 574,750
- -------------------------------------------------------------------------------
1,912,495
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.34%
Elgin National Industries, Sr. Unsec. Gtd. Sub. Notes,
11.00%, 11/01/07 320,000 340,800
- -------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.74%
MMI Products Inc., Sr. Unsec. Sub. Notes,
11.25%, 04/15/07 380,000 418,000
- -------------------------------------------------------------------------------
Simmons Co., Sr. Sub. Notes, 10.75%, 04/15/06 300,000 322,500
- -------------------------------------------------------------------------------
740,500
- -------------------------------------------------------------------------------
METAL FABRICATORS - 0.22%
Gulf States Steel Inc., First Mortgage Notes,
13.50%, 04/15/03 230,000 224,250
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
42
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
METALS MINING - 0.38%
Rio Algom Ltd. (Canada), Yankee Unsec. Deb., 7.05%,
11/01/05 $ 370,000 $ 383,641
- -------------------------------------------------------------------------------
NATURAL GAS - 1.77%
Enron Corp.,
Notes, 6.75%, 08/01/09 750,000 770,850
- -------------------------------------------------------------------------------
Sr. Sub. Deb., 6.75%, 07/01/05 450,000 458,311
- -------------------------------------------------------------------------------
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 525,000 543,375
- -------------------------------------------------------------------------------
1,772,536
- -------------------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.31%
United Stationer Supply, Sr. Sub. Notes,
12.75%, 05/01/05 275,000 314,875
- -------------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.88%
Gulf Canada Resources, Ltd. (Canada), Sr. Yankee Unsec.
Notes, 8.35%, 08/01/06 800,000 881,480
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.84%
Petroleum Geo-Services A.S.A. (Norway), Yankee Notes,
7.50%, 03/31/07 750,000 806,760
- -------------------------------------------------------------------------------
R&B Falcon Corp., Sr. Notes, 7.375%, 04/15/18 (Acquired
04/08/98 - 06/04/98; Cost $996,978)(b) 1,000,000 1,036,880
- -------------------------------------------------------------------------------
1,843,640
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 2.37%
Abraxas Petroleum Corp., Series D Sr. Unsec. Gtd.
Notes, 11.50%, 11/01/04 125,000 129,375
- -------------------------------------------------------------------------------
Centaur Mining & Exploration, Ltd. (Australia), Sr.
Gtd. Notes, 11.00%, 12/01/07 (Acquired 11/24/97; Cost
$550,000)(b) 550,000 562,375
- -------------------------------------------------------------------------------
Chesapeake Energy Corp., Sr. Notes, 9.625%, 05/01/05
(Acquired 04/17/98; Cost $300,000)(b) 300,000 301,500
- -------------------------------------------------------------------------------
Kelley Oil & Gas Corp., Series B Sr. Gtd. Sub. Notes,
10.375%, 10/15/06 400,000 406,000
- -------------------------------------------------------------------------------
Queen Sand Resources, Sr. Notes, 12.50%, 07/01/08
(Acquired 06/30/98; Cost $400,000)(b) 400,000 400,000
- -------------------------------------------------------------------------------
Southwest Royalties, Inc., Sr. Gtd. Notes,
10.50%, 10/15/04 65,000 52,325
- -------------------------------------------------------------------------------
Talisman Energy, Inc. (Canada), Yankee Deb.,
7.125%, 06/01/07 500,000 522,025
- -------------------------------------------------------------------------------
2,373,600
- -------------------------------------------------------------------------------
PERSONAL CARE - 1.00%
Alberto-Culver Corp., Notes, 6.375%, 06/15/28 1,000,000 1,002,270
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.19%
Panda Global Energy Co. (China), Sr. Yankee Sec. Gtd.
Notes, 12.50%, 04/15/04 210,000 192,150
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.44%
News America Holdings, Inc.,
Sr. Gtd. Deb., 9.25%, 02/01/13 750,000 919,875
- -------------------------------------------------------------------------------
Sr. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 525,520
- -------------------------------------------------------------------------------
1,445,395
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
RAILROADS - 0.70%
Norfolk Southern Corp., Putable Bonds,
7.05%, 05/01/37 $ 650,000 $ 700,745
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.58%
Glenborough Realty Trust, Sr. Notes, 7.625%, 03/15/05
(Acquired 03/18/98; Cost $798,696)(b) 800,000 803,824
- -------------------------------------------------------------------------------
Spieker Properties LP, Unsec. Deb., 7.35%, 12/01/17 750,000 774,600
- -------------------------------------------------------------------------------
1,578,424
- -------------------------------------------------------------------------------
RESTAURANTS - 0.19%
Planet Hollywood International, Inc., Sr. Unsec. Sub.
Notes, 12.00%, 04/01/05 215,000 194,575
- -------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.33%
Plainwell, Inc., Sr. Sub. Notes, 11.00%, 03/01/08
(Acquired 03/03/98 - 03/04/98; Cost $331,413)(b) 330,000 333,300
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.02%
CEX Holdings, Inc., Sr. Sub. Notes, 9.625%, 06/01/08
(Acquired 05/20/98; Cost $430,000)(b) 430,000 438,062
- -------------------------------------------------------------------------------
CSK Auto Inc., Sr. Gtd. Sub. Deb., 11.00%, 11/01/06 260,000 286,650
- -------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes, 13.00%,
07/15/02 150,000 150,750
- -------------------------------------------------------------------------------
Wilsons - The Leather Experts Inc., Sr. Notes, 11.25%,
08/15/04 140,000 147,700
- -------------------------------------------------------------------------------
1,023,162
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.75%
Big 5 Corp., Sr. Unsec. Notes, 10.875%, 11/15/07 500,000 516,250
- -------------------------------------------------------------------------------
J Crew Operating Corp., Sr. Sub. Notes,
10.375%, 10/15/07 240,000 231,600
- -------------------------------------------------------------------------------
747,850
- -------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.84%
Sovereign Bancorp, Inc., Sub. Notes,
8.00%, 03/15/03 800,000 839,568
- -------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.32%
MDC Communications Corp. (Canada), Sr. Yankee Unsec.
Sub. Notes, 10.50%, 12/01/06 300,000 315,000
- -------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.07%
Laidlaw Inc. (Canada), Yankee Deb.,
6.65%, 10/01/04 550,000 559,762
- -------------------------------------------------------------------------------
Pegasus Shipping Hellas Co. (Bermuda), Sr. Sec. Gtd.
Mortgage Notes, 11.875%, 11/15/04 (Acquired 11/19/97;
Cost $483,000)(b) 500,000 508,750
- -------------------------------------------------------------------------------
1,068,512
- -------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.39%
MSX International, Inc., Sr. Sub. Notes, 11.375%,
01/15/08 (Acquired 01/16/98; Cost $380,225)(b) 380,000 393,300
- -------------------------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.42%
ATC Group Services, Inc., Sr. Sub. Notes, 12.00%,
01/15/08 (Acquired 01/22/98 - 01/28/98; Cost
$458,625)(b) 450,000 416,250
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
43
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
SHIPPING - 1.87%
Holt Group, Sr. Notes, 9.75%, 01/15/06 (Acquired
01/14/98 - 01/15/98; Cost $290,525)(b) $ 290,000 $ 285,650
- -------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Cayman Islands), Series D
Yankee Sr. Gtd. Unsec. Unsub. Deb., 6.988%, 08/01/37
(Acquired 10/02/97; Cost $753,008)(b) 750,000 636,112
- -------------------------------------------------------------------------------
Pacific & Atlantic Holdings, First Mortgage Notes,
11.50%, 05/30/08 (Acquired 05/21/98; Cost $522,315)(b) 530,000 514,100
- -------------------------------------------------------------------------------
Stena Line A.B. (Sweden), Sr. Yankee Notes, 10.625%,
06/01/08 430,000 438,063
- -------------------------------------------------------------------------------
1,873,925
- -------------------------------------------------------------------------------
SOVEREIGN DEBT - 2.50%
Province of Manitoba (Canada), Yankee Bonds, 7.75%,
07/17/16 700,000 822,619
- -------------------------------------------------------------------------------
Province of Quebec (Canada), Yankee Deb.,
5.735%, 03/02/26 750,000 820,575
- -------------------------------------------------------------------------------
6.29%, 03/06/26 800,000 862,496
- -------------------------------------------------------------------------------
2,505,690
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.45%
KMC Telecom Holdings, Inc., Sr. Disc. Notes, 12.50%,
02/15/08 (Acquired 01/26/98 - 01/27/98; Cost
$413,850)(b)(d) 750,000 446,250
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.71%
360 Communications Co., Sr. Notes, 7.60%, 04/01/09 750,000 812,445
- -------------------------------------------------------------------------------
Cable & Wireless Communications PLC (United Kingdom),
Yankee Notes, 6.75%, 03/06/08 750,000 760,755
- -------------------------------------------------------------------------------
Clearnet Communications Inc. (Canada), Sr. Yankee
Unsec. Disc. Notes, 14.75%, 12/15/05(d) 110,000 92,950
- -------------------------------------------------------------------------------
GST Telecommunications, Inc., Sr. Sec. Notes, 13.25%,
05/01/07 300,000 345,750
- -------------------------------------------------------------------------------
PageMart Wireless, Inc., Sr. Sub. Disc. Notes, 11.25%,
02/01/08(d) 750,000 457,500
- -------------------------------------------------------------------------------
Sygnet Wireless Inc., Sr. Unsec. Notes,
11.50%, 10/01/06 220,000 242,000
- -------------------------------------------------------------------------------
2,711,400
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.61%
Bell Canada (Canada), Yankee Deb., 9.50%, 10/15/10 350,000 443,240
- -------------------------------------------------------------------------------
Esprit Telecom Group PLC (United Kingdom), Sr. Yankee
Notes, 11.50%, 12/15/07 350,000 361,813
- -------------------------------------------------------------------------------
Exodus Communications, Sr. Notes, 11.25%, 07/01/08
(Acquired 06/26/98; Cost $480,000)(b) 480,000 484,200
- -------------------------------------------------------------------------------
MCI Communications Corp., Putable Sr. Unsec. Deb.,
7.125%, 06/15/27 1,000,000 1,057,900
- -------------------------------------------------------------------------------
Versatel Telecom BV (Netherlands), Sr. Notes, 13.25%,
05/15/08 (Acquired 05/20/98; Cost $250,000)(b)(e) 250,000 263,750
- -------------------------------------------------------------------------------
2,610,903
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
TELEPHONE - 1.14%
ESAT Holdings Ltd. (Ireland), Sr. Yankee Notes,
12.50%, 02/01/07(d) $ 470,000 $ 350,150
- -------------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.375%, 07/15/43 750,000 794,535
- -------------------------------------------------------------------------------
1,144,685
- -------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.73%
Fruit of the Loom, Notes, 6.50%, 11/15/03 750,000 726,532
- -------------------------------------------------------------------------------
TRUCKERS - 0.12%
AmeriTruck Distribution Corp., Series B Sr. Sub.
Notes, 12.25%, 11/15/05 209,000 122,264
- -------------------------------------------------------------------------------
TRUCKS & PARTS - 0.12%
Blue Bird Body Co., Series B Sr. Sub. Notes, 10.75%,
11/15/06 110,000 120,450
- -------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.70%
Allied Waste Industries, Sr. Unsec. Disc. Notes,
11.30%, 06/01/07(d) 900,000 663,750
- -------------------------------------------------------------------------------
WMX Technologies, Inc., Unsec. Notes, 7.10%, 08/01/26 1,000,000 1,033,150
- -------------------------------------------------------------------------------
1,696,900
- -------------------------------------------------------------------------------
Total U.S. Dollar Denominated Non- Convertible Bonds
& Notes
(Cost $67,875,781) 70,176,133
- -------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS AND NOTES -
10.43%(f)
AUSTRALIA - 0.57%
Citibank Ltd. (Banks - Money Center), Unsec. Notes,
7.00%, 03/15/02 AUD 900,000 579,039
- -------------------------------------------------------------------------------
CANADA - 6.29%
Bank of Montreal (Banks - Money Center), Sub. Deb.,
7.92%, 07/31/12 CAD 850,000 661,411
- -------------------------------------------------------------------------------
Bell Mobility Cellular Inc. (Telecommunications -
Cellular/Wireless), Deb., 6.55%, 06/02/08 750,000 519,119
- -------------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 450,000 343,071
- -------------------------------------------------------------------------------
Clearnet Communications (Telecommunications-
Cellular/Wireless),
Sr. Disc. Notes, 11.75%, 08/13/07 (Acquired
07/31/97 - 11/04/97; Cost $630,905)(b)(d) 1,500,000 671,989
- -------------------------------------------------------------------------------
Sr. Disc. Notes, 10.40%, 05/15/08(d) 1,600,000 643,078
- -------------------------------------------------------------------------------
Microcell Telecommunications Inc.
(Telecommunications - Cellular/Wireless), Sr. Disc.
Notes, 11.125%, 10/15/07(d) 1,000,000 429,965
- -------------------------------------------------------------------------------
NAV Canada (Services - Commercial & Consumer), Bonds,
7.40%, 06/01/27 1,000,000 822,875
- -------------------------------------------------------------------------------
Poco Petroleums Ltd. (Oil & Gas - Exploration &
Production), Unsec. Deb., 6.60%, 09/11/07 750,000 515,685
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
44
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
CANADA - (CONTINUED)
Teleglobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 CAD 850,000 $ 642,210
- -----------------------------------------------------------------------------
Trans-Canada Pipelines (Natural Gas),
Series Q Deb., 10.625%, 10/20/09 500,000 470,974
- -----------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 280,000 222,297
- -----------------------------------------------------------------------------
Westcoast Energy, Inc. (Oil & Gas - Exploration
& Production), Deb., 6.45%, 12/03/06 (Acquired
12/18/96; Cost $369,585)(b) 500,000 355,243
- -----------------------------------------------------------------------------
6,297,917
- -----------------------------------------------------------------------------
GERMANY - 2.44%
International Bank for Reconstruction &
Development (Banks - Money Center), Unsec.
Global Bonds, 7.125%, 04/12/05(c) DEM 1,000,000 635,274
- -----------------------------------------------------------------------------
LKB Global (Financial - Diversified), Gtd.
Notes, 6.00%, 01/25/06 3,000,000 1,804,016
- -----------------------------------------------------------------------------
2,439,290
- -----------------------------------------------------------------------------
NEW ZEALAND - 0.28%
International Bank for Reconstruction &
Development (Banks - Money Center),
Sr. Notes, 6.77%, 08/20/07(c) NZD 1,000,000 283,851
- -----------------------------------------------------------------------------
UNITED KINGDOM - 0.85%
Sutton Bridge Financial Ltd. (Financial -
Diversified), Gtd. Eurobonds, 8.625%, 06/03/22
(Acquired 05/29/97; Cost $733,585)(b) GBP 450,000 848,611
- -----------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-
Convertible Bonds & Notes (Cost $10,730,022) 10,448,708
- -----------------------------------------------------------------------------
U.S. DOLLAR DENOMINATED CONVERTIBLE BONDS &
NOTES - 0.52%
SHIPPING - 0.52%
Hutchison Delta Finance (Cayman Islands), Yankee
Conv. Unsec. Notes, 7.00%, 11/08/02 (Cost
$527,500) $ 500,000 520,000
- -----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED CONVERTIBLE
BONDS & NOTES - 2.25%(f)
GERMANY - 0.61%
Daimler-Benz A.G. (Automobiles), Conv. Gtd.
Unsub. Eurobonds, 4.125%, 07/05/03 DEM 570,000 605,307
- -----------------------------------------------------------------------------
JAPAN - 0.60%
Matsushita Electric Industrial Co. Ltd.
(Electrical Equipment), Conv. Bonds, 1.30%,
03/29/02 JPY 50,000,000 511,479
- -----------------------------------------------------------------------------
Sony Corp. (Electrical Equipment), Conv. Deb.,
1.40%, 03/31/05 8,000,000 89,079
- -----------------------------------------------------------------------------
600,558
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
UNITED KINGDOM - 1.04%
British Airport Authority PLC (Airlines), Conv.
Bonds, 5.75%, 03/29/06 GBP 500,000 $ 1,043,143
- --------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Convertible
Bonds & Notes (Cost $2,003,675) 2,249,008
- --------------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED GOVERNMENT
BONDS & NOTES - 11.23%(f)
AUSTRALIAN DOLLARS - 1.07%
New South Wales Treasury Corp., Gtd. Notes, 8.00%,
03/01/08 AUD 1,500,000 1,076,929
- --------------------------------------------------------------------------------
BRITISH POUND STERLING - 3.84%
Federal National Mortgage Association, Sr. Unsec.
Notes, 6.875%, 06/07/02 GBP 450,000 756,857
- --------------------------------------------------------------------------------
Ontario Province, Deb., 11.125%, 02/14/01 500,000 902,997
- --------------------------------------------------------------------------------
United Kingdom Treasury,
Bonds, 8.00%, 12/07/00 400,000 684,868
- --------------------------------------------------------------------------------
Gtd. Notes, 7.00%, 11/06/01 400,000 675,570
- --------------------------------------------------------------------------------
Bonds, 7.50%, 12/07/06 450,000 828,219
- --------------------------------------------------------------------------------
3,848,511
- --------------------------------------------------------------------------------
CANADIAN DOLLARS - 1.04%
Municipal Finance Authority of British Columbia,
Bonds, 7.75%, 12/01/05 CAD 500,000 384,521
- --------------------------------------------------------------------------------
Ontario Province,
Sr. Unsec. Unsub. Global Bonds,
8.00%, 03/11/03 750,000 562,564
- --------------------------------------------------------------------------------
Quebec (Province of), Deb.,
9.375%, 01/16/23 100,000 97,196
- --------------------------------------------------------------------------------
1,044,281
- --------------------------------------------------------------------------------
GERMAN DEUTSCHE MARKS - 0.64%
Bundesrepublic Deutschland, Bonds, 6.875%, 05/12/05 DEM 1,000,000 626,262
- --------------------------------------------------------------------------------
NEW ZEALAND DOLLARS - 2.07%
Federal National Mortgage Association, Notes, 7.25%,
06/20/02 NZD 1,250,000 644,909
- --------------------------------------------------------------------------------
New Zealand Government,
Bonds, 8.00%, 02/15/01 750,000 399,132
- --------------------------------------------------------------------------------
Bonds, 10.00%, 03/15/02 1,800,000 1,029,608
- --------------------------------------------------------------------------------
2,073,649
- --------------------------------------------------------------------------------
SWEDISH KRONAS - 2.57%
Swedish Government,
Bonds, 10.25%, 05/05/03 SEK 6,000,000 933,714
- --------------------------------------------------------------------------------
Bonds, 6.00%, 02/09/05 6,000,000 803,731
- --------------------------------------------------------------------------------
Bonds, 6.50%, 10/25/06 6,000,000 833,821
- --------------------------------------------------------------------------------
2,571,266
- --------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Government Bonds
& Notes (Cost $11,862,728) 11,240,898
- --------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
45
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCK - 0.02%
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Nextel Communications, Inc. - Class A(g)(Cost $12,000) 743 $ 18,482
- -------------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 1.77%
BANKS (REGIONAL) - 0.48%
Westpac Banking Corp. STRYPES Trust - $3.135 Conv. Pfd. 16,000 483,000
- -------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.29%
Conseco Inc. - $4.278 Conv. PRIDES 8,000 1,286,000
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks (Cost
$990,600) 1,769,000
- -------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 0.44%
FRANCE - 0.44%
Societe Generale (Banks - Major Regional)
(Cost $272,296) 2,150 447,109
- -------------------------------------------------------------------------------
WARRANTS - 0.05%
ELECTRICAL EQUIPMENT - 0.01%
Electronic Retailing Systems International,
expiring 02/01/04(h) 590 5,900
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.00%
MVE Inc., expiring 02/15/02(h) 190 3,802
- -------------------------------------------------------------------------------
METAL FABRICATORS - 0.00%
Gulf States Steel Inc., expiring 04/15/03(h) 230 575
- -------------------------------------------------------------------------------
PERSONAL CARE - 0.00%
IHF Capital Inc., Series I, expiring 11/14/99 (Acquired
11/04/94 - 12/07/94; Cost $0)(b)(h) 150 750
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.02%
Clearnet Communications Inc. (Canada),
expiring 09/15/05(h) 891 8,687
- -------------------------------------------------------------------------------
Orion Network Systems, Inc., expiring 01/15/07(h) 580 9,280
- -------------------------------------------------------------------------------
17,967
- -------------------------------------------------------------------------------
TELEPHONE - 0.02%
ESAT Holdings Ltd., expiring 02/01/07
(Acquired 06/16/97; Cost $0)(b)(h) 470 18,800
- -------------------------------------------------------------------------------
Knology Holdings, Inc., expiring 10/15/07
(Acquired 03/12/98; Cost $0)(b)(h) 1,000 5,250
- -------------------------------------------------------------------------------
24,050
- -------------------------------------------------------------------------------
Total Warrants (Cost $7,590) 53,044
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 2.40%
U.S. TREASURY NOTES & BONDS - 2.40%
5.75%, 04/30/03 1,000,000 1,009,890
- -------------------------------------------------------------------------------
6.125%, 11/15/27 1,300,000 1,393,847
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $2,376,500) 2,403,737
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(a) VALUE
<S> <C> <C>
REPURCHASE AGREEMENT - 0.03%(i)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(j)
(Cost $31,723) $ 31,723 $ 31,723
- ----------------------------------------------------------------------
TOTAL INVESTMENTS - 99.22% 99,357,842
- ----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.78% 782,498
- ----------------------------------------------------------------------
NET ASSETS - 100.00% $100,140,340
======================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Principal amount is in U.S. Dollars, except as indicated by note (f).
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $12,060,592
which represents 12.04% of the Fund's net assets.
(c) Zero coupon bond issued at a discount. The interest rate shown represents
the rate of original issue discount.
(d) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(e) Issued as a unit. This unit includes one Sr. Note plus one warrant to
purchase 6.667 shares of common stock.
(f) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(g) Non-income producing security.
(h) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(i) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
AUD - Australian Dollar Pfd. - Preferred
CAD - Canadian Dollar PRIDES - Preferred Redeemable Increased
Conv. - Convertible Dividend Equity Security
Deb. - Debentures Sec. - Secured
DEM - German Deutsche Mark SEK - Swedish Krona
Disc. - Discounted Sr. - Senior
GBP - British Pound Sterling STRYPES - Structured Yield Product
Gtd. - Guaranteed Exchangeable for Stock
JPY - Japanese Yen Sub. - Subordinated
NZD - New Zealand Dollar Unsec. - Unsecured
Unsub. - Unsubordinated
See Notes To Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
46
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $96,690,415) $ 99,357,842
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $773,991) 812,710
- ----------------------------------------------------------------------
Cash 74,743
- ----------------------------------------------------------------------
Receivables for:
Investment sold 15,435
- ----------------------------------------------------------------------
Forward currency contracts 125,852
- ----------------------------------------------------------------------
Capital stock sold 136,021
- ----------------------------------------------------------------------
Dividends and interest 1,679,458
- ----------------------------------------------------------------------
Investment for deferred compensation plan 18,129
- ----------------------------------------------------------------------
Other assets 85
- ----------------------------------------------------------------------
Total assets 102,220,275
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 1,874,405
- ----------------------------------------------------------------------
Capital stock reacquired 112,858
- ----------------------------------------------------------------------
Deferred compensation plan 18,129
- ----------------------------------------------------------------------
Accrued advisory fees 49,496
- ----------------------------------------------------------------------
Accrued administrative services fees 3,809
- ----------------------------------------------------------------------
Accrued directors' fees 2,500
- ----------------------------------------------------------------------
Accrued operating expenses 18,738
- ----------------------------------------------------------------------
Total liabilities 2,079,935
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $100,140,340
======================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 8,512,046
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 11.76
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $3,686,393
- -------------------------------------------------------------------------------
Dividends 39,724
- -------------------------------------------------------------------------------
Total investment income 3,726,117
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 287,120
- -------------------------------------------------------------------------------
Administrative services fees 22,341
- -------------------------------------------------------------------------------
Custodian fees 19,427
- -------------------------------------------------------------------------------
Directors' fees and expenses 4,472
- -------------------------------------------------------------------------------
Organizational costs 965
- -------------------------------------------------------------------------------
Other 29,929
- -------------------------------------------------------------------------------
Total expenses 364,254
- -------------------------------------------------------------------------------
Net investment income 3,361,863
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (101,760)
- -------------------------------------------------------------------------------
Foreign currencies (79,463)
- -------------------------------------------------------------------------------
Forward currency contracts 700,860
- -------------------------------------------------------------------------------
519,637
- -------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 349,078
- -------------------------------------------------------------------------------
Foreign currencies 47,245
- -------------------------------------------------------------------------------
Forward currency contracts (383,347)
- -------------------------------------------------------------------------------
12,976
- -------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and forward
currency contracts 532,613
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $3,894,476
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
47
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,361,863 $ 5,150,458
- -----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 519,637 1,075,468
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies and forward
currency contracts 12,976 695,704
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,894,476 6,921,630
- -----------------------------------------------------------------------------
Distributions to shareholders from net investment
income -- (77,788)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 6,927,212 18,851,039
- -----------------------------------------------------------------------------
Net increase in net assets 10,821,688 25,694,881
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 89,318,652 63,623,771
- -----------------------------------------------------------------------------
End of period $100,140,340 $89,318,652
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 87,582,458 $80,655,246
- -----------------------------------------------------------------------------
Undistributed net investment income 7,556,940 4,195,077
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward
currency contracts 2,173,440 1,653,803
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 2,827,502 2,814,526
- -----------------------------------------------------------------------------
$100,140,340 $89,318,652
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Diversified Income Fund (the "Fund"). The Fund's investment
objective is to seek to achieve a high level of current income. The Fund will
seek to achieve its objective by investing primarily in a diversified
portfolio of foreign and U.S. government and corporate debt securities,
including lower rated high yield debt securities (commonly known as "junk
bonds"). These high yield bonds may involve special risks in addition to the
risks associated with investment in higher rated debt securities. High yield
bonds may be more susceptible to real or perceived adverse economic and
competitive industry conditions than higher grade bonds. Also, the secondary
market in which high yield bonds are traded may be less liquid than the market
for higher grade bonds. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of significant accounting policies followed by the Fund
in the preparation of its financial statements.
A. Security Valuations--Debt obligations are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as institution-size trading in similar
groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Investment securities for which
prices are not provided by the pricing service and which are listed or
traded on an exchange are valued at the last sales price on the exchange
where the security is principally traded or, lacking any sales on a
particular day, at the mean between the closing bid and asked prices on
that day unless the Board of Directors, or persons designated by the Board
of Directors, determines that the over-the-counter quotations more closely
reflect the current market value of the security. Securities traded in the
over-the-counter market, except (i) securities priced by the pricing
service, (ii) securities for which representative exchange prices are
available, and (iii) securities reported in the NASDAQ National Market
System, are valued at the mean between representative last bid and asked
prices obtained from
AIM V.I. DIVERSIFIED INCOME FUND
48
<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 forward currency contracts at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT ------------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
- ---------- ---------- ----------- ----------- --------------
<S> <C> <C> <C> <C> <C>
07/13/98 JPY 5,000,000 $ 38,941 $ 36,283 $ 2,658
07/27/98 GBP 550,000 911,570 917,499 (5,929)
07/28/98 DEM 3,350,000 1,879,910 1,861,009 18,901
07/29/98 SEK 19,000,000 2,470,741 2,385,307 85,434
07/31/98 GBP 1,375,000 2,282,500 2,293,233 (10,733)
08/04/98 AUD 1,730,000 1,128,133 1,074,970 53,163
08/06/98 JPY 29,500,000 224,335 214,856 9,479
08/17/98 NZD 2,900,000 1,537,000 1,504,213 32,787
08/28/98 GBP 1,800,000 2,925,450 2,997,305 (71,855)
08/31/98 DEM 2,500,000 1,422,718 1,391,604 31,114
09/08/98 JPY 37,500,000 275,128 274,425 703
09/21/98 NZD 1,400,000 717,640 724,547 (6,907)
09/22/98 AUD 870,000 527,916 540,879 (12,963)
----------- ----------- --------
$16,341,982 $16,216,130 $125,852
=========== =========== ========
</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.
E. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I
M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
such Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $22,341 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,375 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
AIM V.I. DIVERSIFIED INCOME FUND
49
<PAGE>
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June 30,
1998 was $32,563,391 and $19,933,646, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 4,985,116
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,317,689)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 2,667,427
==========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
---------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
Sold 1,442,204 $16,754,171 2,860,755 $ 30,505,544
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 6,908 77,788
- ----------------------------------------------------------------------------
Reacquired (844,594) (9,826,959) (1,114,698) (11,732,293)
- ----------------------------------------------------------------------------
597,610 $ 6,927,212 1,752,965 $ 18,851,039
============================================================================
</TABLE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, ------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46 $ 10.00
- ------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.36 0.73 0.73 0.69 0.76 0.54
- ------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.11 0.24 0.28 0.94 (1.42) 0.29
- ------------------------------------------------------------------------------------------
Total from investment
operations 0.47 0.97 1.01 1.63 (0.66) 0.83
- ------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.68) (0.75) (0.68) (0.35)
- ------------------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- -- -- -- -- (0.02)
- ------------------------------------------------------------------------------------------
Total distributions -- (0.01) (0.68) (0.75) (0.68) (0.37)
- ------------------------------------------------------------------------------------------
Net asset value, end of
period $ 11.76 $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
==========================================================================================
Total return(a) 4.16% 9.39% 10.19% 18.11% (6.35)% 8.33%
==========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $100,140 $89,319 $63,624 $44,630 $25,271 $14,530
==========================================================================================
Ratio of expenses to
average net assets(b) 0.76%(c) 0.80% 0.86% 0.88%(d) 0.91% 1.05%(d)
==========================================================================================
Ratio of net investment
income to average net
assets(e) 7.03%(c) 6.90% 7.09% 7.65%(d) 8.07% 6.78%(d)
==========================================================================================
Portfolio turnover rate 21% 52% 76% 72% 100% 57%
==========================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursement. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.03% and 1.69% (annualized) for January 31, 1995 and 1994, respectively.
(c) Ratios are annualized and based on average net assets of $96,499,677.
(d) Annualized.
(e) After fee waivers and/or expense reimbursement. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 7.95% and 6.14% (annualized) for January 31, 1995 and
1994, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
50
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
UTILITY SECTOR CONTINUES
HOT PERFORMANCE
A roundtable discussion with the Fund management team for AIM V.I. Global Utilities Fund
for the six months ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID THE FUND PERFORM A. There is significant growth in the just over 60% of the Fund's holdings in
DURING THE SIX MONTHS ENDED JUNE telecommunications sector both inside the domestic utilities sector. Electric
30, 1998? and outside the U.S. because the services power companies comprised almost 24% of
A. We are pleased to report the Fund's and equipment providers continue to do the Fund's portfolio. This is a very
total return was 9.31% for the six-month well in this competitive environment. mature industry, so there are little
period ended June 30, 1998. Compara- Additionally, the frenzy of corporate long-term growth opportunities in this
tively, the Lipper Utility Funds Index re- merger and acquisition activity during the sector for investors. However, with
turned 8.22% during the same period. first half of 1998 has included some most of the country experiencing unus-
The Fund continued to outperform the major telephone companies, such as SBC ually hot temperatures this year, the
Lipper Utility Funds Index for the last Communications, Inc. announcing plans increased demand for air conditioning
three years. For the three-year period to acquire Ameritech Corp. and the combined with deregulation of electri-
ended June 30, 1998, the Fund produced a WorldCom Inc./MCI deal announced last city providers forced some electric
19.18% average annual total return. In year. Three of these companies were companies to pay incredible rates for
comparison, the Lipper Utility Funds Index among the Fund's top 10 holdings at the electricity on the free market when
produced an average annual total return of end of the reporting period, so the Fund emergencies rose. It was reported in
19.32% over the same period. greatly benefited from these deals. The the media that electricity that norm-
telecommunications and telephone sec- ally costs $0.03 to $0.05 a kilowatt
Q. WHAT FACTORS CAUSED THE FUND'S tors comprised over 30% of the Fund at was being purchased for $10 a kilowatt.
PERFORMANCE? the end of the reporting period and was Companies were forced to pay such in-
A. The market's volatility at the end of the Fund's largest sector weighting. flated prices to provide the necessary
1997 carried over into the first quarter of electricity to their customers. How
1998, attracting many investors to the Q. WHAT PERCENTAGE OF THE FUND'S such free market situations affect the
perceived stability of utility stocks. PORTFOLIO WAS IN DOMESTIC UTILITIES? industry as a whole remains to be seen.
The Fund was well-rewarded by this market A. We finished the reporting period with Pinnacle West Capital Corp. was the
sentiment, producing a return of 10.68% only electric power company among the
during the first three months of the year. PORTFOLIO COMPOSITION
We knew that such strong short-term
performance would not be sustainable, As of 6/30/98, based on total net assets
but nonetheless the Fund received a nice
spurt of growth during the fourth quarter TOP 10 HOLDINGS TOP 10 INDUSTRIES
of 1997 and the first quarter of 1998. The 1. El Paso Energy Cap Trust, Inc. 2.60% 1. Electric Companies 24.93%
Fund rose 17.82% from October 1, 1997 2. Williams Companies Inc. (The) 2.37 2. Telephone 18.76
to March 31, 1998, besting the DJIA's gain 3. SBC Communications, Inc. 2.06 3. Natural Gas 9.63
of 11.74%. Such extreme returns are very 4. Pinnacle West Capital Corp. 1.93 4. Communications Equipment 7.13
unusual for the utilities sector and, not 5. BellSouth Corp. 1.81 5. Telecommunications
surprisingly, the Fund's performance ta- 6. Ameritech Corp. 1.78 (Long Distance) 5.84
pered somewhat in the second quarter. 7. National Grid Co. PLC 6. Power Producers (Independent) 3.71
(United Kingdom) 1.76 7. Real Estate Investment Trusts 3.59
Q. TELECOMMUNICATIONS CONTINUED 8. PowerGen PLC 8. Telecommunications
TO BE A MAJOR COMPONENT OF THE (United Kingdom) 1.65 (Cellular/Wireless) 2.21
FUND'S PORTFOLIO. HOW DID THAT 9. Telecom Italia S.p.A. (Italy) 1.57 9. Water Utilities 2.03
SECTOR PERFORM DURING THE REPORT- 10. WorldCom, Inc. 1.56 10. Consumer Finance 1.52
ING PERIOD?
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.
AIM V.I. GLOBAL UTILITIES FUND 51
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
portfolio's top 10 holdings at the end of Group PLC, finished the reporting period panies, Inc., respectively--were
the reporting period, but the Fund owned among the portfolio's top 10 holdings. On natural gas utility holdings.
common stock in 22 electric power com- the other hand, the Fund's foreign hold- Services and equipment providers,
panies all around the world. ings in Asia and Latin America were especially in the telecommunications
hurt by the volatility of the markets in industry, continue to do well in this
Q. WHAT PERCENTAGE OF THE FUND'S those areas. competitive environment. For instance,
PORTFOLIO WAS OVERSEAS? if ABC Company and XYZ Company both are
A. In contrast, we finished the fiscal year Q. WHAT OTHER UTILITY STOCKS DID competing for the same market share,
with approximately 28% of the Fund's THE FUND HOLD? then the service companies and equip-
holdings in the foreign sector. The foreign A. The Fund had significant positions ment providers benefit first because
utilities sector continued to offer the Fund in natural gas, water, and services and the service companies and equipment
the best opportunities for growth as more equipment utility stocks. Just under providers receive business from both
companies privatize around the world, a 10% of the portfolio was in natural gas competing companies. The rapidly chang-
trend we expect to continue. The roaring holdings, the third-largest industry ing environment for both telecommunica-
stock markets in Europe produced excel- weighting. Additionally, the top two posi- tion and electric companies may make
lent returns that enhanced the Fund's tions in the portfolio--El Paso Energy the service and equipment providers a
performance. Two European holdings, Cap. Trust, Inc., and The Williams Com- good area for growth. Approximately 8%
Telecom Italia S.p.A. and National Grid of the Fund is in the service and
equipment providers sector in familiar
GROWTH OF A $10,000 INVESTMENT names as Lucent Technologies, Inc.,
Nokia Corporation, and Superior
From 5/2/94-6/30/98 Telecommunications.
AIM V.I. Global S&P 500 Lipper Utilities Q. WHAT IS YOUR MARKET OUTLOOK
Utilities Fund Stock Index Fund Index FOR UTILITIES IN THE NEAR FUTURE?
5/2/94 $10,000 $10,000 $10,000 A. We are in the midst of the third
7/31/94 9,920 10,239 9,848 year of very good growth for utilities.
10/31/94 9,921 10,628 9,777 We believe this growth can be sustained
1/31/95 9,944 10,660 9,938 for a while. The uncertain markets of
4/30/95 10,259 11,740 10,241 recent times have brought many unlikely
7/31/95 11,015 12,904 10,815 investors into the utility sector, and
10/31/95 11,626 13,432 11,509 this has caused outstanding performance
1/31/96 12,441 14,775 12,409 returns that usually are not associated
4/30/96 12,420 15,281 12,171 with this sector. Furthermore, it is
7/31/96 12,282 15,035 12,012 AVERAGE ANNUAL TOTAL RETURN important to note that these returns
10/31/96 13,138 16,664 12,724 are coming with lower volatility than
1/31/97 14,030 18,666 13,575 As of 6/30/98 other investments.
4/30/97 13,821 19,117 13,313 While it is unrealistic to expect
7/31/97 15,415 22,865 14,723 1 Year 22.96% continued annual returns of 20% for the
10/31/97 15,502 22,011 14,968 Fund, we are positive on the utilities
12/31/97 16,936 23,686 16,683 Inception (5/2/94) 15.68 sector overall. The new, competitive
4/30/98 18,398 26,959 18,209 marketplace means utility stocks will
6/30/98 18,332 27,564 18,137 see more volatility than ever before.
However, we expect utilities poten-
Past performance figures shown represent the AIM V.I. Global Utilities Fund and are not tially to have the lowest volatility
intended to reflect actual annuity values, and do not reflect charges at the separate of any stock in any particular country.
account level which, if applied, would lower the performance results. The Fund's per- Given the global outlook for stable
formance figures are historical and reflect reinvestment of all distributions and interest rates and healthy, moderate
changes in the net asset value. The Fund's investment return and principal value will growth in most areas in which the
fluctuate so that Fund shares, when redeemed, may be worth more or less than their Fund invests, the market conditions
original cost. Source: Towers Data Systems HYPO/REGISTERED TRADEMARK/. seem favorable for utility companies
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of and the Fund for the remainder of 1998.
unmanaged securities widely regarded by investors to be representative of the
stock market in general. The unmanaged Lipper Utilities Fund Index is an average
of the performance of the 30 largest utilities funds tracked by Lipper Analytical
Services, Inc., an independent mutual fund performance monitor.
The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the per-
formance of 30 large-company stocks.
An investment cannot be made in the indexes listed. Index results include
reinvested dividends.
52 AIM V.I. GLOBAL UTILITIES FUND
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 45.92%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.61%
Univision Communications Inc.(a) 4,200 $ 156,450
==================================================================
COMMUNICATIONS EQUIPMENT - 3.63%
ADC Telecommunications, Inc.(a) 4,800 175,351
- ------------------------------------------------------------------
Lucent Technologies, Inc. 4,200 349,387
- ------------------------------------------------------------------
NEXTLINK Communications, Inc.-Class A(a) 1,100 41,663
- ------------------------------------------------------------------
Qwest Communications International Inc.(a) 6,400 223,200
- ------------------------------------------------------------------
Tellabs, Inc.(a) 1,600 114,600
- ------------------------------------------------------------------
US LEC Corp. - Class A(a) 1,300 27,137
- ------------------------------------------------------------------
931,338
- ------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.03%
Evolving Systems, Inc.(a) 300 3,319
- ------------------------------------------------------------------
Mobius Management Systems, Inc.(a) 300 4,500
- ------------------------------------------------------------------
7,819
- ------------------------------------------------------------------
ELECTRIC COMPANIES - 14.07%
Allegheny Energy, Inc. 7,300 219,912
- ------------------------------------------------------------------
Boston Edison Co. 3,400 141,100
- ------------------------------------------------------------------
Carolina Power & Light Co. 4,400 190,850
- ------------------------------------------------------------------
Cinergy Corp. 5,100 178,500
- ------------------------------------------------------------------
DQE, Inc. 7,000 252,000
- ------------------------------------------------------------------
Edison International 5,100 150,769
- ------------------------------------------------------------------
Energy East Corp. 6,000 249,750
- ------------------------------------------------------------------
FPL Group, Inc. 5,600 352,800
- ------------------------------------------------------------------
IPALCO Enterprises, Inc. 2,000 88,875
- ------------------------------------------------------------------
New Century Energies, Inc. 4,500 204,469
- ------------------------------------------------------------------
NIPSCO Industries, Inc. 11,600 324,800
- ------------------------------------------------------------------
Pinnacle West Capital Corp. 11,000 495,000
- ------------------------------------------------------------------
Public Service Company of New Mexico 4,700 106,631
- ------------------------------------------------------------------
Sierra Pacific Resources 3,700 134,356
- ------------------------------------------------------------------
Southern Co. 7,600 210,425
- ------------------------------------------------------------------
Teco Energy, Inc. 7,100 190,369
- ------------------------------------------------------------------
Texas Utilities Co. 2,840 118,215
- ------------------------------------------------------------------
3,608,821
- ------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.12%
ONIX Systems, Inc.(a) 2,100 27,037
- ------------------------------------------------------------------
RELTEC Corp.(a) 100 4,501
- ------------------------------------------------------------------
31,538
- ------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.23%
Quanta Services, Inc.(a) 4,000 58,750
- ------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.03%
Charles River Associates Inc.(a) 300 7,500
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (SPECIALIZED) - 0.67%
Superior TeleCom Inc. 4,125 $ 171,703
- ----------------------------------------------------------------------
NATURAL GAS - 5.61%
Coastal Corp. (The) 1,400 97,737
- ----------------------------------------------------------------------
Columbia Energy Group 2,700 150,187
- ----------------------------------------------------------------------
Energen Corp. 2,800 56,350
- ----------------------------------------------------------------------
KN Energy, Inc. 4,600 249,262
- ----------------------------------------------------------------------
Public Service Company of North Carolina, Inc. 3,200 69,600
- ----------------------------------------------------------------------
Sonat, Inc. 5,400 208,575
- ----------------------------------------------------------------------
Williams Companies, Inc. (The) 18,000 607,500
- ----------------------------------------------------------------------
1,439,211
- ----------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp.(a) 2,400 126,151
- ----------------------------------------------------------------------
CalEnergy Co., Inc.(a) 5,400 162,338
- ----------------------------------------------------------------------
288,489
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.59%
Alexandria Real Estate Equities, Inc. 3,400 101,787
- ----------------------------------------------------------------------
Anthracite Mortgage Capital Inc. 2,000 27,750
- ----------------------------------------------------------------------
Boston Properties, Inc. 4,300 148,350
- ----------------------------------------------------------------------
CCA Prison Realty Trust 3,000 91,875
- ----------------------------------------------------------------------
Corporate Office Properties Trust, Inc. 3,500 31,062
- ----------------------------------------------------------------------
Correctional Properties Trust(a) 800 16,200
- ----------------------------------------------------------------------
Crescent Real Estate Equities, Co. 2,300 77,338
- ----------------------------------------------------------------------
Entertainment Properties Trust 700 12,775
- ----------------------------------------------------------------------
Golf Trust of America, Inc. 1,300 44,688
- ----------------------------------------------------------------------
Mack-Cali Realty Corp. 2,000 68,750
- ----------------------------------------------------------------------
Meditrust Corp. 2,500 69,844
- ----------------------------------------------------------------------
Patriot American Hospitality, Inc. 6,599 157,963
- ----------------------------------------------------------------------
Starwood Hotels & Resorts 1,500 72,469
- ----------------------------------------------------------------------
920,851
- ----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.20%
Metzler Group, Inc.(a) 1,400 51,275
- ----------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.22%
Hyperion Telecommunications, Inc.(a) 3,600 56,475
- ----------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.71%
IXC Communications, Inc.(a) 3,300 160,050
- ----------------------------------------------------------------------
Pacific Gateway Exchange, Inc.(a) 3,200 128,200
- ----------------------------------------------------------------------
WinStar Communications, Inc.(a) 6,100 261,919
- ----------------------------------------------------------------------
WorldCom, Inc.(a) 8,287 401,401
- ----------------------------------------------------------------------
951,570
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
53
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE - 12.08%
Advanced Communications Group, Inc.(a) 1,800 $ 12,488
- -----------------------------------------------------------------------------
Ameritech Corp. 10,200 457,725
- -----------------------------------------------------------------------------
Bell Atlantic Corp. 3,600 164,250
- -----------------------------------------------------------------------------
BellSouth Corp. 6,900 463,163
- -----------------------------------------------------------------------------
Century Telephone Enterprises 6,800 311,950
- -----------------------------------------------------------------------------
Cincinnati Bell, Inc. 13,300 380,712
- -----------------------------------------------------------------------------
Electric Lightwave, Inc. - Class A(a) 6,300 69,694
- -----------------------------------------------------------------------------
GTE Corp. 3,200 178,000
- -----------------------------------------------------------------------------
Intermedia Communications Inc.(a) 2,400 100,650
- -----------------------------------------------------------------------------
McLeodUSA Inc. - Class A(a) 3,100 120,512
- -----------------------------------------------------------------------------
SBC Communications, Inc. 13,200 528,000
- -----------------------------------------------------------------------------
SCC Communications Corp.(a) 3,500 42,875
- -----------------------------------------------------------------------------
Teleport Communications Group Inc. - Class A(a) 2,800 151,900
- -----------------------------------------------------------------------------
US West, Inc. 2,500 117,500
- -----------------------------------------------------------------------------
3,099,419
- -----------------------------------------------------------------------------
Total Domestic Common Stocks (Cost $8,094,110) 11,781,209
- -----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 5.50%
COMMUNICATIONS EQUIPMENT - 0.58%
NEXTLINK Communications, Inc. - $3.25 Conv. Pfd.
(Acquired 03/26/98; Cost $145,000)(b) 2,900 148,245
- -----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.08%
Salomon Smith Barney Holdings - $3.48 Conv. Pfd. DECS 400 22,375
- -----------------------------------------------------------------------------
NATURAL GAS - 3.04%
El Paso Energy Cap Trust, Inc. - $2.375 Conv. Pfd. 12,600 667,800
- -----------------------------------------------------------------------------
MCN Corp. - $2.013 Conv. PRIDES 4,800 113,700
- -----------------------------------------------------------------------------
781,500
- -----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.39%
AES Trust II - $2.69 Conv. Pfd. 4,000 233,280
- -----------------------------------------------------------------------------
AES Trust II - $2.75 Conv. Pfd. 2,100 122,472
- -----------------------------------------------------------------------------
355,752
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.41%
Winstar Communications - $3.50 Conv. Pfd.(b) (Acquired
03/12/98; Cost $95,000) 1,900 104,025
- -----------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks
(Cost $1,387,867) 1,411,897
- -----------------------------------------------------------------------------
DOMESTIC NON-CONVERTIBLE PREFERRED
STOCKS - 0.25%
ENTERTAINMENT - 0.25%
Time Warner Inc. - Series M, $102.50 PIK Pfd. 58 64,888
- -----------------------------------------------------------------------------
Total Domestic Non-Convertible Preferred Stocks (Cost
$52,105) 64,888
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 24.05%
ARGENTINA - 0.36%
Central Costanera S.A. - Class B (Electric Companies) 20,700 $ 60,039
- -------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 1,000 32,437
- -------------------------------------------------------------------------------
92,476
- -------------------------------------------------------------------------------
AUSTRALIA - 0.14%
Telstra Corp. Ltd. (Telephone) 14,380 36,973
- -------------------------------------------------------------------------------
AUSTRIA - 0.45%
Oesterreichische Elektrizitaetswirtschafts A.G. - Class
A (Electric Companies) 970 116,247
- -------------------------------------------------------------------------------
BELGIUM - 0.44%
Electrabel S.A. (Electric Companies) 400 113,471
- -------------------------------------------------------------------------------
BRAZIL - 1.18%
Centrais Eletricas de Santa Catarina S.A. (Electric
Companies) 40,000 30,435
- -------------------------------------------------------------------------------
Companhia Paranaense de Energia (Electric Companies) 3,100 28,675
- -------------------------------------------------------------------------------
Eletricidade de Sao Paulo S.A. (Electric Companies) 270 20,310
- -------------------------------------------------------------------------------
Empresa Bandeirante de Energia S.A. (Electric
Companies)(a) 270 4,272
- -------------------------------------------------------------------------------
Empresa Metropolitana de Aguas e Energia S.A. (Electric
Companies)(a) 270 210
- -------------------------------------------------------------------------------
Empresa Paulista de Transmissao de Energia Eletrica S.A.
(Electric Companies)(a) 270 955
- -------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. - ADR (Telephone) 2,000 218,375
- -------------------------------------------------------------------------------
303,232
- -------------------------------------------------------------------------------
CANADA - 1.51%
Laidlaw One, Inc. - $1.22 Conv. Pfd. (Waste Management) 2,500 91,250
- -------------------------------------------------------------------------------
MetroNet Communications Corp. - Class B (Communications
Equipment)(a) 1,800 50,850
- -------------------------------------------------------------------------------
TELUS Corp. (Telecommunications - Cellular & Wireless) 4,300 111,223
- -------------------------------------------------------------------------------
Westcoast Energy Inc. (Natural Gas) 5,500 122,719
- -------------------------------------------------------------------------------
Westshore Terminals Income Fund (Services - Facilities &
Environmental) 2,200 10,468
- -------------------------------------------------------------------------------
386,510
- -------------------------------------------------------------------------------
CHILE - 0.81%
Cia. de Telecomunicaciones de Chile S.A. - ADR
(Telephone) 6,300 127,969
- -------------------------------------------------------------------------------
Enersis S.A. - ADR (Electric Companies) 3,300 80,644
- -------------------------------------------------------------------------------
208,613
- -------------------------------------------------------------------------------
DENMARK - 0.29%
Tele Danmark A.S. - ADR (Telephone) 1,600 75,400
- -------------------------------------------------------------------------------
FINLAND - 0.57%
Nokia Oyj A.B. - Class A - ADR (Communications
Equipment) 2,000 145,125
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
54
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - 0.88%
Alstom (Engineering & Construction)(a) 2,600 $ 85,598
- -------------------------------------------------------------------------------
France Telecom S.A. - ADR (Communications Equipment) 2,000 139,125
- -------------------------------------------------------------------------------
224,723
- -------------------------------------------------------------------------------
GERMANY - 1.57%
RWE A.G. (Electric Companies) 2,425 143,620
- -------------------------------------------------------------------------------
VEBA A.G. (Manufacturing - Diversified) 1,310 88,156
- -------------------------------------------------------------------------------
Viag A.G. (Manufacturing - Diversified) 250 172,185
- -------------------------------------------------------------------------------
403,961
- -------------------------------------------------------------------------------
HUNGARY - 0.36%
Magyar Tavkozlesi ADR (Telecommunications - Long
Distance) 3,100 91,256
- -------------------------------------------------------------------------------
ISRAEL - 0.20%
Gilat Communications Ltd. (Telecommunications -
Cellular/Wireless)(a) 5,800 50,025
- -------------------------------------------------------------------------------
ITALY - 3.00%
Societa Nordelettrica S.p.A. (Electric Companies) 49,000 134,114
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 38,025 232,120
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 55,277 404,042
- -------------------------------------------------------------------------------
770,276
- -------------------------------------------------------------------------------
JAPAN - 0.50%
Nippon Telegraph & Telephone Corp.
(Telecommunications - Long Distance) 90 74,957
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. - ADR
(Telecommunications - Long Distance) 1,300 54,600
- -------------------------------------------------------------------------------
129,557
- -------------------------------------------------------------------------------
NETHERLANDS - 0.58%
KPN N.V. (Telecommunications - Long Distance) 284 10,938
- -------------------------------------------------------------------------------
Royal PTT Nederland N.V. - ADR (Services - Commercial &
Consumer) 2,033 129,350
- -------------------------------------------------------------------------------
TNT Post Group N.V. (Air Freight)(a) 284 7,264
- -------------------------------------------------------------------------------
147,552
- -------------------------------------------------------------------------------
NEW ZEALAND - 1.03%
Sky Network Television Ltd. (Broadcasting - Television,
Radio & Cable)(a) 1,700 20,400
- -------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. - Interim ADR
(Telephone) 2,300 38,669
- -------------------------------------------------------------------------------
Telecom Corp. of New Zealand Ltd. - ADR (Telephone) 6,300 206,325
- -------------------------------------------------------------------------------
265,394
- -------------------------------------------------------------------------------
PERU - 0.25%
Luz Del Sur S.A. (Power Producers - Independent) 1,700 18,912
- -------------------------------------------------------------------------------
Telefonica del Peru S.A. - ADR (Telecommunications -
Long Distance) 2,200 44,963
- -------------------------------------------------------------------------------
63,875
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
PORTUGAL - 1.77%
Electricidade de Portugal, S.A. - ADR (Electric
Companies) 3,700 $ 170,431
- -----------------------------------------------------------------------------
Portugal Telecom S.A. - ADR (Telephone) 4,700 248,806
- -----------------------------------------------------------------------------
Telecel - Comunicacaoes Pessoais, S.A.
(Telecommunications - Cellular/Wireless) 200 35,500
- -----------------------------------------------------------------------------
454,737
- -----------------------------------------------------------------------------
SPAIN - 2.22%
Autopistas Concesionaria Espanola S.A. (Services -
Commercial & Consumer) 3,900 60,401
- -----------------------------------------------------------------------------
Autopistas Concesionaria Espanola S.A. - Rts., expiring
07/10/98 (Services - Commercial & Consumer)(a) 3,900 3,020
- -----------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 15,700 254,927
- -----------------------------------------------------------------------------
Telefonica de Espana - ADR (Telephone) 1,800 250,312
- -----------------------------------------------------------------------------
568,660
- -----------------------------------------------------------------------------
SWEDEN - 0.85%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 7,600 217,550
- -----------------------------------------------------------------------------
UNITED KINGDOM - 5.09%
Hyder PLC (Water Utilities) 4,280 67,144
- -----------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 10,313 69,609
- -----------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 30,695 424,616
- -----------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Companies) 1,100 62,012
- -----------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 15,950 139,900
- -----------------------------------------------------------------------------
Southern Electric PLC (Electric Companies) 9,706 87,890
- -----------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 14,979 218,097
- -----------------------------------------------------------------------------
Wessex Water PLC (Water Utilities) 11,792 90,230
- -----------------------------------------------------------------------------
Yorkshire Water PLC (Water Utilities) 19,580 146,551
- -----------------------------------------------------------------------------
1,306,049
- -----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$4,464,562) 6,171,662
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC NON-CONVERTIBLE BONDS & NOTES - 5.68%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.42%
Comcast Corp., Sr. Sub. Deb., 9.50%,
01/15/08 $ 100,000 106,500
- -----------------------------------------------------------------------------
CONSUMER FINANCE - 0.32%
GMAC, Notes, 9.00%, 10/15/02 75,000 83,219
- -----------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.74%
El Paso Electric Co., Series D Sec. First Mortgage
Bonds, 8.90%, 02/01/06 75,000 84,595
- -----------------------------------------------------------------------------
Western Resources Inc., Sr. Notes, 7.125%, 08/01/09 100,000 104,590
- -----------------------------------------------------------------------------
189,185
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
55
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT - 1.10%
Time Warner, Inc.,
Deb., 9.125%, 01/15/13 $ 100,000 $ 123,396
- ----------------------------------------------------------------------------
Notes, 8.18%, 08/15/07 75,000 83,569
- ----------------------------------------------------------------------------
Unsec. Deb., 6.85%, 01/15/26 75,000 76,455
- ----------------------------------------------------------------------------
283,420
- ----------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.42%
California Energy Co., Notes, 10.25%, 01/15/04 100,000 107,750
- ----------------------------------------------------------------------------
NATURAL GAS - 0.49%
Ferrellgas Partners, Series B Sr. Sec. Gtd. Notes,
9.375%, 06/15/06 75,000 77,625
- ----------------------------------------------------------------------------
PanEnergy Corp., Notes, 7.875%, 08/15/04 45,000 48,876
- ----------------------------------------------------------------------------
126,501
- ----------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.42%
Tennessee Gas Pipeline Co., Bonds, 7.00%, 03/15/27 100,000 106,771
- ----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.12%
AES Corp., Sr. Sub. Notes, 10.25%, 07/15/06 75,000 81,750
- ----------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 82,900
- ----------------------------------------------------------------------------
Indiana Michigan Power, Sec. Lease Obligation Bonds,
9.82%, 12/07/22 93,413 123,258
- ----------------------------------------------------------------------------
287,908
- ----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.65%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 165,653
- ----------------------------------------------------------------------------
Total Domestic Non-Convertible Bonds & Notes (Cost
$1,357,753) 1,456,907
- ----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE BONDS - 3.14%
COMMUNICATIONS EQUIPMENT - 0.77%
Global Telesystems Group, Conv. Sr. Sub. Notes, 8.75%,
06/30/00 80,000 197,700
- ----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.17%
Candescent Technology Corp., Conv. Sr. Sub. Deb.,
7.00%, 05/01/03 (Acquired 04/17/98; Cost $300,000)(b) 300,000 300,000
- ----------------------------------------------------------------------------
CONSUMER FINANCE - 1.20%
Bell Atlantic Financial Services, Conv. Bonds, 5.75%,
04/01/03 (Acquired 02/12/98; Cost $300,000)(b) 300,000 307,314
- ----------------------------------------------------------------------------
Total Domestic Convertible Bonds (Cost $743,463) 805,014
- ----------------------------------------------------------------------------
FOREIGN NON-CONVERTIBLE BONDS & NOTES - 3.65%(c)
CANADA - 1.89%
Bell Canada (Telecommunications - Cellular/Wireless)
Deb., 10.875%, 10/11/04 CAD 50,000 42,710
- ----------------------------------------------------------------------------
Series EW Deb., 8.80%, 08/17/05 50,000 40,183
- ----------------------------------------------------------------------------
Canadian Oil Debco Inc. (Oil & Gas - Exploration &
Production), Deb., 11.00%, 10/31/00 100,000 76,238
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
CANADA - (CONTINUED)
<S> <C> <C>
Ontario Hydro (Electric Companies), Global Bonds,
9.00%, 06/24/02 CAD 100,000 $ 76,498
- ----------------------------------------------------------------------------
Telegobe Canada, Inc. (Telephone), Unsec. Deb.,
8.35%, 06/20/03 100,000 75,554
- ----------------------------------------------------------------------------
Trans-Canada Pipelines (Oil & Gas - Exploration &
Production)
Series Q Deb., 10.625%, 10/20/09 125,000 117,743
- ----------------------------------------------------------------------------
Unsec. Notes, 8.55%, 02/01/06 70,000 55,574
- ----------------------------------------------------------------------------
484,500
- ----------------------------------------------------------------------------
UNITED KINGDOM - 1.76%
National Grid Co. PLC (Electric Companies), Bonds,
4.25%, 02/17/08 GBP 240,000 452,091
- ----------------------------------------------------------------------------
Total Foreign Non-Convertible Bonds & Notes (Cost
$878,803) 936,591
- ----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 1.24%
U.S. TREASURY BONDS - 0.64%
7.625%, 02/15/25 $ 130,000 163,696
- ----------------------------------------------------------------------------
U.S. TREASURY NOTES - 0.60%
6.625%, 06/30/01 150,000 154,317
- ----------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $292,052) 318,013
- ----------------------------------------------------------------------------
REPURCHASE AGREEMENT - 9.39%(d)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98
(Cost $2,409,754)(e) 2,409,754 2,409,754
- ----------------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 98.82% 25,355,935
- ----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.18% 302,718
- ----------------------------------------------------------------------------
NET ASSETS - 100.00% $25,658,653
============================================================================
</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 these securities at 06/30/98 was $859,584 which
represented 3.35% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency of country indicated.
(d) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreements. The collateral is
marked to market daily to ensure its market value as being 102% of the
sales price of the repurchase agreement. The investments in some
repurchase agreements are through participation in joint accounts with
other mutual funds, private accounts, and certain non-registered
investment companies managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 6/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 at $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
CAD - Canadian Dollar
Conv. - Convertible
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
GBP - British Pound Sterling
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
PRIDES - Preferred Redeemable Increased Dividend Equity Securities
Rts. - Rights
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
56
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $19,680,469) $25,355,935
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $124,133) 124,578
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 122,513
- ---------------------------------------------------------------------
Investments sold 173,577
- ---------------------------------------------------------------------
Dividends and interest 128,266
- ---------------------------------------------------------------------
Investment for deferred compensation plan 14,772
- ---------------------------------------------------------------------
Other assets 19
- ---------------------------------------------------------------------
Total assets 25,919,660
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 219,602
- ---------------------------------------------------------------------
Capital stock reacquired 10
- ---------------------------------------------------------------------
Deferred compensation plan 14,772
- ---------------------------------------------------------------------
Foreign currency contracts 23
- ---------------------------------------------------------------------
Accrued advisory fees 13,317
- ---------------------------------------------------------------------
Accrued directors' fees 2,024
- ---------------------------------------------------------------------
Accrued administrative services fees 3,729
- ---------------------------------------------------------------------
Accrued operating expenses 7,530
- ---------------------------------------------------------------------
Total liabilities 261,007
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $25,658,653
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,538,611
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $16.68
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $18,848 foreign withholding tax) $ 271,232
- -------------------------------------------------------------------------------
Interest 174,614
- -------------------------------------------------------------------------------
Total investment income 445,846
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 77,543
- -------------------------------------------------------------------------------
Administrative services fees 22,318
- -------------------------------------------------------------------------------
Custodian fees 11,744
- -------------------------------------------------------------------------------
Directors' fees and expenses 4,356
- -------------------------------------------------------------------------------
Professional fees 10,670
- -------------------------------------------------------------------------------
Other 5,708
- -------------------------------------------------------------------------------
Total expenses 132,339
- -------------------------------------------------------------------------------
Less: Expenses paid indirectly (257)
- -------------------------------------------------------------------------------
Net expenses 132,082
- -------------------------------------------------------------------------------
Net investment income 313,764
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 618,994
- -------------------------------------------------------------------------------
Foreign currencies 9,501
- -------------------------------------------------------------------------------
Futures contracts 110,924
- -------------------------------------------------------------------------------
Option contracts 920
- -------------------------------------------------------------------------------
740,339
- -------------------------------------------------------------------------------
Net unrealized appreciation of:
Investment securities 1,051,364
- -------------------------------------------------------------------------------
Foreign currencies 1,343
- -------------------------------------------------------------------------------
1,052,707
- -------------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, futures and
option contracts 1,793,046
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations $2,106,810
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
57
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 313,764 $ 458,649
- -------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, futures and option contracts 740,339 176,145
- -------------------------------------------------------------------------------
Net unrealized appreciation of investment securities
and foreign currencies 1,052,707 2,779,707
- -------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,106,810 3,414,501
- -------------------------------------------------------------------------------
Distributions from net realized gains -- (6,795)
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 1,472,982 5,095,582
- -------------------------------------------------------------------------------
Net increase in net assets 3,579,792 8,503,288
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 22,078,861 13,575,573
- -------------------------------------------------------------------------------
End of period $25,658,653 $22,078,861
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $18,309,021 $16,836,039
- -------------------------------------------------------------------------------
Undistributed net investment income 753,340 439,576
- -------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and option
contracts 919,991 179,652
- -------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and option contracts 5,676,301 4,623,594
- -------------------------------------------------------------------------------
$25,658,653 $22,078,861
===============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Global Utilities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income, and as a secondary
objective the Fund seeks to achieve capital appreciation, by investing
primarily in the common and preferred stocks of public utility companies
(either domestic or foreign). Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or, absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between last bid and asked
prices based upon quotes furnished by independent sources. Securities for
which market quotations either are not readily available or are questionable
are valued at fair value as determined in good faith by or under the
supervision of the Company's officers in a manner specifically authorized by
the Board of Directors. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value.
Generally, trading in
AIM V.I. GLOBAL UTILITIES FUND
58
<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. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Dividend income and distributions to shareholders are recorded on
the ex-dividend date. Realized gains or losses from securities transactions
are recorded on the identified cost basis.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollars at date of valuation. Purchases and sales of portfolio securities
and income items denominated in foreign currencies are translated into U.S.
dollar amounts on the respective dates of such transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options' underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $22,318 for such
services.
AIM V.I. GLOBAL UTILITIES FUND
59
<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 six months ended June 30, 1998, the Fund incurred legal fees of
$1,322 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $257 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $257 during the six months ended June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $5,517,127 and $2,816,382, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $5,938,875
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (263,717)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $5,675,158
=========================================================================
</TABLE>
Cost of investments for tax purposes is $19,680,777.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
-------------------- ---------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- -----------
<S> <C> <C> <C> <C>
Sold 300,517 $4,838,733 505,614 $ 6,971,987
- -----------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 459 6,795
- -----------------------------------------------------------------------
Reacquired (208,635) (3,365,751) (140,799) (1,883,200)
- -----------------------------------------------------------------------
91,882 $1,472,982 365,274 $ 5,095,582
=======================================================================
</TABLE>
NOTE 7 - OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
OPTION CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period -- $ --
- ---------------------------------------
Written 14 3,018
- ---------------------------------------
Closed (14) (3,018)
- ---------------------------------------
Expired -- --
- ---------------------------------------
End of period -- $ --
=======================================
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
60
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
JUNE 30, --------------------------- JANUARY 31,
1998 1997 1996 1995 1995
-------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 15.26 $ 12.55 $11.64 $9.69 $10.00
- -----------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.19 0.32 0.40 0.29 0.27
- -----------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 1.23 2.40 0.99 1.98 (0.33)
- -----------------------------------------------------------------------------------------
Total from investment
operations 1.42 2.72 1.39 2.27 (0.06)
- -----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- (0.41) (0.31) (0.25)
- -----------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.01) (0.07) (0.01) --
- -----------------------------------------------------------------------------------------
Total distributions -- (0.01) (0.48) (0.32) (0.25)
- -----------------------------------------------------------------------------------------
Net asset value, end of
period $ 16.68 $ 15.26 $12.55 $11.64 $ 9.69
=========================================================================================
Total return(a) 9.31% 21.63% 12.07% 23.73% (0.56)%
=========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $25,659 $22,079 $13,576 $8,394 $2,958
=========================================================================================
Ratio of expenses to
average net assets 1.11%(b) 1.28% 1.40%(c) 1.47%(c)(d) 1.31%(d)(e)
=========================================================================================
Ratio of net investment
income to average net
assets 2.63%(b) 2.81% 3.56%(c) 3.76%(c)(d) 4.39%(d)(e)
=========================================================================================
Portfolio turnover rate 13% 28% 47% 58% 69%
=========================================================================================
Average brokerage
commission rate paid(f) $0.0383 $0.0365 $0.0477 N/A N/A
=========================================================================================
</TABLE>
(a) Totals returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $24,057,019.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.55%, 3.42%, 2.44% (annualized) and 2.79%
(annualized) for 1996 and 1995, respectively.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 2.80% (annualized) and 2.90% (annualized),
respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. GLOBAL UTILITIES FUND
61
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
AIM V.I. GOVERNMENT SECURITIES FUND
PERFORMS WELL IN MIXED BOND MARKET
A roundtable discussion with the Fund management team for AIM V.I. Government Securities Fund
for the six-month period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. INVESTORS WERE ATTRACTED TO THE returns. With inflation low and no immedi- fered investors similar choices. Five-year
RELATIVE SAFETY OF U.S. GOVERNMENT ate threat of action from the Fed, the Fund notes will now be auctioned quarterly
ISSUES DURING THE FIRST HALF OF continued to employ a barbell strategy. By instead of monthly.
1998. HOW DID THE FUND PERFORM holding a combination of short- and long- These changes will allow the Treasury to
DURING THIS PERIOD? term bonds, the Fund is more flexible and increase the size of other auctions (for
A. Total return for the Fund was 3.66%, able to take advantage of opportunities in two-year notes, for instance), while reduc-
edging out the Lehman Brothers Intermedi- different interest-rate environments. The ing the total amount of money it borrows.
ate Government Bond Index return of shorter-term bond holdings can help tem- Overall, a smaller supply could drive the
3.39% for the first half of 1998. per volatility while the long-term bonds prices of bonds up, decreasing yields.
provide income and total return opportuni-
Q. WHAT WERE THE MAJOR ISSUES ties. Mortgage-backed obligations issued Q. HOW WAS THE FUND POSITIONED AT
AFFECTING FIXED-INCOME MARKETS? by U.S. government agencies offer the Fund THE END OF THE REPORTING PERIOD?
A. Overall, the first half of 1998 was attractive, lower-risk returns as well. A. As always, we diversify our portfolio
a favorable environment for bonds. A among different sectors of the government
thriving domestic economy and solid Q. HOW DID YOU MANAGE THE MORT-
corporate cash flows encouraged fixed- GAGE PORTION OF THE PORTFOLIO?
income investors. There was no policy A. Market volatility has been relatively PORTFOLIO COMPOSITION
change from the Federal Reserve Board low, which makes mortgages more attractive
(the Fed). However, there was signi- than Treasuries. We've kept a slight over- As of 6/30/98, based on total net assets
ficant uncertainty about the effects of weight position in mortgage bonds because
economic turmoil overseas, particularly of their ability to add incremental yield. Pie Chart
in emerging markets, which prompted a A Treasury rally like the one we saw at
flight to quality. During May and June, the end of the second quarter is often a Mortgage-backed Obligations 61.44%
investors started to worry about Asia's sign of a possible increase in mortgage U.S. Agency Debentures 20.18%
impact on corporate profits, and they refinancings. However, during the report- Cash Equivalents 4.57%
turned to high-quality, long-term bonds ing period, the Fund was not greatly af- U.S. Treasury Obligations 13.81%
for safety. fected by refinancing. That's due, in
The result was a narrow rally that part, to our mortgage selection strategy. BREAKDOWN OF MORTGAGE-BACKED OBLIGATIONS
sent the yield on the 30-year Treasury See the box on the facing page to read
bond to its lowest levels since the more about our approach. Federal National Mortgage Assn. 22.71%
1960s, falling to 5.63% at the end of Federal Home Loan Mortgage Corp. 41.78%
the reporting period. Long bonds Q. HOW WILL CHANGES IN TREASURY Government National Mortgage
vacillated during the reporting period, SUPPLY AFFECT THE GOVERNMENT Assn. 35.51%
but within a very narrow range: from a BOND MARKET?
low of 5.57% to a high of 6.07%. A. The government's need for financing is Weighted Average Maturity 7.16 years
The yield curve flattened considerably, shrinking in light of a substantial Duration 4.07 years
so that the spread between the two-year surplus. In May, the Treasury Department
note and the 30-year Treasury note announced a major restructuring of its Please keep in mind that the Fund's
shrank to just 16 basis points as of calendar for selling intermediate-term portfolio composition is subject to change
June 30, 1998. (A basis point is one government securities. Three-year notes, and there is no assurance the Fund will
one-hundredth of a percentage point.) which have been auctioned monthly since continue to hold any particular security.
1976, will now be eliminated. The Treasury
Q. WHAT WAS YOUR MANAGEMENT felt that two-year and five-year notes of-
STRATEGY IN THIS ENVIRONMENT?
A. Our goal in managing the Fund is to
achieve low volatility and competitive
</TABLE>
62 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
<TABLE>
<S> <C> <C>
market to participate in the best-perform- Q. WHAT IS YOUR OUTLOOK FOR THE ---------------------------------------
ing areas. While our emphasis during the GOVERNMENT BOND MARKET? THE MORTGAGE SELECTION PROCESS
reporting period was on mortgage-backed A. Interest rates can't keep going down
obligations, we maintained exposure to forever. However, if inflation stays low, the Selecting mortgage bonds for the
each of the government market sectors. At Fed will probably remain hesitant to raise Fund's portfolio is a research-intensive
the end of the reporting period, the Fund's rates. Fed Chairman Alan Greenspan, process. We hope to find mortgages
total net assets were divided among the speaking to Congress in July (after the end that will increase returns and that are
four asset classes as follows: 61.44% mort- of the reporting period), warned that the less likely to be refinanced, since
gage obligations, 13.81% U.S. Treasury tight labor market could eventually acceler- refinancings can create uncertain cash
obligations, 20.18% U.S. Agency deben- ate inflation, which could lead to an in- flows in the Fund.
tures, and 4.57% cash equivalents. crease in rates. We remain alert to the Projecting the rate of refinancing
The weighted average maturity of the possibility of a modest resurrection of depends, of course, on economic vari-
portfolio was 7.16 years and its average inflation during 1999. ables like interest rates inflation, and
duration was 4.07 years. The Fund's aver- No matter which way interest rates go, business development. But we also
age credit rating was AAA, the highest we are able to alter our strategy to respond consider demographic variables such
credit rating possible, as measured by to different market conditions. We can as mobility and population trends. In
Standard and Poor's (S&P), a widely change the percentage of the portfolio certain areas populated by younger
known credit rating agency. These ratings devoted to mortgages vs. Treasuries, or we homeowners the refinancing rate tends
are historical and are based on analysis of can shorten the barbell by investing in to be higher than in older, more estab-
the credit quality of the individual shorter Treasuries or agency issues. lished areas. Even the month of the
securities in the Fund's portfolio. year can affect the refinancing rate.
School vacations, homebuilding activ-
GROWTH OF A $10,000 INVESTMENT ity, and weather make relocation (and
refinancing) more likely in the late
From 5/5/93-6/30/98 spring and early summer.
Because economic and demographic
Lehman Brothers factors can vary greatly from region to
AIM V.I. Government Intermediate region, geographic diversification is an
Securities Fund Bond Index important strategy for mitigating the
(In thousands) risk in the portfolio. For instance,
5/5/93 $10,000 $10,000 compared to middle America, the econo-
7/31/93 10,180 10,165 AVERAGE ANNUAL TOTAL RETURN mies on both U.S. coasts are more
10/31/93 10,393 10,384 heavily influenced by government
1/31/94 10,478 10,477 As of 6/30/98 spending on building contracts, and the
4/30/94 9,939 10,116 mortgage markets tend to experience
7/31/94 10,069 10,258 1 Year 9.23% refinancings at different times in the
10/31/94 9,947 10,205 5 Years 5.41 business cycle.
1/31/95 10,120 10,358 Inception (5/5/93) 5.55 Another factor is the age of the
4/30/95 10,487 10,739 mortgage itself. We try to emphasize
7/31/95 10,870 11,119 well-seasoned mortgages--meaning
10/31/95 11,219 11,410 mortgages that have been on the mar-
1/31/96 11,599 11,762 ket longer. These are more likely to
4/30/96 11,225 11,550 have gone through refinancing before,
7/31/96 11,350 11,698 so we don't expect them to do it again.
10/31/96 11,713 12,056 Generally, we also emphasize bonds we
1/31/97 11,820 12,183 can purchase close to face value or
4/30/97 11,891 12,270 at discounted levels. Then, if there are
7/31/97 12,369 12,701 refinancings the Fund is likely to
10/31/97 12,572 12,940 achieve a capital gain rather than
12/31/97 12,888 13,244 a loss.
4/30/98 12,984 13,334 After weighing all of these factors,
6/30/98 13,211 13,516 we select mortgages with a variety of
maturities, loan ages, and coupons as
The performance figures shown represent the AIM V.I. Government Securities Fund and they will perform differently and help
are not intended to reflect actual annuity values, and do not reflect charges at the diversify the Fund's portfolio.
separate account level which, if applied, would lower the performance results. The ---------------------------------------
Fund's performance 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 so that Fund shares, when redeemed, may be worth more or less than their
original cost. Source: Towers Data Systems HYPO/Registered Trademark/.
The Lehman Brothers Intermediate Government Bond Index is an unmanaged composite
generally considered representative of intermediate U.S. Treasury and U.S. government
agency securities. Results shown here are for the period 5/31/93 through 6/30/98.
Source: Lipper Analytical Services, Inc.
An investment cannot be made in the indexes listed. Index results include reinvested
dividends.
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND 63
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 81.62%
FEDERAL FARM CREDIT BANK - 2.98%
Medium term notes
5.96%, 07/14/03 $ 200,000 $ 201,990
- -------------------------------------------------------------------------------
6.22%, 06/17/08 1,000,000 1,002,810
- -------------------------------------------------------------------------------
1,204,800
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN BANK BOARD - 5.89%
Debentures
8.375%, 10/25/99 150,000 155,119
- -------------------------------------------------------------------------------
6.00%, 06/27/00 250,000 251,653
- -------------------------------------------------------------------------------
5.97%, 12/11/00 1,000,000 1,006,610
- -------------------------------------------------------------------------------
7.31%, 07/06/01 500,000 521,950
- -------------------------------------------------------------------------------
8.17%, 12/16/04 400,000 451,028
- -------------------------------------------------------------------------------
2,386,360
- -------------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 14.32%
Debentures
6.13%, 08/19/99 150,000 150,797
- -------------------------------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 08/01/10 757,380 754,540
- -------------------------------------------------------------------------------
6.50%, 12/01/08 to 02/01/28 2,849,389 2,855,621
- -------------------------------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 1,576,857 1,611,396
- -------------------------------------------------------------------------------
10.50%, 08/01/19 217,082 238,449
- -------------------------------------------------------------------------------
8.50%, 08/01/24 178,060 186,629
- -------------------------------------------------------------------------------
5,797,432
- -------------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") - 32.56%
Debentures
5.261%, 06/02/99 500,000 498,995
- -------------------------------------------------------------------------------
7.55%, 04/22/02 400,000 425,096
- -------------------------------------------------------------------------------
8.50%, 02/01/05 500,000 520,110
- -------------------------------------------------------------------------------
5.75%, 06/15/05 500,000 499,060
- -------------------------------------------------------------------------------
Medium term notes
7.375%, 03/28/05 300,000 326,343
- -------------------------------------------------------------------------------
Pass through certificates
7.50%, 11/01/09 to 07/01/27 3,102,282 3,194,511
- -------------------------------------------------------------------------------
6.50%, 10/01/10 to 06/01/23 1,527,214 1,538,342
- -------------------------------------------------------------------------------
7.00%, 07/01/11 to 01/01/28 5,315,666 5,416,211
- -------------------------------------------------------------------------------
8.50%, 09/01/24 225,851 236,718
- -------------------------------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 1,800,000 517,788
- -------------------------------------------------------------------------------
13,173,174
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") -
21.82%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 $ 76,607 $ 83,003
- ---------------------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 142,702 154,773
- ---------------------------------------------------------------------------
11.00%, 10/15/15 45,419 50,997
- ---------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 29,885 32,938
- ---------------------------------------------------------------------------
6.50%, 12/15/23 450,648 453,320
- ---------------------------------------------------------------------------
8.00%, 10/15/25 to 07/15/26 2,873,721 2,992,130
- ---------------------------------------------------------------------------
7.50%, 05/15/27 999,426 1,029,089
- ---------------------------------------------------------------------------
7.00%, 04/15/28 to 06/15/28 3,966,350 4,032,033
- ---------------------------------------------------------------------------
8,828,283
- ---------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 0.78%
Debentures
7.30%, 01/31/02 300,000 315,513
- ---------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 1.99%
Debentures
5.27%, 02/22/99 500,000 499,785
- ---------------------------------------------------------------------------
5.55%, 12/15/99 150,000 149,777
- ---------------------------------------------------------------------------
6.50%, 08/01/02 150,000 154,370
- ---------------------------------------------------------------------------
803,932
- ---------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 1.28%
Debentures
6.375%, 06/15/05 500,000 517,335
- ---------------------------------------------------------------------------
Total U.S. Government Agency Securities (Cost
$32,381,764) 33,026,829
- ---------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 13.81%
U.S. TREASURY NOTES & BONDS - 12.84%
6.125%, 12/31/01 to 11/15/27 3,000,000 3,173,740
- ---------------------------------------------------------------------------
6.00%, 07/31/02 300,000 305,025
- ---------------------------------------------------------------------------
6.625%, 05/15/07 500,000 537,375
- ---------------------------------------------------------------------------
7.50%, 11/15/16 500,000 600,265
- ---------------------------------------------------------------------------
6.875%, 08/15/25 500,000 579,200
- ---------------------------------------------------------------------------
5,195,605
- ---------------------------------------------------------------------------
U.S. TREASURY STRIPS(A) - 0.97%
6.80%, 11/15/18 1,250,000 390,525
- ---------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $5,276,279) 5,586,130
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENT - 8.99%(b)
SBC Capital Markets, Inc., 5.85%,
07/01/98(c) (Cost $3,637,967) 3,637,967 3,637,967
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 104.42% 42,250,926
- ---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (4.42)% (1,788,382)
- ---------------------------------------------------------------------------
NET ASSETS - 100.00% $40,462,544
===========================================================================
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
64
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) STRIPS are traded on a discount basis. In such cases the interest rate
shown represents the rate of discount paid or received at the time of
purchase by the Fund.
(b) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(c) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$1,000,162,500. Collateralized by $3,590,870,000 U.S. Government
obligations, 0%, due 08/15/00 to 11/15/24 with an aggregate market value at
06/30/98 of $1,148,593,549.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
65
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $41,296,010) $ 42,250,926
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 26,552
- ----------------------------------------------------------------------
Interest 286,952
- ----------------------------------------------------------------------
Investment for deferred compensation plan 17,807
- ----------------------------------------------------------------------
Other assets 10,039
- ----------------------------------------------------------------------
Total assets 42,592,276
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 2,083,264
- ----------------------------------------------------------------------
Deferred compensation plan 17,807
- ----------------------------------------------------------------------
Accrued advisory fees 16,362
- ----------------------------------------------------------------------
Accrued directors' fees 1,866
- ----------------------------------------------------------------------
Accrued administrative services fees 2,911
- ----------------------------------------------------------------------
Accrued operating expenses 7,522
- ----------------------------------------------------------------------
Total liabilities 2,129,732
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 40,462,544
- ----------------------------------------------------------------------
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 3,659,782
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $11.06
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,191,117
- --------------------------------------------------------------------
EXPENSES:
Advisory fees 91,681
- --------------------------------------------------------------------
Administrative services fees 17,370
- --------------------------------------------------------------------
Custodian fees 6,999
- --------------------------------------------------------------------
Directors' fees and expenses 3,546
- --------------------------------------------------------------------
Professional fees 10,622
- --------------------------------------------------------------------
Organizational costs 967
- --------------------------------------------------------------------
Other 2,987
- --------------------------------------------------------------------
Total expenses 134,172
- --------------------------------------------------------------------
Net investment income 1,056,945
- --------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN FROM INVESTMENT SECURITIES:
Net realized gain from investment securities 39,294
- --------------------------------------------------------------------
Net unrealized appreciation of investment securities 217,784
- --------------------------------------------------------------------
Net gain on investment securities 257,078
- --------------------------------------------------------------------
Net increase in net assets resulting from operations $1,314,023
====================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
66
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,056,945 $ 1,620,458
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities 39,294 (100,162)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities 217,784 728,502
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,314,023 2,248,798
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (15,600)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 5,348,725 7,040,082
- ------------------------------------------------------------------------------
Net increase in net assets 6,662,748 9,273,280
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 33,799,796 24,526,516
- ------------------------------------------------------------------------------
End of period $40,462,544 $33,799,796
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $37,333,401 $31,984,676
- ------------------------------------------------------------------------------
Undistributed net investment income 2,642,342 1,585,397
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (468,115) (507,409)
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities 954,916 737,132
- ------------------------------------------------------------------------------
$40,462,544 $33,799,796
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Government Securities Fund (the "Fund"). The Fund's investment
objective is to achieve a high level of current income consistent with
reasonable concern for safety of principal by investing in debt securities
issued, guaranteed or otherwise backed by the United States Government.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt obligations that are issued or guaranteed by the
U.S. Government, its agencies, authorities, and instrumentalities are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate, maturity and seasoning differential.
Securities for which market prices are not provided by the pricing service
are valued at the mean between last bid and asked prices based upon quotes
furnished by independent sources. Securities for which market quotations
are either not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term obligations having 60 days or less to maturity are
valued at amortized cost which approximates market value.
B. Securities Transactions, Investment Income and Distributions -Securities
transactions are accounted for on a trade date basis. Interest income is
recorded as earned from settlement date and is recorded on the accrual
basis. Distributions to shareholders are recorded on the ex-dividend date.
Realized gains or losses from securities transactions are recorded on the
identified cost basis.
AIM V.I. GOVERNMENT SECURITIES FUND
67
<PAGE>
C. Federal Income Taxes - For federal income tax purposes, each portfolio in
the Company is taxed as a separate entity. It is the Fund's policy to
continue to comply with the requirements of the Internal Revenue Code
applicable to regulated investment companies and to distribute all of its
taxable income and capital gains to its shareholders. Therefore, no
provision for federal income taxes is recorded in the financial statements.
The Fund had capital loss carryforwards (which may be carried forward to
offset future taxable capital gains, if any) of $507,409, which expires, if
not previously utilized, through the year 2004. The Fund cannot distribute
capital gains to shareholders until the tax loss carryforwards have been
utilized.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment
advisory agreement, the Fund pays an advisory fee to AIM at an annual rate of
0.50% of the first $250 million of the Fund's average daily net assets, plus
0.45% of the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $17,370 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,328 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $17,417,564 and $10,989,515, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $969,169
- -----------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (14,253)
- -----------------------------------------------------------------------
Net unrealized appreciation of investment securities $954,916
=======================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
-------------------- ----------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- --------- -----------
<S> <C> <C> <C> <C>
Sold 859,764 $9,332,829 1,272,288 $13,023,561
- ------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 1,468 15,600
- ------------------------------------------------------------------------
Reacquired (367,782) (3,984,104) (591,274) (5,999,079)
- ------------------------------------------------------------------------
491,982 $5,348,725 682,482 $ 7,040,082
========================================================================
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
68
<PAGE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
JUNE DECEMBER 31, JANUARY 31,
30, ------------------------- -------------------
1998 1997 1996 1995 1995 1994
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24 $ 10.00
- -----------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.22 0.59 0.58 0.54 0.53 0.38
- -----------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 0.17 0.22 (0.35) 0.74 (0.88) 0.10
- -----------------------------------------------------------------------------------------------
Total from investment
operations 0.39 0.81 0.23 1.28 (0.35) 0.48
- -----------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.53) (0.50) (0.50) (0.24)
- -----------------------------------------------------------------------------------------------
Net asset value, end of
period $ 11.06 $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
===============================================================================================
Total return(a) 3.66% 8.16% 2.29% 13.84% (3.42)% 4.78%
===============================================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $40,463 $33,800 $24,527 $19,545 $12,887 $10,643
===============================================================================================
Ratio of expenses to
average net assets 0.73%(b) 0.87% 0.91% 1.19%(c) 0.95%(d) 1.00%(c)(d)
===============================================================================================
Ratio of net investment
income to average net
assets 5.76%(b) 5.85% 5.80% 5.78%(c) 5.51%(e) 4.74%(c)(e)
===============================================================================================
Portfolio turnover rate 32% 66% 32% 41% 29% 0%
===============================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $36,976,251.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.10% and 1.80% (annualized) for January 1995 and 1994, respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 5.35% and 3.94% (annualized) for January 1995 and
1994, respectively.
AIM V.I. GOVERNMENT SECURITIES FUND
69
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND PERFORMANCE SOLID
IN SPITE OF "ASIAN FLU"
A roundtable discussion with the management team for AIM V.I. Growth Fund
for the six-month period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. AFTER A STRONG FIRST QUARTER, small-size stocks were particularly hard the Fund's portfolio at the reporting period's
THE "ASIAN FLU" RETURNED TO CREATE hit by this market turn. close, as they did six months earlier.
A VOLATILE MARKETPLACE IN THE In addition to concerns about foreign Emblematic of what is going on in this
SECOND QUARTER. HOW DID THE FUND currency, investors were concerned that field is the merger, announced in April, of
DO IN THIS ENVIRONMENT? inflation would bring an end to this profit- insurance giant Travelers Group, Inc. and
A. Fund performance was very good able bull market. However, the Federal major money-center banker Citicorp--two
despite market conditions. The Fund Reserve Board (the Fed) left interest rates stocks in the portfolio. This is the largest
posted an 18.86% total return for the unchanged and U.S. economy as a whole corporate merger in history; it melds two
six months ended June 30, 1998. In remained strong. Retail stocks performed financial-services leaders that both reported
addition, the Fund outperformed the extremely well and technology stocks, solid earnings for the first quarter of 1998.
15.57% total return of the Lipper which struggled during much of the
Growth Fund Index, an unmanaged second quarter, rebounded with excellent Q. TECHNOLOGY, A TRADITIONAL GROWTH
average of the performance of the 30 numbers in the last two weeks of the SECTOR,IS YOUR SECOND-LARGEST WEIGHTING. WHY?
largest growth mutual funds tracked reporting period. A. This sector was not generally in favor
by Lipper Analytical Services. during much of the reporting period be-
Q. DID YOU ALTER THE PORTFOLIO AS cause of the Asian downdraft and because a
Q. WHAT FACTORS AFFECTED THE MAR- MARKET CONDITIONS CHANGED? few leading companies reported disappoint-
KETS DURING THE REPORTING PERIOD? A. Not drastically. We trimmed holdings ing earnings. Nevertheless, the technology
A. As the new year unfolded, the of energy stocks, which fell out of favor in sector is still doing well. Overall it was the
markets seemed to shrug off Asia's the wake of events in Asia. Health-care, best performing sector in the S&P 500 for
difficulties. The much-anticipated financial, and technology stocks remained the first six months of 1998.
slowdown in the U.S. economy, pre- attractive and we increased our holdings in The new year began with promise, with
dicted to result from the Asian each of those sectors. We also increased our U.S. personal computer sales increasing
troubles, was less serious than holdings in the retail sector as it performed 16% during the first quarter of 1998. This
expected. U.S. gross domestic output well throughout the reporting period. was good news for portfolio holdings such
rose at a 4.8% annual rate during the as Dell Computer Corp., which reported
first quarter of 1998. Inflation, Q. WHY ARE FINANCIAL STOCKS STILL a string of earnings increases, and also for
perhaps as a consequence, remained ATTRACTIVE? THEY WERE PROMINENT
low. The Commerce Department's over- IN THE PORTFOLIO SIX MONTHS AGO. TOP 10 EQUITY HOLDINGS
all price index rose an annualized A. Traditionally, financial stocks--compa-
0.9% during the first quarter--its nies like banks and brokerage houses-- As of 6/30/98, based on total net assets
slowest rate in 34 years. have not been thought of as growth stocks.
Fund performance rebounded, too, But we follow earnings growth for indi- 1. Microsoft Corp. 2.14%
and during the latter half of the vidual companies, so our model picks up 2. MCI Communications Corp. 1.97
first quarter, the Fund outperformed sectors that are showing relative earnings 3. General Electric Co. 1.80
both the S&P 500 and the Lipper momentum. This pulls us into sectors that 4. Merck & Co. 1.59
Growth Fund Index. may grow very well for a few years that a 5. Bristol-Myers Squibb Co. 1.49
The story during the second half of traditional growth manager might not even 6. Freddie Mac 1.47
the reporting period was much dif- consider. With financial markets ebullient, 7. Becton, Dickinson & Co. 1.34
ferent, however. The Asian currency interest rates stable, and the trend toward 8. American Home Products Corp. 1.26
woes,which had been noticeably ab- globalization and consolidation unabated, 9. Service Corp. International 1.22
sent during the first half of the financial stocks have certainly shown 10. Warner Lambert Co. 1.16
year, returned. Paired with new con- growth-stock-like profits recently. At
cerns about the Russian economy, the approximately 20% of net assets, financials Please keep in mind that the Fund's portfolio
Asian crisis drove investors toward represented the largest sector weighting in composition is subject to change and there is
the perceived safety and liquidity no assurance the Fund will continue to hold
of a select number of large- and any particular security.
"mega-cap" stocks. As a result,
many companies with strong earnings
potential were overlooked in favor
of momentum stock. Mid- and
</TABLE>
70 AIM V.I. GROWTH FUND
<PAGE>
<TABLE>
<S> <C> <C>
other technology sector leaders such problem, reprogramming computers to Merck & Co., Inc., a solid portfolio
as Microsoft Corp., which is among our recognize this date. We believe the de- holding with such well-established
largest holdings. mand in this facet of the industry should products as the anti-cholesterol drug
While technology stocks struggled consistently grow, irrespective of market Zocor, has developed an anti-migraine
through much of the second quarter, the volatility, as the Year 2000 approaches. drug that is currently being reviewed
final few weeks proved profitable for many for marketing in the U.S.
companies within the sector. Despite vola- Q. AND WHY DOES THE HEALTH-CARE A consistent growth stock, Merck
tility, our technological holdings have SECTOR REMAIN A MAJOR EMPHASIS? represents what we dub the "core"
done well. One of our larger holdings is A. Our health-care holdings were increased portion of the Fund, companies with
BMC Software, Inc., a rapidly growing pro- during the reporting period to about 20% proven long-term consistent earnings
ducer of software products that improve of assets. performance. Other portfolio holdings
the efficiency of large-scale business com- A major positive factor here has been are companies showing momentum in their
puter environments. We feel that this is the FDA's gradual streamlining of filing earnings growth. As corporate earnings
the kind of technology-based productivity and approval systems. This development growth has decelerated recently, we have
improvement that underpins recent economic has been welcomed by pharmaceutical found ourselves migrating more into core
expansion and corporate cost control. firms, especially those with new products companies with reliable earnings
Apparently investors agreed as the stock or drug delivery systems. A steady stream records.
was up 58% at the end of the reporting of new pharmaceutical products has been
period. a significant contributor to this sector's Q. WHAT IS YOUR OUTLOOK FOR THE FUND?
We also are targeting firms known for recent good performance. For example, A. While Asian woes and global unrest
their expertise in solving the Year 2000 caused investors to flock towards more
liquid blue-chip stocks at the end of
GROWTH OF A $10,000 INVESTMENT the reporting period, we believe many
of these large- and "mega-cap" stocks
From 5/5/93-6/30/98 to be overvalued. Over time, the
perceived magnitude of economic crisis
AIM V.I. S&P 500 should dissipate, and investors should
Growth Fund Stock Index return to faster growing large- and
(In thousands) mid-cap companies. Fortunately, the
5/5/93 $10,000 $10,000 Fund continues to own a portfolio of
7/31/93 10,420 10,254 AVERAGE ANNUAL TOTAL RETURN fast growing large- and mid-cap names.
10/31/93 11,160 10,778
1/31/94 11,607 11,169 As of 6/30/98 Q. AND FOR THE ECONOMY AND MARKETS
4/30/94 10,626 10,532 IN GENERAL?
7/31/94 10,425 10,783 1 Year 30.55% A. Inflation continues to be low in the
10/31/94 11,207 11,193 5 Years 19.88 U.S. and other developed countries. If
1/31/95 10,782 11,227 Inception (5/5/93) 20.28 inflation remains contained, the Federal
4/30/95 12,060 12,365 Reserve Board, which has left monetary
7/31/95 14,094 13,591 policy unchanged for more than a year,
10/31/95 14,436 14,147 will be less likely to raise interest
1/31/96 14,806 15,561 rates. However, the ongoing economic
4/30/96 15,712 16,093 problems in Asia and Russia remain a
7/31/96 14,887 15,835 threat to corporate profits and to the
10/31/96 16,639 17,550 performance of stocks in general.
1/31/97 18,105 19,659 If consumer spending remains high,
4/30/97 17,640 20,133 the retail sector should continue its
7/31/97 21,635 24,081 strong run through 1998. The increasing
10/31/97 21,213 23,181 demand for housing and business needs
12/31/97 22,042 24,945 like computers could propel stocks
4/30/98 25,119 28,393 ahead this summer as well. We will
6/30/98 25,899 29,029 continue to invest in stocks in the
health-care, financial, and techno-
Past performance cannot guarantee comparable future results. logical sectors as well as other funda-
mentally strong companies with high
The performance figures shown represent the AIM V.I. Growth Fund and are not intended earnings growth potential.
to reflect actual annuity values, and do not reflect charges at the separate account
level which, if applied, would lower the performance results. The Fund's performance
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 so that
Fund shares, when redeemed, may be worth more or less than their original cost. Source:
Towers Data Systems HYPO/Registered Trademark/.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged
securities widely regarded by investors to be representative of the stock market in general.
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.
An investment cannot be made in the indexes listed. Index results include reinvested
dividends.
</TABLE>
AIM V.I. GROWTH FUND 71
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 82.06%
AEROSPACE/DEFENSE - 0.53%
Sundstrand Corp. 30,000 $ 1,717,500
- ----------------------------------------------------------------
AGRICULTURAL PRODUCTS - 0.22%
Universal Corp. 18,800 702,650
- ----------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.47%
Federal-Mogul Corp. 22,500 1,518,750
- ----------------------------------------------------------------
BANKS (MONEY CENTER) - 1.55%
BankAmerica Corp. 18,000 1,555,875
- ----------------------------------------------------------------
Chase Manhattan Corp. (The) 46,000 3,473,000
- ----------------------------------------------------------------
5,028,875
- ----------------------------------------------------------------
BANKS (REGIONAL) - 0.41%
AmSouth Bancorporation 6,200 243,737
- ----------------------------------------------------------------
North Fork Bancorporation, Inc. 45,000 1,099,687
- ----------------------------------------------------------------
1,343,424
- ----------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.96%
Coca-Cola Co. (The) 40,000 3,420,000
- ----------------------------------------------------------------
PepsiCo, Inc. 71,400 2,940,787
- ----------------------------------------------------------------
6,360,787
- ----------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.53%
CBS Corp.(a) 50,000 1,587,500
- ----------------------------------------------------------------
Chancellor Media Corp.(a) 22,200 1,102,368
- ----------------------------------------------------------------
Clear Channel Communications, Inc.(a) 7,638 833,496
- ----------------------------------------------------------------
Comcast Corp. - Class A 66,000 2,679,187
- ----------------------------------------------------------------
Jacor Communications, Inc.(a) 26,500 1,563,500
- ----------------------------------------------------------------
Tele-Communications, Inc. - Class A(a) 95,000 3,651,563
- ----------------------------------------------------------------
11,417,614
- ----------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.53%
Monsanto Co. 30,500 1,704,188
- ----------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.26%
Millennium Chemicals Inc. 25,000 846,875
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 1.66%
CIENA Corp.(a) 19,000 1,322,875
- ----------------------------------------------------------------
Lucent Technologies, Inc. 31,500 2,620,406
- ----------------------------------------------------------------
Tellabs, Inc.(a) 20,000 1,432,500
- ----------------------------------------------------------------
5,375,781
- ----------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.35%
Compaq Computer Corp. 41,500 1,177,563
- ----------------------------------------------------------------
Dell Computer Corp.(a) 16,500 1,531,406
- ----------------------------------------------------------------
International Business Machines Corp. 14,500 1,664,781
- ----------------------------------------------------------------
4,373,750
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING) - 0.93%
Ascend Communications, Inc.(a) 31,600 $ 1,566,175
- -----------------------------------------------------------------
Cisco Systems, Inc.(a) 15,700 1,445,381
- -----------------------------------------------------------------
3,011,556
- -----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.58%
EMC Corp.(a) 41,800 1,873,163
- -----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.51%
Advanced Fibre Communications, Inc.(a) 32,000 1,282,000
- -----------------------------------------------------------------
BMC Software, Inc.(a) 40,000 2,077,500
- -----------------------------------------------------------------
Cadence Design Systems, Inc.(a) 37,500 1,171,875
- -----------------------------------------------------------------
Computer Associates International, Inc. 28,000 1,555,750
- -----------------------------------------------------------------
Computer Sciences Corp.(a) 31,100 1,990,400
- -----------------------------------------------------------------
Compuware Corp.(a) 32,000 1,636,000
- -----------------------------------------------------------------
Concord EFS, Inc.(a) 46,500 1,214,813
- -----------------------------------------------------------------
HBO & Co. 53,000 1,868,250
- -----------------------------------------------------------------
Microsoft Corp.(a) 64,000 6,936,000
- -----------------------------------------------------------------
Unisys Corp.(a) 48,000 1,356,000
- -----------------------------------------------------------------
21,088,588
- -----------------------------------------------------------------
CONSUMER FINANCE - 0.88%
Countrywide Credit Industries, Inc. 12,800 649,600
- -----------------------------------------------------------------
FIRSTPLUS Financial Group, Inc.(a) 3,200 115,200
- -----------------------------------------------------------------
Providian Financial Corp. 26,500 2,081,906
- -----------------------------------------------------------------
2,846,706
- -----------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 1.25%
AmeriSource Health Corp. - Class A(a) 33,000 2,167,688
- -----------------------------------------------------------------
Bergen Brunswig Corp. - Class A 3,100 143,763
- -----------------------------------------------------------------
Cardinal Health, Inc. 9,200 862,500
- -----------------------------------------------------------------
Sysco Corp. 34,300 878,938
- -----------------------------------------------------------------
4,052,889
- -----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 2.32%
American Power Conversion Corp.(a) 16,200 486,000
- -----------------------------------------------------------------
General Electric Co. 64,000 5,824,000
- -----------------------------------------------------------------
Symbol Technologies, Inc. 31,800 1,200,450
- -----------------------------------------------------------------
7,510,450
- -----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.44%
Waters Corp.(a) 24,000 1,414,500
- -----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.05%
Altera Corp.(a) 6,000 177,376
- -----------------------------------------------------------------
ENTERTAINMENT - 0.46%
Viacom, Inc. - Class B(a) 25,600 1,491,200
- -----------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
72
<PAGE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR) - 0.14%
Lam Research Corp.(a) 23,500 $ 449,438
- -----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 6.36%
Ambac Financial Group, Inc. 42,500 2,486,250
- -----------------------------------------------------------------------------
American Express Co. 17,000 1,938,000
- -----------------------------------------------------------------------------
Fannie Mae 55,000 3,341,250
- -----------------------------------------------------------------------------
Freddie Mac 101,000 4,753,313
- -----------------------------------------------------------------------------
Heller Financial, Inc.(a) 55,000 1,650,000
- -----------------------------------------------------------------------------
MBIA, Inc. 20,500 1,534,938
- -----------------------------------------------------------------------------
MGIC Investment Corp. 25,500 1,455,094
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 17,500 1,599,063
- -----------------------------------------------------------------------------
SunAmerica, Inc. 32,000 1,838,000
- -----------------------------------------------------------------------------
20,595,908
- -----------------------------------------------------------------------------
FOOTWEAR - 0.12%
Wolverine World Wide, Inc. 17,600 381,700
- -----------------------------------------------------------------------------
HARDWARE & TOOLS - 0.26%
Black & Decker Corp. (The) 14,000 854,000
- -----------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 5.02%
Abbott Laboratories 52,200 2,133,675
- -----------------------------------------------------------------------------
American Home Products Corp. 79,000 4,088,250
- -----------------------------------------------------------------------------
Bristol-Myers Squibb Co. 42,000 4,827,375
- -----------------------------------------------------------------------------
Johnson & Johnson 20,000 1,475,000
- -----------------------------------------------------------------------------
Warner-Lambert Co. 54,000 3,746,250
- -----------------------------------------------------------------------------
16,270,550
- -----------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.16%
ICN Pharmaceuticals, Inc. 62,300 2,846,331
- -----------------------------------------------------------------------------
Mylan Laboratories, Inc. 9,200 276,575
- -----------------------------------------------------------------------------
R.P. Scherer Corp.(a) 20,000 1,772,500
- -----------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 44,900 2,096,268
- -----------------------------------------------------------------------------
6,991,674
- -----------------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 3.50%
Lilly (Eli) & Co. 15,000 990,937
- -----------------------------------------------------------------------------
Merck & Co., Inc. 38,400 5,136,000
- -----------------------------------------------------------------------------
Pfizer Inc. 14,300 1,554,231
- -----------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 21,300 982,462
- -----------------------------------------------------------------------------
Schering-Plough Corp. 29,100 2,666,288
- -----------------------------------------------------------------------------
11,329,918
- -----------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.79%
Columbia/HCA Healthcare Corp. 16,000 466,000
- -----------------------------------------------------------------------------
Quorum Health Group, Inc.(a) 55,000 1,457,500
- -----------------------------------------------------------------------------
Universal Health Services, Inc. - Class B(a) 10,700 624,613
- -----------------------------------------------------------------------------
2,548,113
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (LONG TERM CARE) - 0.77%
Health Care & Retirement Corp.(a) 29,500 $ 1,163,406
- -----------------------------------------------------------------------
HEALTHSOUTH Corp.(a) 50,000 1,334,375
- -----------------------------------------------------------------------
2,497,781
- -----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.16%
Arterial Vascular Engineering, Inc.(a) 54,300 1,941,225
- -----------------------------------------------------------------------
Becton, Dickinson & Co. 56,000 4,347,000
- -----------------------------------------------------------------------
Biomet, Inc. 49,500 1,636,594
- -----------------------------------------------------------------------
Guidant Corp. 36,000 2,567,250
- -----------------------------------------------------------------------
Medtronic, Inc. 9,700 618,375
- -----------------------------------------------------------------------
Stryker Corp. 29,700 1,139,737
- -----------------------------------------------------------------------
Sybron International Corp.(a) 48,400 1,222,100
- -----------------------------------------------------------------------
13,472,281
- -----------------------------------------------------------------------
HOUSEHOLD FURNITURE & APPLIANCES - 0.50%
Furniture Brands International, Inc.(a) 21,000 589,312
- -----------------------------------------------------------------------
Maytag Corp. 21,000 1,036,875
- -----------------------------------------------------------------------
1,626,187
- -----------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.24%
Colgate-Palmolive Co. 17,500 1,540,000
- -----------------------------------------------------------------------
Dial Corp. (The) 30,000 778,125
- -----------------------------------------------------------------------
Procter & Gamble Co. (The) 18,500 1,684,656
- -----------------------------------------------------------------------
4,002,781
- -----------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.78%
Equitable Companies, Inc. 16,000 1,199,000
- -----------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 26,000 1,326,000
- -----------------------------------------------------------------------
2,525,000
- -----------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 1.79%
Ace, Ltd. 23,400 912,600
- -----------------------------------------------------------------------
Allmerica Financial Corp. 16,000 1,040,000
- -----------------------------------------------------------------------
American International Group, Inc. 8,600 1,255,600
- -----------------------------------------------------------------------
Travelers Group, Inc. 42,502 2,576,684
- -----------------------------------------------------------------------
5,784,884
- -----------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.74%
Everest Reinsurance Holdings, Inc. 7,600 292,125
- -----------------------------------------------------------------------
Fremont General Corp. 16,200 877,838
- -----------------------------------------------------------------------
Mercury General Corp. 12,600 810,338
- -----------------------------------------------------------------------
Old Republic International Corp. 14,500 425,031
- -----------------------------------------------------------------------
2,405,332
- -----------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.51%
Merrill Lynch & Co., Inc. 18,000 1,660,500
- -----------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.83%
Franklin Resources, Inc. 24,700 1,333,800
- -----------------------------------------------------------------------
T. Rowe Price Associates, Inc. 36,000 1,352,250
- -----------------------------------------------------------------------
2,686,050
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
73
<PAGE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
LEISURE TIME (PRODUCTS) - 0.91%
Harley-Davidson, Inc. 28,900 $ 1,119,875
- ------------------------------------------------------------------
Mattel, Inc. 43,500 1,840,594
- ------------------------------------------------------------------
2,960,469
- ------------------------------------------------------------------
LODGING - HOTELS - 1.20%
Carnival Corp. 62,000 2,456,750
- ------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 18,100 1,438,950
- ------------------------------------------------------------------
3,895,700
- ------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 2.24%
AlliedSignal Inc. 19,200 852,000
- ------------------------------------------------------------------
Crane Co. 12,900 626,456
- ------------------------------------------------------------------
Thermo Electron Corp.(a) 45,000 1,538,438
- ------------------------------------------------------------------
Tyco International Ltd. 30,000 1,890,000
- ------------------------------------------------------------------
U.S. Industries, Inc. 34,800 861,300
- ------------------------------------------------------------------
United Technologies Corp. 16,000 1,480,000
- ------------------------------------------------------------------
7,248,194
- ------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.09%
Cooper Cameron Corp.(a) 9,600 489,600
- ------------------------------------------------------------------
Halliburton Co. 12,000 534,750
- ------------------------------------------------------------------
Western Atlas Inc.(a) 29,600 2,512,300
- ------------------------------------------------------------------
3,536,650
- ------------------------------------------------------------------
PERSONAL CARE - 1.35%
Avon Products, Inc. 25,500 1,976,250
- ------------------------------------------------------------------
Gillette Co. 42,000 2,380,875
- ------------------------------------------------------------------
4,357,125
- ------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.32%
AES Corp.(a) 19,700 1,035,481
- ------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.32%
Gannett Co., Inc. 14,600 1,037,513
- ------------------------------------------------------------------
RESTAURANTS - 0.60%
McDonald's Corp. 28,000 1,932,000
- ------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 1.40%
Home Depot, Inc. (The) 32,000 2,658,000
- ------------------------------------------------------------------
Lowe's Companies, Inc. 46,000 1,865,875
- ------------------------------------------------------------------
4,523,875
- ------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.88%
Circuit City Stores - Circuit City Group 35,000 1,640,625
- ------------------------------------------------------------------
Ingram Micro, Inc. - Class A(a) 27,000 1,194,750
- ------------------------------------------------------------------
2,835,375
- ------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.75%
Federated Department Stores, Inc.(a) 15,000 807,188
- ------------------------------------------------------------------
Proffitt's, Inc.(a) 40,000 1,615,000
- ------------------------------------------------------------------
2,422,188
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DISCOUNTERS) - 0.40%
Family Dollar Stores, Inc. 16,400 $ 303,400
- ------------------------------------------------------------------
Ross Stores, Inc. 23,000 989,000
- ------------------------------------------------------------------
1,292,400
- ------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.76%
CVS Corp. 29,000 1,129,188
- ------------------------------------------------------------------
Rite Aid Corp. 35,200 1,322,200
- ------------------------------------------------------------------
2,451,388
- ------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.93%
Albertson's, Inc. 6,900 357,506
- ------------------------------------------------------------------
Kroger Co.(a) 40,500 1,736,438
- ------------------------------------------------------------------
Safeway, Inc.(a) 22,600 919,538
- ------------------------------------------------------------------
3,013,482
- ------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 2.74%
Costco Companies, Inc.(a) 30,000 1,891,875
- ------------------------------------------------------------------
Dayton Hudson Corp. 49,000 2,376,500
- ------------------------------------------------------------------
Fred Meyer, Inc.(a) 33,400 1,419,500
- ------------------------------------------------------------------
Kmart Corp.(a) 99,200 1,909,600
- ------------------------------------------------------------------
Wal-Mart Stores, Inc. 21,000 1,275,750
- ------------------------------------------------------------------
8,873,225
- ------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.31%
Bed Bath & Beyond, Inc.(a) 13,400 694,288
- ------------------------------------------------------------------
Office Depot, Inc.(a) 62,300 1,966,344
- ------------------------------------------------------------------
Staples, Inc.(a) 54,700 1,582,881
- ------------------------------------------------------------------
4,243,513
- ------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 1.19%
Gap, Inc. (The) 28,000 1,725,500
- ------------------------------------------------------------------
Intimate Brands, Inc. 35,000 964,688
- ------------------------------------------------------------------
TJX Companies, Inc. 48,000 1,158,000
- ------------------------------------------------------------------
3,848,188
- ------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.43%
Ahmanson (H.F.) & Co. 10,200 724,200
- ------------------------------------------------------------------
Washington Mutual, Inc. 15,750 684,141
- ------------------------------------------------------------------
1,408,341
- ------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.56%
Outdoor Systems, Inc.(a) 65,050 1,821,400
- ------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.22%
Service Corp. International 92,300 3,957,363
- ------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 0.53%
Keane, Inc.(a) 30,500 1,708,000
- ------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.04%
Equifax, Inc. 57,100 2,073,444
- ------------------------------------------------------------------
Fiserv, Inc.(a) 30,150 1,280,433
- ------------------------------------------------------------------
3,353,877
- ------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
74
<PAGE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (EMPLOYMENT) - 0.27%
AccuStaff, Inc.(a) 28,100 $ 878,125
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.43%
AT&T Corp. 26,000 1,485,250
- -----------------------------------------------------------------------------
MCI Communications Corp. 110,000 6,393,750
- -----------------------------------------------------------------------------
7,879,000
- -----------------------------------------------------------------------------
TEXTILES (APPAREL) - 1.00%
Jones Apparel Group, Inc.(a) 9,500 347,343
- -----------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 26,000 1,625,000
- -----------------------------------------------------------------------------
Warnaco Group, Inc. (The) 30,000 1,273,125
- -----------------------------------------------------------------------------
3,245,468
- -----------------------------------------------------------------------------
WASTE MANAGEMENT - 0.63%
Waste Management, Inc. 58,300 2,040,500
- -----------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $186,316,149) 265,737,559
- -----------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED
STOCK - 0.44%
FINANCIAL (DIVERSIFIED) - 0.44%
MGIC Investment Corp. - $3.12 Conv. Pfd. 15,000 1,434,375
- -----------------------------------------------------------------------------
Total Domestic Convertible Preferred Stock (Cost
$1,058,616) 1,434,375
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
DOMESTIC CONVERTIBLE CORPORATE
NOTE - 0.47%
ELECTRICAL EQUIPMENT - 0.47%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%,
05/01/06(b) (acquired 10/31/96 - 12/06/96; cost
$1,166,399) (Cost $1,166,399) $ 923,000 1,515,012
- -----------------------------------------------------------------------------
FOREIGN STOCKS & OTHER
EQUITY INTERESTS - 8.50% SHARES
CANADA - 1.40%
Bank of Montreal (Banks - Major Regional) 11,100 611,196
- -----------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Financial -
Diversified) 14,500 713,218
- -----------------------------------------------------------------------------
Northern Telecom Ltd. - ADR (Communications
Equipment) 42,000 2,383,500
- -----------------------------------------------------------------------------
Royal Bank of Canada (Banks - Major Regional) 13,700 824,207
- -----------------------------------------------------------------------------
4,532,121
- -----------------------------------------------------------------------------
FINLAND - 0.70%
Nokia Oyj A.B. - Class A - ADR (Communications
Equipment) 6,200 449,888
- -----------------------------------------------------------------------------
Nokia Oyj A.B. - Class A (Communications Equipment) 24,800 1,832,663
- -----------------------------------------------------------------------------
2,282,551
- -----------------------------------------------------------------------------
FRANCE - 2.20%
Alcatel Alsthom (Communications Equipment) 8,500 1,731,078
- -----------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 26,000 2,124,906
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - (CONTINUED)
Renault S.A. (Automobiles)(a) 22,500 $ 1,280,131
- --------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 9,500 1,975,597
- --------------------------------------------------------------------------------
7,111,712
- --------------------------------------------------------------------------------
GERMANY - 0.16%
Adidas Salomon A.G. (Footwear) 2,950 514,487
- --------------------------------------------------------------------------------
IRELAND - 0.53%
Elan Corp. PLC - ADR (Health Care - Drugs - Generic &
Other)(a) 26,600 1,710,711
- --------------------------------------------------------------------------------
NETHERLANDS - 0.89%
Akzo Nobel N.V. (Chemicals - Diversified) 5,450 1,212,272
- --------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 20,000 1,682,284
- --------------------------------------------------------------------------------
2,894,556
- --------------------------------------------------------------------------------
SWEDEN - 0.62%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 60,000 1,717,500
- --------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - Class B
(Communications Equipment) 9,600 280,476
- --------------------------------------------------------------------------------
1,997,976
- --------------------------------------------------------------------------------
SWITZERLAND - 2.00%
Nestle S.A. (Foods) 1,500 3,214,497
- --------------------------------------------------------------------------------
UBS - Union Bank of Switzerland (Banks - Major
Regional)(a) 8,750 3,258,070
- --------------------------------------------------------------------------------
6,472,567
- --------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$22,079,030) 27,516,681
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT - 8.98%(c)
Dresdner Kleinwort Benson North America LLC 5.85%,
07/01/98(d) (Cost $29,082,498) $29,082,498 29,082,498
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.45% 325,286,125
- --------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.45)% (1,454,595)
- --------------------------------------------------------------------------------
NET ASSETS - 100.00% $323,831,530
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
market value of this security at 06/30/98 represented 0.47% of the Fund's
net assets.
(c) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered in investment companies managed by the
investment advisor or its affiliates.
(d) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
Sub. - Subordinated
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
75
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $239,702,692) $325,286,125
- ----------------------------------------------------------------------
Foreign currencies, at market (cost $27,976) 27,340
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 188,460
- ----------------------------------------------------------------------
Investments sold 2,009,498
- ----------------------------------------------------------------------
Dividends and interest 206,825
- ----------------------------------------------------------------------
Investment for deferred compensation plan 19,005
- ----------------------------------------------------------------------
Other assets 800
- ----------------------------------------------------------------------
Total assets 327,738,053
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 3,615,564
- ----------------------------------------------------------------------
Capital stock reacquired 66,919
- ----------------------------------------------------------------------
Deferred compensation plan 19,005
- ----------------------------------------------------------------------
Accrued advisory fees 167,414
- ----------------------------------------------------------------------
Accrued directors' fees 2,316
- ----------------------------------------------------------------------
Accrued administrative services fees 3,188
- ----------------------------------------------------------------------
Accrued operating expenses 32,117
- ----------------------------------------------------------------------
Total liabilities 3,906,523
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $323,831,530
======================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 13,738,456
======================================================================
Net asset value, offering and redemption price per share $23.57
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $43,062 foreign withholding tax) $ 1,123,590
- ------------------------------------------------------------------------------
Interest 770,826
- ------------------------------------------------------------------------------
Total investment income 1,894,416
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 935,432
- ------------------------------------------------------------------------------
Administrative services fees 19,128
- ------------------------------------------------------------------------------
Custodian fees 43,808
- ------------------------------------------------------------------------------
Directors' fees and expenses 4,891
- ------------------------------------------------------------------------------
Organizational costs 965
- ------------------------------------------------------------------------------
Other 38,439
- ------------------------------------------------------------------------------
Total expenses 1,042,663
- ------------------------------------------------------------------------------
Net investment income 851,753
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FUTURES AND OPTIONS CONTRACTS:
Net realized gain (loss) from:
Investment securities 13,452,632
- ------------------------------------------------------------------------------
Foreign currencies (3,977)
- ------------------------------------------------------------------------------
Futures contracts 2,342,733
- ------------------------------------------------------------------------------
Options contracts (210,765)
- ------------------------------------------------------------------------------
15,580,623
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 33,119,893
- ------------------------------------------------------------------------------
Foreign currencies (2,096)
- ------------------------------------------------------------------------------
Options contracts 413,643
- ------------------------------------------------------------------------------
33,531,440
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies, futures
and options contracts 49,112,063
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $49,963,816
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
76
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 851,753 $ 1,211,773
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and options contracts 15,580,623 22,109,980
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
options contracts 33,531,440 28,069,985
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 49,963,816 51,391,738
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (1,119,140)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (8,443,286)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 15,015,944 38,384,566
- ------------------------------------------------------------------------------
Net increase in net assets 64,979,760 80,213,878
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 258,851,770 178,637,892
- ------------------------------------------------------------------------------
End of period $323,831,530 $258,851,770
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $198,991,625 $183,975,681
- ------------------------------------------------------------------------------
Undistributed net investment income 2,034,559 1,182,806
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
options contracts 37,224,008 21,643,385
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and options contracts 85,581,338 52,049,898
- ------------------------------------------------------------------------------
$323,831,530 $258,851,770
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth Fund (the "Fund"). The Fund's investment objective is
to seek growth of capital principally through investment in common stocks of
seasoned and better capitalized companies considered by AIM to have strong
earnings momentum. Currently, shares of the Fund are sold only to insurance
company separate accounts to fund the benefits of variable annuity contracts
and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A.Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where the
security is principally traded, or lacking any sales on a particular day, the
security is valued at the mean between the closing bid and asked prices on
that day. Each security traded in the over-the-counter market (but not
including securities reported on the NASDAQ National Market System) is valued
at the mean between the last bid and asked prices based upon quotes furnished
by market makers for such securities. If no mean is available, as is the case
in some foreign markets, the closing bid will be used absent a last sales
price. Each security reported on the NASDAQ National Market System is valued
at the last sales price on the valuation date or absent a last sales price, at
the mean of the closing bid and asked prices. Debt obligations (including
convertible bonds) are valued on the basis of prices provided by an
independent pricing service. Prices provided by the pricing service may be
determined without exclusive reliance on quoted prices and may reflect
appropriate factors such as yield, type of issue, coupon rate and maturity
date. Securities for which market prices are not provided by any of the above
methods are valued at the mean between last bid and asked prices based upon
quotes furnished by independent sources. Securities for which market
quotations either are not readily available or are questionable are valued at
fair value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors. Short-term
AIM V.I. GROWTH FUND
77
<PAGE>
obligations having 60 days or less to maturity are valued at amortized cost
which approximates market value. Generally, trading in foreign securities is
substantially completed each day at various times prior to the close of the
New York Stock Exchange. The values of such securities used in computing the
net asset value of the Fund's shares are determined as of such times. Foreign
currency exchange rates are also generally determined prior to the close of
the New York Stock Exchange. Occasionally, events affecting the values of
such securities and such exchange rates may occur between the times at which
they are determined and the close of the New York Stock Exchange which will
not be reflected in the computation of the Fund's net asset value. If events
materially affecting the value of such securities occur during such period,
then these securities will be valued at their fair value as determined in
good faith by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash as collateral for the
account of the broker (the Fund's agent in acquiring the futures position).
During the period the futures contracts are open, changes in the value of
the contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
F. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The option's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
G. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
H. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock-in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
78 AIM V.I. GROWTH FUND
<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 six months ended June 30, 1998, AIM was reimbursed $19,128 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,512 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees, if
so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$173,480,910 and $149,627,037, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $86,033,439
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (612,503)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $85,420,936
==========================================================================
</TABLE>
Cost of investments for tax purposes is $239,865,189.
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 1,246,514 $ 27,248,118 2,757,339 $ 51,600,352
- ----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 492,909 9,562,426
- ----------------------------------------------------------------------------
Reacquired (562,384) (12,232,174) (1,185,922) (22,778,212)
- ----------------------------------------------------------------------------
684,130 $ 15,015,944 2,064,326 $ 38,384,566
============================================================================
</TABLE>
NOTE 6 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period 1,815 $ 531,904
- ----------------------------------------
Written 1,944 781,037
- ----------------------------------------
Closed (2,073) (664,334)
- ----------------------------------------
Exercised (712) (324,189)
- ----------------------------------------
Expired (974) (324,418)
- ----------------------------------------
End of period -- $ --
- ----------------------------------------
</TABLE>
NOTE 7 - PUT OPTIONS CONTRACTS PURCHASED
Transactions in put options purchased during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- --------
<S> <C> <C>
Beginning of year 1,317 $ 350,774
- --------------------------------------
Purchased 353 113,507
- --------------------------------------
Closed (753) (227,113)
- --------------------------------------
Expired (917) (237,168)
- --------------------------------------
End of year -- $ --
======================================
</TABLE>
AIM V.I. GROWTH FUND
79
<PAGE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- -----------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59 $ 10.00
- ------------------------ -------- -------- -------- -------- ------- -------
Income from investment
operations:
Net investment income 0.06 0.08 0.07 0.09 0.06 0.02
- ------------------------ -------- -------- -------- -------- ------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 3.68 4.27 2.52 3.65 (0.88) 1.59
- ------------------------ -------- -------- -------- -------- ------- -------
Total from investment
operations 3.74 4.35 2.59 3.74 (0.82) 1.61
- ------------------------ -------- -------- -------- -------- ------- -------
Less distributions:
Dividends from net
investment income -- (0.09) (0.06) (0.01) (0.06) (0.02)
- ------------------------ -------- -------- -------- -------- ------- -------
Distributions from net
realized gains -- (0.68) (0.72) -- -- --
- ------------------------ -------- -------- -------- -------- ------- -------
Total distributions -- (0.77) (0.78) (0.01) (0.06) (0.02)
- ------------------------ -------- -------- -------- -------- ------- -------
Net asset value, end of
period $ 23.57 $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
======================== ======== ======== ======== ======== ======= =======
Total return(a) 18.86% 26.87% 18.09% 34.89% (7.11)% 16.07%
======================== ======== ======== ======== ======== ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $323,832 $258,852 $178,638 $102,600 $45,497 $25,115
======================== ======== ======== ======== ======== ======= =======
Ratio of expenses to
average net assets 0.72%(b) 0.73% 0.78% 0.84%(c) 0.95% 0.85%(c)(d)
======================== ======== ======== ======== ======== ======= =======
Ratio of net investment
income to average net
assets 0.59%(b) 0.54% 0.79% 0.95%(c) 0.71% 0.51%(c)(d)
======================== ======== ======== ======== ======== ======= =======
Portfolio turnover rate 57% 132% 143% 125% 179% 99%
======================== ======== ======== ======== ======== ======= =======
Average brokerage
commission rate paid(e) $ 0.0611 $ 0.0618 $ 0.0629 N/A N/A N/A
======================== ======== ======== ======== ======== ======= =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of
$292,327,721.
(c) Annualized.
(d) After fee waivers and/or expense reimbursement. Ratios of
expenses and net investment income (loss) to average net assets
prior to fee waivers and/or expense reimbursements were 1.50%
(annualized) and (0.14)% (annualized), respectively.
(e) The average commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities
for the period divided by the total number of related shares
purchased and sold, which is required to be disclosed for fiscal
years beginning September 1, 1995 and thereafter.
AIM V.I. GROWTH FUND
80
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND GENERATES SOLID RETURNS,
ADOPTS MORE CONSERVATIVE STANCE
A roundtable discussion with the Fund management team for AIM V.I. Growth and Income Fund
for the six-month period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID AIM V.I. GROWTH & DO YOU THINK THE MARKET IS TOO HIGH? Q. WHY ARE FINANCIAL STOCKS STILL ATTRACTIVE?
INCOME FUND PERFORM DURING THE A. That is probably impossible to say. THEY WERE PROMINENT IN THE PORTFOLIO SIX
REPORTING PERIOD? While the strength of the U.S. economy MONTHS AGO.
A. The Fund did very well, once provides solid underpinnings for equity per- A. With financial markets healthy, interest
again delivering steady growth and formance, we think the market is very expen- rates stable, and the trend toward globaliza-
income. For the six months ended sive by any valuation measure. Especially tion and consolidation unabated, financial
June 30, 1998, total return, includ- for very large companies, the so-called stocks have been performing very well, and in
ing reinvestment of quarterly distri- "mega-caps" like General Electric, price/ many cases their valuations seem much more
butions, was 14.41%. This performance earnings ratios have risen dramatically reasonable than for the market in general. At
is consistent with the Fund's excel- just in the past year or so. approximately 16% of net assets, financials
lent long-term track record as shown And this has happened even as earnings represent one of the largest sector weightings
on the following pages. growth has leveled off or declined. Average in the portfolio, as they did six months ago.
earnings growth for large domestic compa- Emblematic of what is going on in this
Q. WHAT WERE MARKET CONDITIONS nies was in the single digits for the first field is the merger, announced in April, of
LIKE DURING THE REPORTING PERIOD? quarter of 1998, compared to double digits insurance giant Travelers Group, Inc. and
A. As the new year unfolded, the the past few years. major money-center banker Citicorp--two
markets shrugged off the difficulties stocks in the Fund's portfolio. This largest
of the previous months that had re- Q. AS A RESULT, HAVE YOU CHANGED THE WAY corporate merger in history aims to meld two
sulted from the economic crisis in YOU MANAGE THE FUND? financial-services leaders that reported solid
Asia. A much-anticipated slowdown A. We are becoming a bit more conservative earnings for the first quarter of 1998.
in the U.S. economy, predicted to as we see confidence in earnings erode. One One factor spurring this consolidation
result from the Asian troubles, step we have taken is raising our stake in wave is the financial burden the Year 2000
never materialized. U.S. gross domes- convertible securities. With convertibles, problem poses for financial companies. It
tic output rose at a 4.8% annual you can keep an income-generating interest
rate during the first quarter of in a corporation without being exposed to TOP 10 EQUITY HOLDINGS
1998. Inflation, widely believed to all the fluctuation in the value of the
result from such robust economic company's common stock. As of 6/30/98, based on total net assets
expansion, remained low. The Commerce At the end of the reporting period, con-
Department's overall price index rose vertible corporate bonds represented more 1. Philip Morris Companies, Inc. 3.72%
an annualized 0.9% during the first than 7% of the portfolio, and convertible 2. Chase Manhattan Corp. (The) 2.69
quarter--its slowest rate in 34 preferred stocks were approximately 6% of 3. Warner-Lambert Co. 1.89
years. As concerns about Asia the portfolio. TJX Companies and Continental 4. WorldCom, Inc. 1.73
receded, the markets resumed their Airlines are examples of good holdings whose 5. Pfizer, Inc. 1.71
rise. profits we have protected by moving into 6. American International
In the second quarter, concerns their convertible securities. Group, Inc 1.68
about the Southeast Asian crisis 7. General Electric Co. 1.67
returned and, combined with a pro- Q. WHERE ELSE HAVE YOU FOUND GOOD 8. UBS AG-Registered 1.62
longed economic downturn in Japan, OPPORTUNITIES? 9. Pharmacia & Upjohn, Inc. 1.55
changed the dynamic of the market- A. Three areas that have done well for the 10. American Home Products Corp. 1.49
place. Investors abandoned faster Fund are the financial sector; communication
growing small- and mid-cap stocks, services; and health-care stocks, parti- Please keep in mind that the Fund's portfolio
and moved instead toward the rela- cularly pharmaceuticals. composition is subject to change and there is
tive safety and liquidity of large- no assurance the Fund will continue to hold
company stocks. any particular security.
Q. SOME OBSERVERS EXPRESS CONCERN
ABOUT STOCK PRICES RISING SO MUCH.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND 81
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
will be advantageous to spread those Q. HEALTH CARE IS STILL A SIGNIFICANT Another positive factor has been
reprogramming costs over as large a base PORTION OF THE PORTFOLIO. WHY? the FDA's gradual streamlining of
as possible. A. Though reduced slightly over the six- filing and approval systems. This has
month reporting period, our health-care been welcomed by pharmaceutical firms,
Q. WHAT MAKES COMMUNICATIONS holdings are still large: about 16% of especially those with new products or
SERVICES A GOOD INVESTMENT? assets. Consolidation and cost cutting in drug delivery systems. A steady stream
A. We increased our holdings in this area the health-care sector have been benefit- of new pharmaceutical products has been
during the reporting period to about 6% ing profit margins for service providers, a significant contributor to this
of assets. Technical changes and the growth and a number of HMOs and other care pro- sector's recent good performance.
of new services, especially wireless viders were able to raise premiums recent- Portfolio holding Warner-Lambert Co.
services, characterize the communications ly for the first time in years. recently received "fast track" FDA
sector. It, too, is undergoing a wave of Underlying the improved profit picture approval for some of their new
mergers and acquisitions. One of the largest of many health-care providers are systems products: an example being the
mergers on the table involves rapidly improvements such as those provided by cholesterol reducer Lipitor.
growing WorldCom Inc. and MCI Communica- portfolio holding HBO & Company. HBO
tions Corp., both portfolio holdings. produces software that integrates health- Q. WHAT IS YOUR OUTLOOK FOR
Another portfolio holding, SBC Communica- care information so that patient informa- THE FUND?
tions Inc., has merger proposals outstand- tion, for example, can move seamlessly A. A primary concern is the
ing for two other "Baby Bells," Southern among doctors' offices, hospitals and other re-emergence of problems in Asia and
New England Telecom and Ameritech. providers, and insurance companies. their effect on the marketplace. We
believe that the perceived magnitude of
AVERAGE ANNUAL TOTAL RETURN economic crisis should dissipate over
GROWTH OF $10,000 INVESTMENT As of 6/30/98 time, and investors should return to
faster growing large- and mid-cap com-
5/2/94-6/30/98 1 Year 23.26% panies targeted by the Fund.
In general, we believe we have
AIM V.I. Growth S&P 500 Inception (5/2/94) 22.28 positioned the Fund well by trying to
& Income Fund Stock Index balance higher-growth, lower-income
(In thousands) securities with some slower-growth,
5/2/94 $10,000 $10,000 higher-income positions. While the vast
7/31/94 10,030 10,239 majority of portfolio holdings are
10/31/94 10,344 10,628 growth-oriented equities, we have
1/31/95 10,090 10,660 increased our holdings of convertibles,
4/30/95 11,201 11,740 and we have a small position, just
7/31/95 12,559 12,904 below 3.5% of assets, in government
10/31/95 13,056 13,432 securities to supplement the income
1/31/96 13,680 14,775 stream.
4/30/96 14,398 15,281
7/31/96 13,881 15,035 Q. WHAT'S YOUR OUTLOOK FOR THE
10/31/96 15,274 16,664 ECONOMY AND MARKETS IN GENERAL?
1/31/97 16,994 18,666 A. Inflation continues to be low in
4/30/97 16,717 19,117 the U.S. and other developed countries.
7/31/97 20,423 22,865 If inflation remains contained, the
10/31/97 19,740 22,011 Federal Reserve Board, which has left
12/31/97 20,333 23,686 monetary policy unchanged for more than
4/30/98 22,579 26,959 a year, will be less likely to raise
6/30/98 23,093 27,564 interest rates. However, the ongoing
economic problems in Asia remains a
Past performance cannot guarantee comparable threat to corporate profits and to the
future results. performance of stocks in general.
Investors have displayed a willing-
ness to pay premium prices for the
The performance figures shown represent the AIM V.I. Growth and Income Fund and are not highly liquid stocks of the very
intended to reflect actual annuity values, and do not reflect charges at the separate largest companies--the so called "mega-
account level which, if applied, would lower the performance results. The Fund's caps". At some point, investors could
performance figures are historical and reflect reinvestment of all distributions and shift their focus to the more reason-
changes in the net asset value. The Fund's investment return and principal value will ably priced stocks in the large- and
fluctuate so that Fund shares, when redeemed, may be worth more or less than their mid-cap arenas. Such a development
original cost. Source: Towers Data Systems HYPO/REGISTERED TRADEMARK/. could prove beneficial for the Fund.
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged
securities widely regarded by investors to be representative of the stock market in
general. The unmanaged Lipper Growth & Income Fund Index represents an average of the
performance of the 30 largest growth-and-income funds. It's compiled by Lipper Analytical
Services, Inc., an independent mutual fund performance monitor. Results shown reflect
reinvestment of dividends. 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.
An investment cannot be made in the indexes listed. Index results include reinvested
dividends.
82 AIM V.I. GROWTH AND INCOME FUND
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS - 81.97%
AUTO PARTS & EQUIPMENT - 0.75%
Federal - Mogul Corp. 30,000 $ 2,025,000
- ----------------------------------------------------------------------
Lear Corp.(a) 100,000 5,131,250
- ----------------------------------------------------------------------
7,156,250
- ----------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 3.07%
Banc One Corp. 85,000 4,744,063
- ----------------------------------------------------------------------
Bank of Montreal (Canada) 50,000 2,753,136
- ----------------------------------------------------------------------
Mellon Bank Corp. 55,000 3,829,375
- ----------------------------------------------------------------------
Royal Bank of Canada (Canada) 41,100 2,472,622
- ----------------------------------------------------------------------
UBS AG - Registered (Switzerland)(a) 41,461 15,438,043
- ----------------------------------------------------------------------
29,237,239
- ----------------------------------------------------------------------
BANKS (MONEY CENTER) - 4.31%
BankAmerica Corp. 75,000 6,482,813
- ----------------------------------------------------------------------
Chase Manhattan Corp. (The) 340,000 25,670,000
- ----------------------------------------------------------------------
Citicorp 60,000 8,955,000
- ----------------------------------------------------------------------
41,107,813
- ----------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 0.52%
Coca-Cola Co. (The) 57,800 4,941,900
- ----------------------------------------------------------------------
BROADCASTING (RADIO, TELEVISION & CABLE) - 1.76%
CBS Corp.(a) 120,000 3,810,000
- ----------------------------------------------------------------------
Comcast Corp. - Class A 80,000 3,247,500
- ----------------------------------------------------------------------
MediaOne Group Inc.(a) 90,000 3,954,375
- ----------------------------------------------------------------------
Tele-Communications, Inc. - Class A(a) 150,000 5,765,625
- ----------------------------------------------------------------------
16,777,500
- ----------------------------------------------------------------------
CHEMICALS - 0.33%
Rohm & Haas Co. 30,000 3,118,125
- ----------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 1.66%
Monsanto Co. 215,000 12,013,125
- ----------------------------------------------------------------------
PPG Industries, Inc. 55,000 3,825,938
- ----------------------------------------------------------------------
15,839,063
- ----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.11%
Alcatel Alsthom CGE - Sponsored ADR 50,000 2,034,375
- ----------------------------------------------------------------------
DSC Communications Corp.(a)(b)(c) 80,000 2,400,000
- ----------------------------------------------------------------------
Lucent Technologies, Inc. 60,000 4,991,250
- ----------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 275,000 7,871,875
- ----------------------------------------------------------------------
Tellabs, Inc.(a) 40,000 2,865,000
- ----------------------------------------------------------------------
20,162,500
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE) - 1.34%
Compaq Computer Corp. 170,000 $ 4,823,750
- ------------------------------------------------------------------------
Dell Computer Corp.(a) 30,000 2,784,375
- ------------------------------------------------------------------------
International Business Machines Corp. 45,000 5,166,563
- ------------------------------------------------------------------------
12,774,688
- ------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.03%
Ascend Communications, Inc.(a) 40,000 1,982,500
- ------------------------------------------------------------------------
Cisco Systems, Inc.(a) 85,000 7,825,313
- ------------------------------------------------------------------------
9,807,813
- ------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 2.63%
Computer Associates International, Inc. 55,000 3,055,938
- ------------------------------------------------------------------------
Compuware Corp.(a) 60,000 3,067,500
- ------------------------------------------------------------------------
HBO & Co. 90,000 3,172,500
- ------------------------------------------------------------------------
Microsoft Corp.(a) 70,000 7,586,250
- ------------------------------------------------------------------------
Novell, Inc.(a) 300,000 3,825,000
- ------------------------------------------------------------------------
Sterling Commerce, Inc.(a) 90,000 4,365,000
- ------------------------------------------------------------------------
25,072,188
- ------------------------------------------------------------------------
CONSUMER FINANCE - 1.11%
Beneficial Corp. 17,500 2,680,781
- ------------------------------------------------------------------------
Household International, Inc. 105,000 5,223,750
- ------------------------------------------------------------------------
MBNA Corp. 80,000 2,640,000
- ------------------------------------------------------------------------
10,544,531
- ------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.78%
Bergen Brunswig Corp. - Class A 60,000 2,782,500
- ------------------------------------------------------------------------
Cardinal Health, Inc. 50,000 4,687,500
- ------------------------------------------------------------------------
7,470,000
- ------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.82%
Cinergy Corp. 52,500 1,837,500
- ------------------------------------------------------------------------
Edison International 70,000 2,069,375
- ------------------------------------------------------------------------
FPL Group, Inc. 30,000 1,890,000
- ------------------------------------------------------------------------
PG&E Corp. 65,000 2,051,562
- ------------------------------------------------------------------------
7,848,437
- ------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.98%
General Electric Co. 175,000 15,925,000
- ------------------------------------------------------------------------
Philips Electronics N.V. - ADR - New York Shares
(Netherlands) 35,000 2,975,000
- ------------------------------------------------------------------------
18,900,000
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.88%
Amkor Technology, Inc.(a) 300,000 2,803,125
- ------------------------------------------------------------------------
Intel Corp. 75,000 5,559,375
- ------------------------------------------------------------------------
8,362,500
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
83
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ENTERTAINMENT - 0.81%
Time Warner Inc. 90,000 $ 7,689,375
- -----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.27%
American Express Co. 65,000 7,410,000
- -----------------------------------------------------------------------
Associates First Capital Corp. - Class A 45,000 3,459,375
- -----------------------------------------------------------------------
Fannie Mae 175,000 10,631,250
- -----------------------------------------------------------------------
Freddie Mac 295,000 13,883,438
- -----------------------------------------------------------------------
MBIA, Inc. 40,000 2,995,000
- -----------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 130,000 11,878,750
- -----------------------------------------------------------------------
50,257,813
- -----------------------------------------------------------------------
HARDWARE & TOOLS - 0.51%
Black & Decker Corp. (The) 80,000 4,880,000
- -----------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 5.20%
Abbott Laboratories 90,000 3,678,750
- -----------------------------------------------------------------------
American Home Products Corp. 275,000 14,231,250
- -----------------------------------------------------------------------
Bristol-Myers Squibb Co. 80,000 9,195,000
- -----------------------------------------------------------------------
Johnson & Johnson 60,000 4,425,000
- -----------------------------------------------------------------------
Warner-Lambert Co. 260,000 18,037,500
- -----------------------------------------------------------------------
49,567,500
- -----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.37%
R.P. Scherer Corp.(a) 40,000 3,545,000
- -----------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 5.58%
Lilly (Eli) & Co. 95,000 6,275,938
- -----------------------------------------------------------------------
Merck & Co., Inc. 80,000 10,700,000
- -----------------------------------------------------------------------
Pfizer Inc. 150,000 16,303,124
- -----------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 320,000 14,760,000
- -----------------------------------------------------------------------
SmithKline Beecham PLC - ADR (United Kingdom) 85,000 5,142,500
- -----------------------------------------------------------------------
53,181,562
- -----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.70%
Columbia/HCA Healthcare Corp. 115,000 3,349,375
- -----------------------------------------------------------------------
Health Management Associates, Inc. - Class A(a) 100,000 3,343,750
- -----------------------------------------------------------------------
6,693,125
- -----------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.28%
HEALTHSOUTH Corp.(a) 100,000 2,668,750
- -----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.27%
Arterial Vascular Engineering, Inc.(a) 175,000 6,256,250
- -----------------------------------------------------------------------
Becton, Dickinson & Co. 60,000 4,657,500
- -----------------------------------------------------------------------
Guidant Corp. 20,000 1,426,250
- -----------------------------------------------------------------------
Medtronic, Inc. 60,000 3,825,000
- -----------------------------------------------------------------------
US Surgical Corp. 120,000 5,475,000
- -----------------------------------------------------------------------
21,640,000
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (SPECIALIZED SERVICES) - 0.68%
Omnicare, Inc. 170,000 $ 6,481,250
- ------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.18%
Colgate-Palmolive Co. 75,000 6,600,000
- ------------------------------------------------------------------------
Procter & Gamble Co. (The) 51,500 4,689,719
- ------------------------------------------------------------------------
11,289,719
- ------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.20%
Provident Companies, Inc. 55,000 1,897,500
- ------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.90%
Ace, Ltd. 120,000 4,680,000
- ------------------------------------------------------------------------
American International Group, Inc. 110,000 16,060,000
- ------------------------------------------------------------------------
Travelers Group, Inc. 115,000 6,971,875
- ------------------------------------------------------------------------
27,711,875
- ------------------------------------------------------------------------
INSURANCE (PROPERTY - CASUALTY) - 0.58%
Allstate Corp. (The) 60,000 5,493,750
- ------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.73%
Merrill Lynch & Co., Inc. 75,000 6,918,750
- ------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.73%
Franklin Resources, Inc. 130,000 7,020,000
- ------------------------------------------------------------------------
LODGING - HOTELS - 0.58%
Carnival Corp. - Class A 140,000 5,547,500
- ------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.08%
Hillenbrand Industries, Inc. 30,000 1,800,000
- ------------------------------------------------------------------------
Textron, Inc. 40,000 2,867,500
- ------------------------------------------------------------------------
Tyco International Ltd. (Bermuda) 90,000 5,670,000
- ------------------------------------------------------------------------
10,337,500
- ------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.16%
US Filter Corp.(a)(b)(c) 53,900 1,512,569
- ------------------------------------------------------------------------
NATURAL GAS - 1.44%
El Paso Natural Gas Co. 130,000 4,972,500
- ------------------------------------------------------------------------
Enron Corp. 100,000 5,406,250
- ------------------------------------------------------------------------
Williams Companies, Inc. (The) 100,000 3,375,000
- ------------------------------------------------------------------------
13,753,750
- ------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 2.26%
British Petroleum Co. PLC - ADR (United Kingdom) 50,000 4,412,500
- ------------------------------------------------------------------------
Elf Acquitaine S.A. (France) 30,000 2,130,000
- ------------------------------------------------------------------------
Exxon Corp. 125,000 8,914,063
- ------------------------------------------------------------------------
Royal Dutch Petroleum Co. - New York Shares
(Netherlands) 70,000 3,836,875
- ------------------------------------------------------------------------
Total S.A. (France) 35,000 2,288,125
- ------------------------------------------------------------------------
21,581,563
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
84
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (DRILLING & EQUIPMENT) - 2.27%
Camco International, Inc. 55,000 $ 4,283,125
- --------------------------------------------------------------------
Dresser Industries, Inc. 115,000 5,067,188
- --------------------------------------------------------------------
EVI Weatherford, Inc.(a) 75,000 2,784,375
- --------------------------------------------------------------------
Halliburton Co. 90,000 4,010,625
- --------------------------------------------------------------------
Petroleum Geo-Services ASA - ADR (Norway)(a) 70,000 2,135,000
- --------------------------------------------------------------------
Schlumberger Ltd. 50,000 3,415,624
- --------------------------------------------------------------------
21,695,937
- --------------------------------------------------------------------
PERSONAL CARE - 0.58%
Avon Products, Inc. 12,600 976,500
- --------------------------------------------------------------------
Gillette Co. 80,000 4,535,000
- --------------------------------------------------------------------
5,511,500
- --------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.78%
Xerox Corp. 73,000 7,418,625
- --------------------------------------------------------------------
RAILROADS - 0.52%
Kansas City Southern Industries, Inc. 100,000 4,962,500
- --------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 1.72%
Boston Properties, Inc. 65,000 2,242,500
- --------------------------------------------------------------------
Crescent Real Estate Equities, Co. 105,000 3,530,625
- --------------------------------------------------------------------
Patriot American Hospitality, Inc. 160,000 3,830,000
- --------------------------------------------------------------------
Starwood Hotels & Resorts 80,000 3,865,000
- --------------------------------------------------------------------
Vornado Realty Trust 75,000 2,976,562
- --------------------------------------------------------------------
16,444,687
- --------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.42%
Ingram Micro, Inc. - Class A(a) 90,000 3,982,500
- --------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 2.17%
Federated Department Stores, Inc.(a) 130,000 6,995,625
- --------------------------------------------------------------------
J.C. Penney Co., Inc. 60,000 4,338,750
- --------------------------------------------------------------------
Kohl's Corp.(a) 80,000 4,150,000
- --------------------------------------------------------------------
Proffitt's, Inc.(a) 130,000 5,248,750
- --------------------------------------------------------------------
20,733,125
- --------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.84%
CVS Corp. 100,000 3,893,750
- --------------------------------------------------------------------
Walgreen Co. 100,000 4,131,250
- --------------------------------------------------------------------
8,025,000
- --------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 1.25%
Costco Companies, Inc.(a) 60,000 3,783,750
- --------------------------------------------------------------------
Fred Meyer, Inc.(a) 71,600 3,043,000
- --------------------------------------------------------------------
Wal-Mart Stores, Inc. 83,800 5,090,850
- --------------------------------------------------------------------
11,917,600
- --------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.39%
Washington Mutual, Inc. 85,000 3,692,188
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMMERCIAL & CONSUMER) - 1.68%
Service Corp. International 293,100 $ 12,566,662
- -----------------------------------------------------------------------------
Stewart Enterprises, Inc. - Class A 130,000 3,461,250
- -----------------------------------------------------------------------------
16,027,912
- -----------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.41%
Ceridian Corp.(a) 85,000 4,993,750
- -----------------------------------------------------------------------------
Equifax, Inc. 100,000 3,631,250
- -----------------------------------------------------------------------------
Fiserv, Inc.(a) 115,000 4,883,905
- -----------------------------------------------------------------------------
13,508,905
- -----------------------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.25%
Corrections Corp. of America(a) 100,000 2,350,000
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 2.79%
MCI Communications Corp. 175,000 10,171,875
- -----------------------------------------------------------------------------
WorldCom, Inc.(a) 340,000 16,468,750
- -----------------------------------------------------------------------------
26,640,625
- -----------------------------------------------------------------------------
TELEPHONE - 2.58%
Ameritech Corp. 110,000 4,936,250
- -----------------------------------------------------------------------------
Bell Atlantic Corp. 110,000 5,018,750
- -----------------------------------------------------------------------------
BellSouth Corp. 75,000 5,034,374
- -----------------------------------------------------------------------------
SBC Communications, Inc. 240,000 9,600,000
- -----------------------------------------------------------------------------
24,589,374
- -----------------------------------------------------------------------------
TOBACCO - 3.72%
Philip Morris Companies, Inc. 900,000 35,437,500
- -----------------------------------------------------------------------------
WASTE MANAGEMENT - 0.01%
Thermo Instrument Systems Inc.(a) 4,500 118,125
- -----------------------------------------------------------------------------
Total Common Stocks (Cost $619,895,023) 781,845,501
- -----------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 5.73%
AIR FREIGHT - 0.33%
CNF Trust I - $2.50 Series A Gtd. Conv. Pfd. 50,000 3,175,000
- -----------------------------------------------------------------------------
AIRLINES - 0.47%
Continental Air Finance Trust - $4.25 Conv. Pfd. 35,000 4,453,085
- -----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.17%
Federal-Mogul Finance Trust - $3.50 Gtd. Conv. Pfd.
(Acquired 06/30/98; Cost $1,665,096)(d) 22,300 1,665,096
- -----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.35%
MGIC Investment Corp. - $3.12 Series A Conv. Pfd.
STRYPES 35,000 3,346,875
- -----------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.37%
Medpartners Inc. - $1.44 Conv. Pfd. TAPS 330,000 3,485,625
- -----------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.10%
Conseco Inc. - $4.278 Conv. PRIDES 65,000 10,448,750
- -----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.26%
Salomon Smith Barney Holdings - $3.48 Conv. Pfd. DECS 45,000 2,517,187
- -----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.29%
AES Trust I - $2.69 Series A Gtd. Conv. Pfd. 35,000 2,730,000
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
85
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RAILROADS - 0.39%
Union Pacific Cap Trust - $3.125 Gtd. Conv. Pfd. TIDES
(Acquired 03/27/98 - 04/02/98; Cost $4,068,346)(d) 80,000 $ 3,746,560
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.33%
TJX Cos., Inc. - $7.00 Series E Conv. PEPS 6,000 3,131,625
- -------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.08%
Cendant Corp. - $3.75 Conv. PRIDES(c) 275,000 10,295,313
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.59%
AirTouch Communications, Inc. - $1.74 Series B Conv.
Pfd. 70,000 3,377,500
- -------------------------------------------------------------------------------
Nextel Trust - $1.015 Conv. Pfd. STRYPES 100,000 2,225,000
- -------------------------------------------------------------------------------
5,602,500
- -------------------------------------------------------------------------------
Total Convertible Preferred Stocks
(Cost $55,981,617) 54,597,616
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CONVERTIBLE CORPORATE BONDS - 7.82%
AIRLINES - 0.32%
Continental Airlines, Conv. Unsec. Sub. Notes, 6.75%,
04/15/06 $ 1,500,000 3,092,415
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 2.27%
Candescent Technology Corp., Conv. Sr. Sub. Deb.,
7.00%, 05/01/03 (Acquired 04/17/98; Cost
$5,000,000)(d) 5,000,000 5,000,000
- -------------------------------------------------------------------------------
Comverse Technology Inc., Conv. Sub. Notes, 4.50%,
07/01/05 (Acquired 06/25/98; Cost $3,000,000)(d) 3,000,000 3,056,250
- -------------------------------------------------------------------------------
EMC Corp., Conv. Sub. Notes, 3.25%, 03/15/02 3,500,000 7,196,140
- -------------------------------------------------------------------------------
Global Telesystems Group, Inc., Conv. Sr. Unsec. Sub.
Notes, 8.75%, 06/30/00 (Acquired 02/05/98; Cost
$1,950,312)(b)(d) 1,500,000 3,706,875
- -------------------------------------------------------------------------------
Western Digital Corp., Conv. Gtd. Sub. Deb., 6.80%,
02/18/18 (Acquired 06/12/98; Cost $2,400,000)(d)(e) 10,000,000 2,692,200
- -------------------------------------------------------------------------------
21,651,465
- -------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.87%
America Online, Inc., Conv. Unsec. Sub. Notes, 4.00%,
11/15/02 (Acquired 02/10/98; Cost $2,499,041)(d) 2,000,000 4,292,260
- -------------------------------------------------------------------------------
Platinum Technology, Inc., Conv. Unsec. Sub. Notes,
6.25%, 12/15/02 (Acquired 12/11/97; Cost
$1,997,000)(d) 2,000,000 2,170,000
- -------------------------------------------------------------------------------
Veritas Software Corp., Conv. Unsec. Sub. Notes,
5.25%, 11/01/04 1,500,000 1,822,500
- -------------------------------------------------------------------------------
8,284,760
- -------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.43%
SCI Systems, Inc., Conv. Sub. Notes, 5.00%, 05/01/06 2,500,000 4,103,500
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRONICS SEMICONDUCTORS - 0.39%
Amkor Technology, Inc., Conv. Unsec. Sub. Notes,
5.75%, 05/01/03 $ 4,000,000 $ 3,713,600
- ------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.66%
NCS Healthcare Inc., Conv. Sub. Notes, 5.75%,
08/15/04 (Acquired 08/07/98 - 12/08/97; Cost
$2,133,540)(d) 2,100,000 2,251,389
- ------------------------------------------------------------------------------
Omnicare, Inc., Conv. Sub. Deb., 5.00%, 12/01/07
(Acquired 12/04/97; Cost $3,500,000)(d) 3,500,000 4,090,625
- ------------------------------------------------------------------------------
6,342,014
- ------------------------------------------------------------------------------
HOUSEWARES - 0.24%
Sunbeam Corp., Conv. Sr. Sub. Deb., 7.64%, 03/25/18
(Acquired 06/16/98 - 06/19/98; Cost
$2,662,620)(d)(e) 10,000,000 2,275,000
- ------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.40%
Diamond Offshore Drilling, Inc., Conv. Unsec. Sub.
Notes, 3.75%, 02/15/07 3,250,000 3,780,465
- ------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.37%
Staples Inc., Conv. Unsec. Sub. Deb., 4.50%, 10/01/00
(Acquired 10/23/97 - 12/30/97; Cost $2,299,750)(d) 1,750,000 3,493,998
- ------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.23%
Equity Corp. International, Conv. Unsec. Sub. Deb.,
4.50%, 12/31/04 (Acquired 02/19/98 - 02/20/98; Cost
$2,001,250)(d) 2,000,000 2,194,380
- ------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.23%
Affiliated Computer Services, Conv. Unsec. Sub.
Notes, 4.00%, 03/15/05 (Acquired 03/17/98; Cost
$2,006,875)(d) 2,000,000 2,218,760
- ------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.36%
Career Horizons, Inc., Conv. Bonds, 7.00%, 11/01/02 1,250,000 3,451,462
- ------------------------------------------------------------------------------
WASTE MANAGEMENT - 1.05%
USA Waste Services, Inc.,
Conv. Unsec. Sub. Notes, 4.50%, 06/01/01 3,000,000 5,053,140
- ------------------------------------------------------------------------------
Conv. Sub. Notes, 4.00%, 02/01/02 2,000,000 2,491,260
- ------------------------------------------------------------------------------
WMX Technologies, Conv. Sub. Notes, 2.00%, 01/24/05 2,500,000 2,478,900
- ------------------------------------------------------------------------------
10,023,300
- ------------------------------------------------------------------------------
Total Convertible Corporate Bonds
(Cost $65,353,065) 74,625,119
- ------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 3.45%
9.125%, 05/15/99 9,000,000 9,277,110
- ------------------------------------------------------------------------------
11.75%, 02/15/01 10,000,000 11,505,400
- ------------------------------------------------------------------------------
13.125%, 05/15/01 5,000,000 5,993,650
- ------------------------------------------------------------------------------
13.375%, 08/15/01 5,000,000 6,106,650
- ------------------------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $33,651,758) 32,882,810
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
86
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
REPURCHASE AGREEMENT(f) - 0.89%
Dean Witter Reynolds, Inc., 6.10%, 07/01/98(g)
(Cost $8,470,606) $8,470,606 $ 8,470,606
- -----------------------------------------------------------------------
TOTAL INVESTMENT SECURITIES - 99.86% 952,421,652
- -----------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.14% 1,314,888
- -----------------------------------------------------------------------
NET ASSETS - 100.00% $953,736,540
=======================================================================
</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 8.
(c) A portion of this security is subject to put options purchased. See Note 9.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with the procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $42,853,393
which represented 4.49% of the Fund's net assets.
(e) Zero coupon bond. Interest rate shown represents the rate of original issue
discount.
(f) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase are through
participation in joint accounts with other mutual funds, private accounts
and certain non-registered investment companies managed by the investment
advisor or its affiliates.
(g) Joint repurchase agreements entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
Gtd. - Guaranteed
PEPS - Participating Equity Preferred Shares
Pfd. - Preferred
PRIDES - Preferred Redeemable Increased Dividend Equity Security
Sec. - Secured
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
TAPS - Threshold Appreciation Priced Security
TIDES - Term Income Deferrable Equity Security
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
87
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $783,352,069) $952,421,652
- ----------------------------------------------------------------------
Receivables for:
Investments sold 6,780,916
- ----------------------------------------------------------------------
Capital stock sold 1,452,639
- ----------------------------------------------------------------------
Dividends and interest 2,281,899
- ----------------------------------------------------------------------
Options purchased 227,316
- ----------------------------------------------------------------------
Investment for deferred compensation plan 16,205
- ----------------------------------------------------------------------
Other assets 29,208
- ----------------------------------------------------------------------
Total assets 963,209,835
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 8,660,394
- ----------------------------------------------------------------------
Capital stock reacquired 104,490
- ----------------------------------------------------------------------
Options written 224,882
- ----------------------------------------------------------------------
Deferred compensation plan 16,205
- ----------------------------------------------------------------------
Accrued advisory fees 456,148
- ----------------------------------------------------------------------
Accrued administrative services fees 4,505
- ----------------------------------------------------------------------
Accrued directors' fees 2,000
- ----------------------------------------------------------------------
Accrued operating expenses 4,671
- ----------------------------------------------------------------------
Total liabilities 9,473,295
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $953,736,540
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 44,185,153
======================================================================
Net asset value, offering and redemption price per share $ 21.59
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $102,911 foreign withholding tax) $ 5,275,424
- ------------------------------------------------------------------------------
Interest 3,400,181
- ------------------------------------------------------------------------------
Total investment income 8,675,605
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,435,599
- ------------------------------------------------------------------------------
Administrative services fees 27,639
- ------------------------------------------------------------------------------
Custodian fees 23,293
- ------------------------------------------------------------------------------
Directors' fees and expenses 5,991
- ------------------------------------------------------------------------------
Interest expense (Note 4) 58,555
- ------------------------------------------------------------------------------
Other 12,221
- ------------------------------------------------------------------------------
Total expenses 2,563,298
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (5,485)
- ------------------------------------------------------------------------------
Net expenses 2,557,813
- ------------------------------------------------------------------------------
Net investment income 6,117,792
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 18,975,844
- ------------------------------------------------------------------------------
Foreign currencies 56,797
- ------------------------------------------------------------------------------
Futures contracts (321,187)
- ------------------------------------------------------------------------------
Option contracts (1,237,650)
- ------------------------------------------------------------------------------
17,473,804
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 81,373,820
- ------------------------------------------------------------------------------
Foreign currencies (5,380)
- ------------------------------------------------------------------------------
Futures contracts 277,200
- ------------------------------------------------------------------------------
Option contracts 150,870
- ------------------------------------------------------------------------------
81,796,510
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies,
futures and option contracts 99,270,314
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $105,388,106
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
88
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,117,792 $ 4,767,618
- --------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 17,473,804 9,736,106
- --------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and option
contracts 81,796,510 66,989,418
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 105,388,106 81,493,142
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (326,695)
- --------------------------------------------------------------------------------
Distributions from net realized gains -- (490,042)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 209,235,889 349,104,509
- --------------------------------------------------------------------------------
Net increase in net assets 314,623,995 429,780,914
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 639,112,545 209,331,631
- --------------------------------------------------------------------------------
End of period $953,736,540 $639,112,545
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $746,862,076 $537,626,187
- --------------------------------------------------------------------------------
Undistributed net investment income 10,968,636 4,850,844
- --------------------------------------------------------------------------------
Undistributed net realized gain on sales from
investment securities, foreign currencies, futures
and option contracts 26,895,677 9,421,873
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and option contracts 169,010,151 87,213,641
- --------------------------------------------------------------------------------
$953,736,540 $639,112,545
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Growth and Income Fund (the "Fund"). The Fund's investment
objective is to seek growth of capital, with current income as a secondary
objective. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market (but
not including securities reported on the NASDAQ National Market System) is
valued at the mean between the last bid and asked prices based upon quotes
furnished by market makers for such securities. If a mean is not available,
as is the case in some foreign markets, the closing bid will be used absent
a last sales price. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a
last sales price, at the mean of the closing bid and asked prices. Debt
obligations (including convertible bonds) are valued on the basis of prices
provided by an independent pricing service. Prices provided by the pricing
service may be determined without exclusive reliance on quoted prices, and
may reflect appropriate factors such as yield, type of issue, coupon rate
and maturity date. Securities for which market prices are not provided by
any of the above methods are valued at the mean between the last bid and
asked prices based upon quotes furnished by independent sources. Securities
for which market quotations either are not readily available or are
questionable are valued at fair value as determined in good faith by or
under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value. Generally, trading in foreign securities is
AIM V.I. GROWTH AND INCOME FUND
89
<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.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities as collateral for the account of
the broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contracts may not correlate with changes in the value of the securities
being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "marked-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written. The Fund will
not write a covered call option if, immediately thereafter, the aggregate
value of the securities underlying all such options, determined as of the
dates such options were written, would exceed 25% of the net assets of the
Fund.
H. Put options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
options's underlying instrument at a fixed strike price. In return for this
right, a Fund pays an option premium. The options's underlying instrument
may be a security, or a futures contract. Put options may be used by a Fund
to hedge securities it owns by locking in a minimum price at which the Fund
can sell. If security prices fall, the put option could be exercised to
offset all or a portion of the Fund's resulting losses. At the same time,
because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $27,639 for such
services.
AIM V.I. GROWTH AND INCOME FUND
90
<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 six months ended June 30, 1998, the Fund incurred legal fees of
$1,818 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel to
the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $5,485 under an expense
offset arrangement. The effect of the above arrangement resulted in a reduction
of the Fund's total expenses of $5,485 during the six months ended June 30,
1998.
NOTE 4 - BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund,
with an agreement that the Fund will repurchase such securities at an agreed-
upon price and date. Proceeds from reverse repurchase agreements are treated as
borrowings. The agreements are collateralized by the underlying securities and
are carried at the amount at which the securities will subsequently be
repurchased as specified in the agreements. The maximum amount outstanding
during the period ended June 30, 1998 was $18,886,000 while borrowings averaged
$2,074,785 per day with a weighted average interest rate of 5.61%.
NOTE 5 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June 30,
1998 was $759,707,519 and $541,546,154, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $180,248,162
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (11,558,458)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $169,689,704
===========================================================================
</TABLE>
Cost of investments for tax purposes is $783,731,948.
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
June 30, December 31,
1998 1997
------------------------ ------------------------
Shares Amount Shares Amount
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 10,738,330 $217,917,456 20,645,975 $361,699,824
- ------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 44,268 816,737
- ------------------------------------------------------------------------------
Reacquired (421,720) (8,681,567) (745,032) (13,412,052)
- ------------------------------------------------------------------------------
10,316,610 $209,235,889 19,945,211 $349,104,509
==============================================================================
</TABLE>
NOTE 8 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 4,712 $ 1,004,268
- -------------------------------------------
Written 14,347 3,458,401
- -------------------------------------------
Closed (14,047) (3,460,100)
- -------------------------------------------
Exercised (2,550) (654,784)
- -------------------------------------------
Expired (935) (124,574)
- -------------------------------------------
End of period 1,527 $ 223,211
===========================================
</TABLE>
Open call option contracts written at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30,
1998 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----- -------- ------ --------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
DSC Communications Corp. Oct $35 800 $ 87,597 $ 77,500 $ 10,097
- ------------------------------------------------------------------------------------
Global Telesystems
Group, Inc. Jul 45 53 16,404 26,832 (10,428)
- ------------------------------------------------------------------------------------
Global Telesystems Group
Inc. Aug 50 135 66,929 63,281 3,648
- ------------------------------------------------------------------------------------
US Filter Corp. Aug 30 539 52,281 57,269 (4,988)
- ------------------------------------------------------------------------------------
1,527 $223,211 $224,882 $ (1,671)
====================================================================================
</TABLE>
NOTE 9 - PUT OPTION CONTRACTS PURCHASED
Transactions in put options purchased during the six months ended June 30, 1998
are summarized as follows:
<TABLE>
<CAPTION>
PUT OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS PAID
--------- --------
<S> <C> <C>
Beginning of period 2,187 $ 429,294
- ----------------------------------------
Purchased 2,389 292,659
- ----------------------------------------
Closed (1,937) (356,889)
- ----------------------------------------
Expired (300) (85,367)
- ----------------------------------------
End of period 2,339 $ 279,697
========================================
</TABLE>
Open put option contracts purchased at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30,
1998 UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS PAID VALUE (DEPRECIATION)
- ----- -------- ------ --------- -------- -------- --------------
<S> <C> <C> <C> <C> <C> <C>
DSC Communications Corp. Oct $25 600 $104,300 $ 60,000 $(44,300)
- --------------------------------------------------------------------------------------
DSC Communications Corp. Oct 27.50 200 50,600 33,750 (16,850)
- --------------------------------------------------------------------------------------
Cendant Corp. Jul 20 500 42,193 31,250 (10,943)
- --------------------------------------------------------------------------------------
Cendant Corp. Aug 20 500 40,562 70,313 29,751
- --------------------------------------------------------------------------------------
United States Filter
Corp. Aug 25 539 42,042 32,003 (10,039)
- --------------------------------------------------------------------------------------
2,339 $279,697 $227,316 $(52,381)
======================================================================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
91
<PAGE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995 and
the period May 2, 1994 (date operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
December 31,
June 30, --------------------------- January 31,
1998 1997 1996 1995 1995
-------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
- --------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.11 0.13 0.16 0.14 0.11
- --------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 2.61 3.74 2.36 3.11 (0.02)
- --------------------------------------------------------------------------------------
Total from investment
operations 2.72 3.87 2.52 3.25 0.09
- --------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.01) (0.14) (0.14) (0.11)
- --------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.02) (0.03) (0.41) --
- --------------------------------------------------------------------------------------
Total distributions -- (0.03) (0.17) (0.55) (0.11)
- --------------------------------------------------------------------------------------
Net asset value, end of
period $ 21.59 $ 18.87 $ 15.03 $ 12.68 $ 9.98
======================================================================================
Total return(a) 14.41% 25.72% 19.95% 32.65% 0.90%
======================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $953,737 $639,113 $209,332 $38,567 $7,380
======================================================================================
Ratio of expenses to
average net assets 0.65%(b) 0.69% 0.78% 0.78%(c) 1.07%(c)(d)
======================================================================================
Ratio of net investment
income to average net
assets 1.55%(b) 1.15% 2.05% 1.92%(c) 1.95%(c)(d)
======================================================================================
Portfolio turnover rate 68% 135% 148% 145% 96%
======================================================================================
Average brokerage
commission rate paid(e) $ 0.0589 $ 0.0612 $ 0.0644 N/A N/A
======================================================================================
Borrowings for the
period:
Amount of debt
outstanding at end of
period (000s omitted) $ -- -- -- -- --
======================================================================================
Average amount of debt
outstanding during the
period (000s
omitted)(f) $ 2,075 -- -- -- --
======================================================================================
Average number of shares
outstanding during the
period (000s
omitted)(f) $ 39,118 -- -- -- --
======================================================================================
Average amount of debt
per share during the
period $ 0.0530 -- -- -- --
======================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $797,761,022.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
(e) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
(f) Averages computed on a daily basis.
AIM V.I. GROWTH AND INCOME FUND
92
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
AIM V.I. HIGH YIELD FUND
SEEKS HIGH CURRENT INCOME AND
CONSISTENT RETURNS
A roundtable discussion with the Fund management team for AIM V.I. High Yield Fund
for the two-month period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. THE AIM V.I. HIGH YIELD FUND high-yield bonds issued by American --------------------------------------------
BEGAN OPERATIONS ON MAY 1, corporations. Our goal
1998. HOW DID THE FUND PERFORM We select investments for the portfolio
IN ITS FIRST TWO MONTHS? after carefully researching each issue. in managing the
A. The Fund produced a total return of Our team of analysts monitors individual
0.50% in May and June, the final two issues, follows industry trends, and AIM V.I. High Yield Fund
months of the reporting period. While it watches interest rate and financial market
bested the 0.06% two-month return of the changes that could affect high-yield cor- is to bring investors
Lipper High Yield Bond Fund Index of porate bonds.
comparable mutual funds, it is important We're looking for stable or improv- a high level of current income.
to note that this is not a very extensive ing high-yield securities with strong --------------------------------------------
time period from which to gauge a Fund's potential for consistent income and long-
performance. Nevertheless, the Fund is term growth. Q. HOW IS THE PORTFOLIO DIVERSIFIED?
off to a good start. A. The Fund invests in high-yield bonds
Q. WHAT IS THE TYPICAL CREDIT QUAL- from a variety of industries and companies.
Q. WHAT WERE MARKET CONDITIONS ITY OF THE PORTFOLIO? As economic conditions change, different
LIKE AS THE AIM V.I. HIGH YIELD A. We take a disciplined approach and industries will be affected in different
FUND MADE ITS FIRST APPEARANCE? follow strict credit guidelines. The aver- ways. Fluctuations in price and in
A. The months of May and June were a age portfolio quality is generally in the supply and demand are normal. A port-
challenging time for the high-yield mar- B2/B range, as defined by Moody's Inves- folio that is diversified can weather
ket. During the second quarter of 1998, tors Service and Standard & Poor's, two those changes better.
concerns resurfaced about the effect of widely known credit rating agencies. As of June 30, 1998, the Fund had 39
the Asian economic crises on American These ratings are historical and are based holdings in the portfolio, with our largest
industries. Many companies in the high- on analysis of the credit quality of indi- industry weightings in specialty retail and
yield market reported lower-than- vidual securities in the Fund's portfolio. long-distance telecommunications.
expected earnings. Concerns about the For instance, in the Standard & Poor's
ability of these companies to pay their rating system, bonds can be rated from Q. WHAT IS YOUR OUTLOOK FOR THE
debt caused investors to back away from a high of AAA, which indicates the best SECOND HALF OF 1998?
the high-yield market and to turn towards quality, to the lowest level of D, which A. For the broader domestic bond market,
high-quality long-term bonds for safety. indicate that a bond is in default. We the fundamentals appear sound. With
don't seek higher returns by targeting continuing low inflation and a slight slow-
Q. HOW DO YOU MANAGE THE AIM the more speculative high-yield instru- down in economic growth, there is little
V.I. HIGH YIELD FUND PORTFOLIO? ments such as defaulted or emerging
A. Our goal in managing the AIM V.I. High market credits.
Yield Fund is to bring investors a high Management believes that bonds in the
level of current income. The Fund's port- B2/B range provide the best balance of
folio is invested primarily in lower-rated interest rate sensitivity, credit risk, and
current income.
</TABLE>
AIM V.I. HIGH YIELD FUND 93
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO COMPOSITION
As of 6/30/98, based on total net assets
TOP 10 HOLDINGS TOP 10 INDUSTRIES
<S> <C> <C> <C>
1. Sprectrasite Holdings, Inc., 12.00%, 07/15/08 3.05% 1. Retail (Specialty) 9.82%
2. Resort at Summerlin LP, 13.00%, 12/15/07 3.03 2. Telecommunications (Long Distance) 8.08
3. BPC Holding Corp., 12.50%, 06/15/06 2.96 3. Gaming, Lottery, & Parimutuel
Companies 5.58
4. Versatel Telecom BV, 13.25%, 05/15/08 2.89
4. Shipping 5.53
5. Mediq, Inc., 11.00%, 06/01/08 2.83
5. Telephone 5.52
6. US Xchange LLC, 15.00%, 07/01/08 2.82
6. Broadcasting (Television,
7. CEX Holdings Inc., 9.625%, 06/01/08 2.79 Radio, & Cable) 5.44
8. Stena Line A.B., 10.625%, 06/01/08 2.79 7. Foods 5.26
9. Pegasus Shipping Hellas Co., 11.875%, 11/15/04 2.78 8. Telecommunications
(Cellular/Wireless) 5.26
10. Favorite Brands International, Inc., 10.75%, 05/15/06 2.77
9. Telecommunications 4.78
10. Containers & Packaging (Paper) 2.96
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
reason for the Federal Reserve Board (the As the pace of economic activity
Fed) to raise interest rates. However, Fed slows, companies with weaker credit ------------------------------------
Chairman Alan Greenspan, speaking to profiles will be exposed. We believe that
Congress in July, warned that the tight credit quality will become more of a We take
labor market could eventually accelerate differentiating factor in total return per-
inflation and consequently lead to a future formance, especially if the economy a disciplined approach
increase in interest rates. continues to slow.
In the high-yield arena, we expect the As always, the Fund will strive to main- and follow
new issuance level to remain heavy. That tain an average credit quality rating of
could put more pressure on the secondary single B. However, going forward we may strict credit guidelines.
market in the short term. Companies will participate more in the higher credit-
have to pay higher interest on new issues quality BB sector to help insulate the ------------------------------------
to keep investors interested. That makes portfolio from too much risk.
the yields on existing issues less attractive,
forcing prices down.
</TABLE>
94 AIM V.I. HIGH YIELD FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES - 89.45%
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.70%
Park N View, Inc., Sr. Notes, 13.00%, 05/15/08(a)(b)
(Acquired 05/20/98; Cost $100,000) $ 100,000 $ 98,750
- -------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.76%
Exodus Communications Inc., Sr. Notes, 11.25%,
07/01/08(a) (Acquired 06/26/98; Cost $100,000) 100,000 100,875
- -------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.70%
Metal Management, Inc., Sr. Sub. Notes, 10.00%,
05/15/08(a) (Acquired 06/10/98; $99,500) 100,000 98,750
- -------------------------------------------------------------------------------
CONTAINERS & PACKAGING (PAPER) - 2.96%
BPC Holding Corp., Series B Sr. Sec. Notes, 12.50%,
06/15/06 100,000 108,000
- -------------------------------------------------------------------------------
FOODS - 5.26%
Favorite Brands International, Inc., Sr. Notes, 10.75%,
05/15/06(a) (Acquired 05/14/98; Cost $100,000) 100,000 101,250
- -------------------------------------------------------------------------------
RAB Holdings Inc., Sr. Notes, 13.00%, 05/01/08(a)
(Acquired 05/05/98; Cost $90,900) 90,000 90,900
- -------------------------------------------------------------------------------
192,150
- -------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 5.58%
Resort At Summerlin LP, Sr. Sub. Notes, 13.00%,
12/15/07(a) (Acquired 05/04/98 - 06/15/98; Cost
$108,332) 105,958 110,644
- -------------------------------------------------------------------------------
Venetian Casino/LV Sands, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 90,000 93,375
- -------------------------------------------------------------------------------
204,019
- -------------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 2.04%
Global Health Sciences, Sr. Notes, 11.00%, 05/01/08(a)
(Acquired 05/01/98; Cost $73,875) 75,000 74,625
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.83%
Mediq, Inc., Sr. Unsec. Sub. Notes, 11.00%, 06/01/08(a)
(Acquired 05/21/98; Cost $100,000) 100,000 103,500
- -------------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 2.45%
Pediatric Services of America, Sr. Unsec. Gtd. Sub.
Notes, 10.00%, 04/15/08 90,000 89,550
- -------------------------------------------------------------------------------
HOMEBUILDING - 0.54%
Schuler Homes, Sr. Notes, 9.00%, 04/15/08(a) (Acquired
04/30/98; Cost $19,681) 20,000 19,700
- -------------------------------------------------------------------------------
HOUSEWARES - 2.40%
Decora Industries Inc., Sr. Sec. Notes, 11.00%,
05/01/05(a) (Acquired 05/01/98 - 05/05/98; Cost $88,200) 90,000 87,750
- -------------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 2.67%
Booth Creek Ski Holdings, Sr. Notes, 12.50%, 03/15/07(a)
(Acquired 05/06/98; Cost $95,850) 90,000 97,425
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
LODGING-HOTELS - 2.79%
Stena Line A.B. (Sweden), Sr. Yankee Notes, 10.625%,
06/01/08 $ 100,000 $ 101,875
- -------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 2.73%
Derby Cycle Corp., Sr. Notes, 10.00%, 05/15/08(a)
(Acquired 05/07/98; Cost $100,000) 100,000 99,750
- -------------------------------------------------------------------------------
METAL FABRICATORS - 1.60%
Gulf States Steel, Inc., First Mortgage Notes, 13.50%,
04/15/03 60,000 58,500
- -------------------------------------------------------------------------------
METALS (MINING) - 2.74%
Lodestar Holdings Inc., Sr. Notes, 11.50%, 05/15/05(a)
(Acquired 05/12/98; Cost $100,000) 100,000 100,000
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 1.75%
Ocean Rig Norway A.S. (Norway), Sr. Sec. Gtd. Notes,
10.25%, 06/01/08(a) (Acquired 05/10/98; Cost $67,000) 67,000 63,985
- -------------------------------------------------------------------------------
PUBLISHING - 2.52%
Liberty Group Publishing Inc., Sr. Unsec. Disc. Notes,
11.625%, 02/01/09(c) 150,000 92,250
- -------------------------------------------------------------------------------
RESTAURANTS - 1.44%
Planet Hollywood International Inc., Sr. Unsec. Sub.
Notes, 12.00%, 04/01/05 58,000 52,490
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 9.82%
Amazon.com Inc., Sr. Disc. Notes, 10.00%, 05/01/08(a)(c)
(Acquired 05/05/98; Cost $86,110) 140,000 85,750
- -------------------------------------------------------------------------------
CEX Holdings Inc., Sr. Sub. Notes, 9.625%, 06/01/08(a)
(Acquired 05/20/98; Cost $100,000) 100,000 101,875
- -------------------------------------------------------------------------------
Icon Health & Fitness, Series B Sr. Sub. Notes, 13.00%,
07/15/02 70,000 70,350
- -------------------------------------------------------------------------------
US Office Products Co., Sr. Sub. Notes, 9.75%,
06/15/08(a) (Acquired 06/05/98; Cost $99,538) 100,000 101,125
- -------------------------------------------------------------------------------
359,100
- -------------------------------------------------------------------------------
SHIPPING - 5.53%
MC Shipping Inc., Sr. Notes, 11.25%, 03/01/08(a)
(Acquired 05/05/98 - 05/08/98; Cost $100,763) 100,000 100,500
- -------------------------------------------------------------------------------
Pegasus Shipping Hellas Co. (Bermuda), Sr. Sec. Gtd.
Mortgage Notes, 11.875%, 11/15/04(a) (Acquired 05/05/98;
Cost $102,000) 100,000 101,750
- -------------------------------------------------------------------------------
202,250
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 4.78%
Convergent Communications, Sr. Notes, 13.00%,
04/01/08(a)(d) (Acquired 05/04/98; Cost $89,775) 90,000 87,750
- -------------------------------------------------------------------------------
KMC Telecom Holdings, Inc., Sr. Disc. Notes, 12.50%,
02/15/08(a)(c)(e) (Acquired 05/18/98; Cost $86,870) 146,000 86,870
- -------------------------------------------------------------------------------
174,620
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. HIGH YIELD FUND
95
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 5.26%
Dobson Communications Corp., Sr. Notes, 11.75%, 04/15/07 $ 75,000 $ 80,812
- ------------------------------------------------------------------------------
Spectrasite Holdings Inc., Sr. Disc. Notes, 12.00%,
07/15/08(a)(c) (Acquired 06/23/98; Cost $110,994) 200,000 111,500
- ------------------------------------------------------------------------------
192,312
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 8.08%
Esprit Telecom Group PLC (United Kingdom), Sr. Notes,
10.875%, 06/15/08(a) (Acquired 06/19/98; Cost $100,000) 100,000 99,250
- ------------------------------------------------------------------------------
Long Distance International Inc., Sr. Notes, 12.25%,
04/15/08(a)(f) (Acquired 05/05/98; Cost $90,450) 90,000 90,450
- ------------------------------------------------------------------------------
Versatel Telecom BV (Netherlands), Sr. Notes, 13.25%,
05/15/08(a)(g) (Acquired 05/20/98; Cost $100,000) 100,000 105,500
- ------------------------------------------------------------------------------
295,200
- ------------------------------------------------------------------------------
TELEPHONE - 5.52%
Dobson Wireline Co., Sr. Notes, 12.25%, 06/15/08(a)
(Acquired 06/10/98; Cost $100,000) 100,000 98,500
- ------------------------------------------------------------------------------
US Xchange LLC, Sr. Notes, 15.00%, 07/01/08(a) (Acquired
06/22/98; Cost $100,000) 100,000 103,250
- ------------------------------------------------------------------------------
201,750
- ------------------------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $3,278,815) 3,269,176
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
PREFERRED STOCK - 2.74%
BROADCASTING (TELEVISION, RADIO, & CABLE) - 2.74%
Benedek Communications, 11.50% PIK Pfd.(a) (Acquired
05/07/98; Cost $100,000) 100 100,000
- ------------------------------------------------------------------------------
RIGHTS & WARRANTS - 0.00%
METAL FABRICATORS - 0.00%
Gulf States Steel, Inc., expiring 04/15/03(h) 60 151
- ------------------------------------------------------------------------------
Total Rights & Warrants (Cost $166) 151
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
REPURCHASE AGREEMENT - 7.02%(i)
Dean Witter Reynolds, Inc., 6.10%, 07/01/98
(Cost $256,763) 256,763 256,763
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.21% 3,626,090
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.79% 29,032
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $3,655,122
==============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 06/30/98 was $2,621,974
which represented 71.73% of the Fund's net assets.
(b) Issued as a unit. This unit also includes 100 warrants to purchase 6.73833
shares of common stock per warrant.
(c) Discounted bond at purchase. Interest rate shown represents the coupon
rate at which the bond will accrue at a specified future date.
(d) Issued as a unit. This unit also includes 360 warrants to purchase 10.80
shares of common stock per warrant.
(e) Issued as a unit. This unit also includes 146 warrants to purchase 0.21785
shares of common stock per warrant.
(f) Issued as a unit. This unit also includes 90 warrants to purchase 15.0874
shares of common stock per warrant.
(g) Issued as unit. This unit also includes 100 warrants to purchase 6.667
shares of common stock per warrant.
(h) Non-income producing security.
(i) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investments advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government agency
obligations, 0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate
market value at 06/30/98 of $209,153,696.
Abbreviations:
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
PIK - Payment in Kind
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
96
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $3,635,744) $ 3,626,090
- ---------------------------------------------------------------------
Receivables for:
Investments sold 85,730
- ---------------------------------------------------------------------
Dividends and interest 45,838
- ---------------------------------------------------------------------
Reimbursement from advisor 11,630
- ---------------------------------------------------------------------
Other assets 465
- ---------------------------------------------------------------------
Total assets 3,769,753
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 100,000
- ---------------------------------------------------------------------
Capital stock reacquired 26
- ---------------------------------------------------------------------
Accrued advisory fees 1,775
- ---------------------------------------------------------------------
Accrued directors' fees 1,384
- ---------------------------------------------------------------------
Accrued administrative services fees 7,600
- ---------------------------------------------------------------------
Accrued operating expenses 3,846
- ---------------------------------------------------------------------
Total liabilities 114,631
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $ 3,655,122
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 363,537
=====================================================================
Net asset value, offering and redemption price per share $10.05
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period May 1, 1998 (date operations commenced)
through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $51,679
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,377
- -----------------------------------------------------------------------------
Administrative services fees 7,600
- -----------------------------------------------------------------------------
Custodian fees 3,403
- -----------------------------------------------------------------------------
Directors' fees and expenses 1,384
- -----------------------------------------------------------------------------
Professional fees 1,666
- -----------------------------------------------------------------------------
Other 630
- -----------------------------------------------------------------------------
Total expenses 18,060
- -----------------------------------------------------------------------------
Less:Expenses paid indirectly (462)
- -----------------------------------------------------------------------------
Fees waived and reimbursed by advisor (11,630)
- -----------------------------------------------------------------------------
Net expenses 5,968
- -----------------------------------------------------------------------------
Net investment income 45,711
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Net realized gain (loss) from investment securities (22,354)
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities (9,654)
- -----------------------------------------------------------------------------
Net gain (loss) from investment securities (32,008)
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $13,703
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
97
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the period May 1, 1998 (date operations commenced) through June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
OPERATIONS:
Net investment income $ 45,711
- ---------------------------------------------------------------------
Net realized gain (loss) from investment securities (22,354)
- ---------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities (9,654)
- ---------------------------------------------------------------------
Net increase in net assets resulting from operations 13,703
- ---------------------------------------------------------------------
Net increase from capital stock transactions 3,641,419
- ---------------------------------------------------------------------
Net increase in net assets 3,655,122
- ---------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ---------------------------------------------------------------------
End of period $3,655,122
=====================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $3,641,419
- ---------------------------------------------------------------------
Undistributed net investment income 45,711
- ---------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities (22,354)
- ---------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment
securities (9,654)
- ---------------------------------------------------------------------
$3,655,122
=====================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. High Yield Fund (the "Fund"). The Fund's investment objective
is to achieve a high level of current income by investing primarily in
publicly traded non-investment grade debt securities. The Fund will also
consider the possibility of capital growth when it purchases and sells
securities. Debt securities of less than investment grade are considered "high
risk" securities (commonly referred to as junk bonds). These bonds may involve
special risks in addition to the risks associated with investment in higher
rated debt securities. High yield bonds may be more susceptible to real or
perceived adverse economic and competitive industry conditions than higher
grade bonds. Also, the secondary market in which high yield bonds are traded
may be less liquid than the market for higher grade bonds. The Fund commenced
operations on May 1, 1998. Currently, shares of the Fund are sold only to
insurance company separate accounts to fund the benefits of variable annuity
contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - Debt securities (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
institution-size trading in similar groups of securities, developments
related to special securities, yield, quality, coupon rate, maturity, type
of issue, individual trading characteristics and other market data.
Investment securities for which prices are not provided by the pricing
service and which are listed or traded on an exchange (except convertible
bonds) are valued at the last sales price on the exchange where principally
traded or, lacking any sales on a particular day, at the mean between the
closing bid and asked prices on that day unless the Board of Directors, or
persons designated by the Board of Directors, determines that over-the-
counter quotations more closely reflect the current market value of the
security. Securities traded in the over-the-counter market, except (i)
securities priced by the pricing service, (ii) securities for which
representative exchange prices are available, and (iii) securities reported
in the NASDAQ National Market System, are valued at the mean between
representative last bid and asked prices obtained from an electronic
quotation reporting system, if such prices are available, or from
established market makers. Each security reported in the NASDAQ National
Market System is valued at the last sales price on the valuation date or
absent a last sales price, at the mean between the closing bid and asked
prices. Securities for which market quotations either are not readily
available
98 AIM V.I. HIGH YIELD FUND
<PAGE>
or are questionable are valued at fair value as determined in good faith by
or under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors. Short-term obligations having 60 days
or less to maturity are valued at amortized cost which approximates market
value.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.625% of
the first $200 million of the Fund's average daily net assets, plus 0.55% of
the Fund's average daily net assets of the next $300 million, plus 0.50% of
the Fund's average daily net assets of the next $500 million, plus 0.45% of
the Fund's average daily net assets in excess of $1 billion. During the period
May 1, 1998 (date operations commenced) through June 30, 1998, AIM waived fees
and reimbursed expenses of $11,630.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the period May 1, 1998 (date operations commenced) through June 30,
1998, AIM was reimbursed $7,600 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $462 under an expense offset
arrangement. The effect of the above arrangement resulted in a reduction of
the Fund's total expenses of $462 during the period May 1, 1998 (date
operations commenced) through June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest a director's fees,
if so elected by such director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the period May 1, 1998 (date operations
commenced) through June 30, 1998 was $3,803,279 and $405,863, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $25,342
- -----------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (34,996)
- -----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment securities $(9,654)
=============================================================================
</TABLE>
Investments have the same cost for tax and financial statements.
AIM V.I. HIGH YIELD FUND
99
<PAGE>
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period May 1, 1998 (date
operations commenced) through June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998
-------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 370,513 $3,711,665
- --------------------------------
Reacquired (6,976) (70,246)
- --------------------------------
363,537 $3,641,419
================================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period May 1, 1998 (date operations commenced) through June 30,
1998.
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C>
Net asset value, beginning of period $10.00
------------------------------------------------------- ------
Income from investment operations:
Net investment income 0.13
------------------------------------------------------- ------
Net gains (losses) on securities (both realized and
unrealized) (0.08)
------------------------------------------------------- ------
Total from investment operations 0.05
------------------------------------------------------- ------
Net asset value, end of period $10.05
======================================================= ======
Total return(a) 0.50%
======================================================= ======
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $3,655
======================================================= ======
Ratio of expenses to average net assets(b) 1.19%(c)(d)
======================================================= ======
Ratio of net investment income to average net assets(e) 8.46%(d)
======================================================= ======
Portfolio turnover rate 18%
======================================================= ======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) After fee waivers and/or expense reimbursements. Ratio of
expenses to average net assets prior to fee waivers and/or
expense reimbursements was 3.34% (annualized).
(c) Includes expenses paid indirectly. Excluding expenses paid
indirectly, the ratio of expenses to average net assets would be
1.10% (annualized).
(d) Ratios are annualized and based on average net assets of
$3,233,456.
(e) After fee waivers and/or expense reimbursements. Ratio of net
investment income to average net assets prior to fee waivers
and/or expense reimbursement was 6.31% (annualized).
AIM V.I. HIGH YIELD FUND
100
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
EUROPEAN MARKETS CONTINUE TO
DOMINATE INTERNATIONAL EQUITIES
A roundtable discussion with the Fund management team for AIM V.I. International Equity Fund
about the six-month reporting period ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID THE FUND PERFORM DURING Q. WERE THERE ANY OTHER FACTORS quarter of 1998, many of the Asian markets
THE SIX-MONTH REPORTING PERIOD? DRIVING THE EUROPEAN MARKETS? did rebound, some as much as 40%, but
A. The Fund posted another impressive A. We believe there are four fundamental, they were coming off very low levels. What
period of performance. Total return was long-term themes that have fueled this occurred in the last quarter of 1997 was
18.80% for the six-month period ended incredible rally in Europe: privatization of devastating to those fragile emerging mar-
June 30, 1998. The Fund's performance state-run companies, increased economic kets. Based on the re-emergence of the
surpassed both the Morgan Stanley Capital freedoms in Eastern Europe, corporate Asian crisis in the second quarter of this
International (MSCI) Europe, Australia and restructuring, and the growth of investing year, we believe it's going to take quite
Far East Index (EAFE) of foreign stocks in European markets. some time for Asia to recover fully from
gain of 15.93% during the reporting period Many state-run companies and indus- its current economic troubles.
and the Lipper International Fund Index tries have moved into private hands, such
advance of 15.81%. as Telecom Italia S.p.A. and Portugal Q. ASIAN MARKETS HAVE BEEN EXTREMELY
Telecom S.A., two large holdings in the VOLATILE, ESPECIALLY THOSE IN JAPAN.
Q. WHAT ACCOUNTED FOR THE FUND'S Fund's portfolio. Additionally, the economic HOW HAS THAT AFFECTED THE PORTFOLIO
STRONG PERFORMANCE DURING THE freedoms in Eastern Europe have created a AND WHAT'S IN STORE FOR JAPANESE
PAST SIX MONTHS? new market of consumers and sparked a ECONOMY IN THE FUTURE?
A. The impressive performance by Euro- wave of entrepreneurial efforts in the
pean stocks was the story among interna- former Communist Bloc countries. Once A. Although it seemed apparent to the
tional equities during the past six months. capitalism is planted it can grow very rest of the world that real economic
European markets rose dramatically in the quickly, and we have seen this since the reform was needed in Japan, the
first quarter and markets in Germany, fall of the Berlin Wall. Japanese government was extremely
Sweden, France, and Belgium reached new The restructuring by "Corporate Eu- reluctant to institute any fiscal
highs during the second quarter. As a rope" has made companies leaner and stimulus or tax cuts to get their
result, all of the Fund's top 10 holdings more globally competitive. We have seen economy out of the economic gutter. After
were European companies and approxi- immediate results of this restructuring as
mately 74% of the Fund's portfolio was European earnings growth continued to be TOP 10 EQUITY HOLDINGS
invested in European equities at the end strong during the reporting period. Finally,
of the reporting period. thousands of Europeans have discovered As of 6/30/98, based on total net assets
the wonders of investing in equities. As
Q. WHY DID EUROPEAN MARKETS money has flowed into European markets, 1. Renault S.A.
PERFORM SO WELL DURING THE REPORT- the markets themselves have become larger (France) 1.78%
ING PERIOD? and more liquid than ever before. 2. Railtrack Group PLC
A. The European Economic and Monetary (United Kingdom) 1.42
Union, or EMU, is scheduled to begin on Q. WHAT ABOUT THE REST OF THE 3. VNU-Verenigde Nederlandse
January 1, 1999. In order to qualify for the WORLD? Uitgeversbedrijven Verenigd Bezit
EMU, European nations must adopt strict A. With approximately three-quarters of (Netherlands) 1.30
budgetary guidelines and improve their the Fund now positioned in Europe, there's 4. Cap Gemini Sogeti S.A.
finances. This process has lowered interest not much else to spread around the globe. (France) 1.29
rates and kept inflation--the thief of We have trimmed our total net assets in 5. Nokia Oyj A.B. - Class A
wealth--at bay. With 11 countries ex- Japan from 14% to 6%. In addition, we (Finland) 1.29
pected to join the EMU next year, this have reduced our exposure in Asia, Austra- 6. Nestle S.A. (Switzerland) 1.19
economic restructuring has triggered a lia, and Latin America. These three regions 7. Pinault-Printemps-
bull market never before seen in Europe. were hit hard by the "Asian Flu" last fall Redoute S.A. (France) 1.18
and have been slow to recover. In the first 8. Telecom Italia Mobile
S.p.A. (Italy) 1.17
9. Volkswagen A.G. (Germany) 1.15
10. Telecom Italia S.p.A. (Italy) 1.05
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.
AIM V.I. INTERNATIONAL EQUITY FUND 101
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
two consecutive declines in quarterly outstanding debts resulting from bad loans. think of banking as a growth industry,
gross domestic product, the Japanese Details of the program are still vague at we have seen excellent earnings growth
economy officially is in recession. this time, but this could prove to be an in this industry, especially in Europe.
However, during the second half of the event of landmark importance in Japan. Banking positions owned by the Fund in-
reporting period, some steps were taken by Until the economy begins to show defi- cluded the Royal Bank of Canada,
the Japanese government to rectify these nite signs of a recovery, there is no real Switzerland's Credit Suisse Group, and
problems. Most notably, the United States reason to be significantly weighted in Ja- France's Societe Generale.
and Japan coordinated a joint intervention pan. We continue to own recognizable To no one's surprise during this age
into the currency markets, essentially to Japanese companies such as Honda Motor of communication breakthroughs, the
buy yen and sell dollars. This created Co. Ltd. and Sony Corp., but overall the telecommunications sector demonstrated
some stability in the region and allayed Japanese market has significantly strong earnings during the reporting
fears that the weakness of the yen would underperformed the rest of the world for period and commanded over 10% of the
result in devaluations in the Chinese some time now. Fund's portfolio. The Fund was attract-
yuan and the Hong Kong dollar. ed to such wireless telecommunications
As a follow-up measure, the Japanese Q. IN WHICH INDUSTRIES WAS THE FUND companies as Finland's Nokia Oyj A.B.
government initiated a "bridge bank" POSITIONED? and Telecom Italia Mobile S.p.A.
concept to address the country's A. The Fund's largest industry position was The technology sector also has been
crippled financial system. Under this major regional banks with almost 13.2% strong and, as a result, represented
program, government funds would be used of total net assets. Although one may not about 7% of the Fund's portfolio. Auto-
to reconcile mobile companies comprised a little
over 4% of the portfolio with the
GROWTH OF $10,000 INVESTMENT AVERAGE ANNUAL TOTAL RETURN French automaker Renault S.A. having
the honor of being the Fund's largest
From 5/5/93-6/30/98 As of 6/30/98 single holding at 1.78%.
Lipper Europe- 1 Year 13.76% Q. WHAT IS YOUR OUTLOOK FOR THE FUND
AIM International International Australia-Asia- IN THE NEAR TERM?
Equity Fund Fund Index Far East Index 5 Years 16.18 A. We are still very positive in
(In thousands) Europe, and very cautious on the Paci-
5/5/93 $10,000 $10,000 $10,000 fic Rim. Conditions worldwide remain
7/31/93 9,930 10,347 10,411 Inception (5/5/93) 15.40 very good for equities, although it is
10/31/93 11,240 11,535 11,064 unrealistic to expect continued equity
1/31/94 12,490 12,947 11,749 returns of 20% or more. Things may con-
4/30/94 11,930 12,376 11,695 tinue to worsen in Asia before those
7/31/94 12,040 12,538 11,913 markets experience a recovery, so we do
10/31/94 12,430 12,862 12,212 not anticipate our Asian weightings to
1/31/95 11,057 11,498 11,257 increase any time soon. In Europe,
4/30/95 12,099 12,231 12,383 though, we believe there will continue
7/31/95 13,382 13,080 12,779 to be faster earnings growth with
10/31/95 13,272 12,802 12,204 better valuations than in the United
1/31/96 14,066 13,625 13,112 States, because Europe's cash-to-price
4/30/96 15,100 14,350 13,837 earnings, price-to-book, price-to-divi-
7/31/96 14,738 13,979 13,269 dend, and P/E ratios are all lower than
10/31/96 15,481 14,421 13,522 in the U.S. The economic outlook in
1/31/97 16,434 15,256 13,403 Latin America seems positive as well,
4/30/97 16,475 15,682 13,754 although the markets there struggled
6/30/97 19,131 17,913 15,717 during the six-month reporting period.
10/31/97 17,390 16,346 14,187 The economic indicators in the U.S.
1/31/98 17,781 16,733 14,823 remain positive. Inflation is low and
4/30/98 20,443 19,059 16,400 the Federal Reserve Board has left in-
6/30/98 20,916 18,918 16,451 terest rates unchanged over a year.
This is good for markets around the
Past performance cannot guarantee comparable future results. world as they often take their lead
from the U.S. It is important to note
The performance figures shown represent the AIM V.I. International Equity Fund and that there have been some cautionary
are not intended to reflect actual annuity values, and do not reflect charges at the signs, and we will be watching econo-
separate account level which, if applied, would lower the performance results. The mic indicators closely in the coming
Fund's performance figures are historical and reflect reinvestment of all distributions months. However, as long as we continue
and changes in the net asset value. The Fund's investment return and principal value to see the combination of low infla-
will fluctuate so that Fund shares, when redeemed, may be worth more or less than their tion and low interest rates around the
original cost. Source: Towers Data Systems HYPO/REGISTERED TRADEMARK/. globe, the short-term outlook for
The Europe, Australia, and Far East Index (EAFE) is a group of unmanaged foreign global equities should remain
securities. It is compiled by Morgan Stanley Capital International. Lipper Analytical promising.
Services, Inc., is an independent 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.
102 AIM V.I. INTERNATIONAL EQUITY FUND
</TABLE>
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 94.27%
ARGENTINA - 1.46%
Banco Rio de La Plata S.A. (Banks - Major Regional) 40,000 $ 422,500
- -------------------------------------------------------------------------------
Perez Companc S.A. - Class B (Oil & Gas - Refining &
Marketing) 136,442 685,039
- -------------------------------------------------------------------------------
Telefonica de Argentina S.A. - ADR (Telephone) 32,900 1,067,194
- -------------------------------------------------------------------------------
YPF Sociedad Anonima - ADR (Oil - International
Integrated) 50,400 1,515,150
- -------------------------------------------------------------------------------
3,689,883
- -------------------------------------------------------------------------------
AUSTRALIA - 1.18%
AMP Ltd. (Insurance - Life/Health)(a) 120,800 1,417,933
- -------------------------------------------------------------------------------
Australia & New Zealand Banking Group Ltd. (Banks - Major
Regional) 168,700 1,167,151
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 157,160 404,081
- -------------------------------------------------------------------------------
2,989,165
- -------------------------------------------------------------------------------
AUSTRIA - 0.34%
OMV A.G. (Oil & Gas - Refining & Marketing) 6,500 871,723
- -------------------------------------------------------------------------------
BELGIUM - 1.69%
Barco Industries (Manufacturing - Diversified) 4,000 1,118,581
- -------------------------------------------------------------------------------
Colruyt N.V. (Retail - Food Chains) 1,900 1,491,799
- -------------------------------------------------------------------------------
UCB S.A. (Manufacturing - Diversified) 320 1,661,092
- -------------------------------------------------------------------------------
4,271,472
- -------------------------------------------------------------------------------
BRAZIL - 1.63%
Companhia Energetica de Minas Gerais (Electric Companies) 20,804 647,571
- -------------------------------------------------------------------------------
Petroleo Brasileiro S.A. - Petrobras - Preferred (Oil &
Gas - Exploration & Production) 3,013 560,128
- -------------------------------------------------------------------------------
Telecomunicacoes Brasileiras S.A. (Telecommunications -
Cellular/Wireless) 7,177 570,908
- -------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A. - Rts., expiring
07/02/98 (Telecommunications - Cellular/Wireless)(a) 258 4,135
- -------------------------------------------------------------------------------
Telecomunicacoes de Sao Paulo S.A. - TELESP - Preferred
(Telephone) 5,500 1,293,502
- -------------------------------------------------------------------------------
Telecomunicacoes do Rio de Janeiro S.A.
(Telecommunications - Cellular/Wireless) 4,280 321,958
- -------------------------------------------------------------------------------
Telerj Celular S.A. (Telecommunications -
Cellular/Wireless) 4,280 254,569
- -------------------------------------------------------------------------------
Telesp Celular S.A. (Telecommunications -
Cellular/Wireless)(a) 5,500 456,530
- -------------------------------------------------------------------------------
4,109,301
- -------------------------------------------------------------------------------
CANADA - 5.69%
ATI Technologies, Inc. (Computers - Hardware)(a) 43,100 565,467
- -------------------------------------------------------------------------------
Bank of Montreal (Banks - Major Regional) 35,000 1,927,195
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CANADA - (CONTINUED)
BCE Inc. (Telecommunications - Cellular/Wireless) 28,100 $1,191,010
- -------------------------------------------------------------------------------
Bombardier Inc. (Aerospace/Defense) 46,300 1,258,965
- -------------------------------------------------------------------------------
Canadian National Railway Co. (Railroads) 9,000 478,125
- -------------------------------------------------------------------------------
Geac Computer Corp. Ltd. (Services - Computer Systems)(a) 16,000 532,953
- -------------------------------------------------------------------------------
Imasco Ltd. (Manufacturing - Diversified) 62,600 1,155,358
- -------------------------------------------------------------------------------
Mitel Corp. (Communications Equipment)(a) 61,000 831,413
- -------------------------------------------------------------------------------
Newcourt Credit Group, Inc. (Savings & Loan Companies)(a) 13,500 663,047
- -------------------------------------------------------------------------------
Northern Telecom Ltd. - ADR (Communications Equipment) 22,217 1,260,814
- -------------------------------------------------------------------------------
Royal Bank of Canada (Banks - Major Regional) 32,500 1,955,236
- -------------------------------------------------------------------------------
Suncor, Inc. (Oil - International Integrated) 38,000 1,291,594
- -------------------------------------------------------------------------------
Toronto-Dominion Bank (Banks - Regional) 28,100 1,270,283
- -------------------------------------------------------------------------------
14,381,460
- -------------------------------------------------------------------------------
CHILE - 0.21%
Cia. de Telecommunicaciones de Chile S.A. - ADR (Telephone) 25,500 517,969
- -------------------------------------------------------------------------------
CROATIA - 0.23%
Pliva DD (Health Care - Drugs - Major Pharmaceutical)
(Acquired 05/13/98 - 05/20/98; Cost $604,917)(b) 36,000 585,000
- -------------------------------------------------------------------------------
DENMARK - 0.94%
Novo Nordisk A/S - Class B (Health Care - Drugs - Major
Pharmaceutical) 17,200 2,373,968
- -------------------------------------------------------------------------------
FINLAND - 1.29%
Nokia Oyj A.B. - Class A (Telecommunications -
Cellular/Wireless) 44,000 3,251,498
- -------------------------------------------------------------------------------
FRANCE - 16.55%
Accor S.A. (Lodging - Hotels)(a) 5,500 1,539,581
- -------------------------------------------------------------------------------
Alcatel Alsthom (Manufacturing - Diversified) 8,000 1,629,250
- -------------------------------------------------------------------------------
Altran Technologies, S.A. (Services - Commercial & Consumer) 3,900 885,880
- -------------------------------------------------------------------------------
AXA S.A. (Insurance - Multi-Line) 13,000 1,462,487
- -------------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 24,300 1,985,971
- -------------------------------------------------------------------------------
Cap Gemini Sogeti S.A. (Computers - Software & Services) 20,800 3,269,088
- -------------------------------------------------------------------------------
Danone (Foods) 8,000 2,206,303
- -------------------------------------------------------------------------------
Elf Aquitaine S.A. (Oil - International Integrated) 9,000 1,265,613
- -------------------------------------------------------------------------------
Essilor International S.A. (Manufacturing - Specialized) 4,475 1,893,056
- -------------------------------------------------------------------------------
Lafarge S.A. (Engineering & Construction) 20,400 2,109,356
- -------------------------------------------------------------------------------
Legrand S.A. (Housewares) 5,000 1,323,517
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
103
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - (CONTINUED)
Pinault-Printemps-Redoute S.A. (Retail - General
Merchandise) 3,560 $ 2,980,164
- -------------------------------------------------------------------------------
Promodes (Retail - Food Chains) 2,750 1,524,113
- -------------------------------------------------------------------------------
PSA Peugeot Citreon (Automobiles) 7,000 1,505,501
- -------------------------------------------------------------------------------
Renault S.A. (Automobiles)(a) 79,000 4,494,681
- -------------------------------------------------------------------------------
Rexel S.A. (Distributors - Food & Health) 3,400 1,450,112
- -------------------------------------------------------------------------------
Schneider S.A. (Housewares) 26,000 2,073,720
- -------------------------------------------------------------------------------
Societe BIC S.A. (Office Equipment & Supplies) 10,250 1,253,164
- -------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 8,100 1,684,457
- -------------------------------------------------------------------------------
Sodexho Alliance S.A. (Services - Commercial &
Consumer) 2,800 529,473
- -------------------------------------------------------------------------------
Suez Lyonnaise des Eaux (Manufacturing - Diversified) 11,600 1,909,504
- -------------------------------------------------------------------------------
Total S.A. - Class B (Oil & Gas - Refining & Marketing) 10,300 1,339,366
- -------------------------------------------------------------------------------
Valeo S.A. (Auto Parts & Equipment) 15,000 1,533,625
- -------------------------------------------------------------------------------
41,847,982
- -------------------------------------------------------------------------------
GERMANY - 9.09%
Adidas A.G. (Footwear) 14,100 2,459,075
- -------------------------------------------------------------------------------
Allianz A.G. (Insurance - Multi-Line) 4,300 1,434,288
- -------------------------------------------------------------------------------
Bayerische Vereinsbank A.G. (Banks - Major Regional) 27,000 2,290,800
- -------------------------------------------------------------------------------
BHF - Bank A.G. (Banks - Major Regional) 15,000 571,452
- -------------------------------------------------------------------------------
Continental A.G. (Auto Parts & Equipment) 38,800 1,219,964
- -------------------------------------------------------------------------------
Dresdner Bank A.G. (Banks - Major Regional) 24,000 1,297,621
- -------------------------------------------------------------------------------
Henkel KGaA (Chemicals - Diversified) 24,700 2,444,934
- -------------------------------------------------------------------------------
Karstadt A.G. (Retail - Department Stores) 5,000 2,433,039
- -------------------------------------------------------------------------------
Linde A.G. (Machinery - Diversified) 1,600 1,100,205
- -------------------------------------------------------------------------------
Mannesmann A.G. (Machinery - Diversified) 19,500 2,005,906
- -------------------------------------------------------------------------------
Porsche A.G. (Automobiles) 300 865,081
- -------------------------------------------------------------------------------
SAP A.G. (Computers - Software & Services) 2,650 1,609,133
- -------------------------------------------------------------------------------
VEBA A.G. (Manufactuing - Diversified) 5,000 336,466
- -------------------------------------------------------------------------------
Volkswagen A.G. (Automobiles) 3,000 2,899,684
- -------------------------------------------------------------------------------
22,967,648
- -------------------------------------------------------------------------------
HONG KONG - 1.67%
Cosco Pacific Ltd. (Financial - Diversified) 962,000 344,591
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. (Natural Gas) 966,187 1,097,515
- -------------------------------------------------------------------------------
Hong Kong & China Gas Co. Ltd. - Wts., expiring
09/30/99 (Natural Gas)(a) 43,917 3,005
- -------------------------------------------------------------------------------
HSBC Holdings PLC (Banks - Major Regional) 48,000 1,174,132
- -------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail - Food Chains) 242,000 1,277,630
- -------------------------------------------------------------------------------
Ng Fung Hong Ltd. (Foods) 460,000 317,671
- -------------------------------------------------------------------------------
4,214,544
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INDONESIA - 0.41%
Gulf Indonesia Resources Ltd. (Oil - International
Integrated)(a) 90,400 $ 1,039,600
- -------------------------------------------------------------------------------
IRELAND - 1.24%
Allied Irish Banks PLC (Banks - Regional) 90,000 1,302,895
- -------------------------------------------------------------------------------
Bank of Ireland (Banks - Major Regional) 38,500 789,874
- -------------------------------------------------------------------------------
Elan Corp. PLC - ADR (Health Care - Drugs - Generic &
Other)(a) 16,000 1,029,000
- -------------------------------------------------------------------------------
3,121,769
- -------------------------------------------------------------------------------
ITALY - 6.00%
Assicurazioni Generali (Insurance - Multi - Line) 49,100 1,589,798
- -------------------------------------------------------------------------------
Banca Commerciale Italiana (Banks - Major Regional) 209,300 1,253,503
- -------------------------------------------------------------------------------
Banca di Roma (Banks - Major Regional)(a) 645,000 1,304,339
- -------------------------------------------------------------------------------
Credito Italiano S.p.A. (Banks - Major Regional) 225,000 1,169,987
- -------------------------------------------------------------------------------
Ente Nazionale Idrocarburi S.p.A. (Oil & Gas - Refining &
Marketing) 201,000 1,310,021
- -------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks - Major
Regional) 81,000 1,275,987
- -------------------------------------------------------------------------------
Pirelli S.p.A. (Electrical Equipment) 522,442 1,627,826
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 485,000 2,960,636
- -------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 365,000 2,667,936
- -------------------------------------------------------------------------------
15,160,033
- -------------------------------------------------------------------------------
JAPAN - 6.23%
Advantest Corp. (Electronics - Instrumentation) 20,630 1,114,570
- -------------------------------------------------------------------------------
Bridgestone Corp. (Auto Parts & Equipment) 47,000 1,116,454
- -------------------------------------------------------------------------------
Canon, Inc. (Office Equipment & Supplies) 40,000 912,515
- -------------------------------------------------------------------------------
Fuji Photo Film Co. (Photography/Imaging) 26,000 909,473
- -------------------------------------------------------------------------------
Hitachi Cable, Ltd. (Metal Fabricators) 124,000 599,884
- -------------------------------------------------------------------------------
Honda Motor Co., Ltd. (Automobiles) 37,000 1,323,725
- -------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics - Component Distributors) 62,000 859,864
- -------------------------------------------------------------------------------
Minebea Co. Ltd. (Electronics - Component
Distributors)(a) 79,000 790,114
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 1,500 1,249,276
- -------------------------------------------------------------------------------
Nippon Television Network Corp. (Broadcasting -
Television, Radio & Cable) 2,690 783,155
- -------------------------------------------------------------------------------
NTT Data Communications Systems Co. (Computers - Software
& Services) 140 507,966
- -------------------------------------------------------------------------------
Rohm Co. (Electronics - Component Distributors) 10,000 1,032,010
- -------------------------------------------------------------------------------
SMC Corp. (Machinery - Diversified) 10,200 779,331
- -------------------------------------------------------------------------------
Sony Corp. (Electronics - Component Distributors) 23,000 1,990,513
- -------------------------------------------------------------------------------
TDK Corp. (Electrical Equipment) 24,000 1,781,576
- -------------------------------------------------------------------------------
15,750,426
- -------------------------------------------------------------------------------
MEXICO - 1.66%
Coca-Cola Femsa S.A. - ADR (Beverages - Non-Alcoholic) 39,800 691,525
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
104
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MEXICO - (CONTINUED)
Fomento Economico Mexicano, S.A. de C.V. - Class B
(Beverages - Alcoholic)(a) 23,820 $ 750,330
- -------------------------------------------------------------------------------
Grupo Televisa S.A. - GDR (Entertainment)(a) 24,700 929,337
- -------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V. - Class A (Paper &
Forest Products) 227,000 802,410
- -------------------------------------------------------------------------------
Panamerican Beverages, Inc. - Class A (Beverages - Non-
Alcoholic) 28,100 883,394
- -------------------------------------------------------------------------------
TV Azteca, S.A. de C.V. - ADR (Broadcasting - Television,
Radio & Cable) 13,400 144,888
- -------------------------------------------------------------------------------
4,201,884
- -------------------------------------------------------------------------------
NETHERLANDS - 5.66%
CMG PLC (Computers - Software & Services) 70,800 2,183,605
- -------------------------------------------------------------------------------
Getronics N.V. (Computers - Software & Services) 42,500 2,205,539
- -------------------------------------------------------------------------------
IHC Caland N.V. (Manufacturing - Specialized) 6,150 346,381
- -------------------------------------------------------------------------------
Koninklijke Ahold N.V. (Retail - Food Chains) 60,000 1,927,249
- -------------------------------------------------------------------------------
Koninklijke Numico N.V. (Foods) 15,000 470,007
- -------------------------------------------------------------------------------
Philips Electronics N.V. (Household Furniture &
Appliances) 21,000 1,766,399
- -------------------------------------------------------------------------------
Randstad Holdings N.V. (Services - Commercial & Consumer) 13,000 783,344
- -------------------------------------------------------------------------------
Vedior N.V. (Business Services)(a) 20,229 572,169
- -------------------------------------------------------------------------------
Vendex International N.V. (Retail - General Merchandise) 20,500 771,415
- -------------------------------------------------------------------------------
VNU-Verenigde Nederlandse Uitgeversbedrijven Verenigd
Bezit (Publishing) 90,100 3,275,235
- -------------------------------------------------------------------------------
14,301,343
- -------------------------------------------------------------------------------
NORWAY - 0.74%
Merkantildata ASA (Services - Commercial & Consumer) 44,000 556,889
- -------------------------------------------------------------------------------
Petroleum Geo-Services A.S.A. (Oil - International
Integrated)(a) 42,000 1,309,760
- -------------------------------------------------------------------------------
1,866,649
- -------------------------------------------------------------------------------
PHILIPPINES - 0.25%
Philippine Long Distance Telephone Co. (Telephone) 16,660 379,544
- -------------------------------------------------------------------------------
Philippine Long Distance Telephone Co. - ADR (Telephone) 11,600 262,450
- -------------------------------------------------------------------------------
641,994
- -------------------------------------------------------------------------------
PORTUGAL - 2.67%
Banco Comercial Portugues, S.A. (Banks - Major Regional) 66,200 1,880,926
- -------------------------------------------------------------------------------
Cimpor-Cimentos de Portugal S.A. (Construction - Cement &
Aggregates) 20,000 703,142
- -------------------------------------------------------------------------------
Electricidade de Portugal, S.A. - ADR (Electric
Companies)(a) 13,800 635,663
- -------------------------------------------------------------------------------
Portugal Telecom S.A. (Telephone) 50,000 2,651,679
- -------------------------------------------------------------------------------
Telecel-Comunicacaoes Pessoais, S.A.
(Telecommunications - Cellular/Wireless)(a) 5,000 888,407
- -------------------------------------------------------------------------------
6,759,817
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SPAIN - 3.27%
Banco Bilbao Vizcaya, S.A. (Banks - Major Regional) 42,900 $ 2,201,650
- -------------------------------------------------------------------------------
Corp. Financiera Reunida, S.A. (Investment Management)(a) 49,400 745,752
- -------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 49,200 1,076,400
- -------------------------------------------------------------------------------
Iberdrola S.A. (Electric Companies) 102,000 1,656,211
- -------------------------------------------------------------------------------
Telefonica de Espana (Telephone) 56,000 2,589,110
- -------------------------------------------------------------------------------
8,269,123
- -------------------------------------------------------------------------------
SWEDEN - 1.71%
Hennes & Mauritz A.B. - Class B (Retail - Specialty -
Apparel) 21,494 1,371,843
- -------------------------------------------------------------------------------
Sparbanken Sverige A.B. - Class A (Banks - Major
Regional) 52,000 1,564,890
- -------------------------------------------------------------------------------
Svenska Handelsbanken - Class A (Banks - Major Regional) 14,591 676,949
- -------------------------------------------------------------------------------
WM-Data A.B. (Computers - Software & Services) 20,500 712,038
- -------------------------------------------------------------------------------
4,325,720
- -------------------------------------------------------------------------------
SWITZERLAND - 6.30%
Clariant A.G. (Chemicals - Specialty) 3,800 2,506,239
- -------------------------------------------------------------------------------
Credit Suisse Group (Banks - Major Regional) 11,400 2,540,107
- -------------------------------------------------------------------------------
Holderbank Financiere Glarus A.G. - Class B
(Construction - Cement & Aggregates) 1,150 1,465,307
- -------------------------------------------------------------------------------
Julius Baer Holding A.G. (Banks - Major Regional)(a) 230 720,506
- -------------------------------------------------------------------------------
Nestle S.A. (Foods) 1,400 3,000,198
- -------------------------------------------------------------------------------
Rieter Holdings Ltd. (Machinery - Diversified) 2,100 1,455,734
- -------------------------------------------------------------------------------
UBS AG - Registered (Banks - Major Regional)(a) 7,108 2,646,521
- -------------------------------------------------------------------------------
Zurich Versicherungs-Gesellschaft (Insurance - Multi-
Line) 2,500 1,597,676
- -------------------------------------------------------------------------------
15,932,288
- -------------------------------------------------------------------------------
TAIWAN - 0.08%
Taiwan Semiconductor Manufacturing Co. - ADR
(Electronics - Semiconductors)(a) 12,000 202,500
- -------------------------------------------------------------------------------
UNITED KINGDOM - 16.08%
Airtours PLC (Services - Commercial & Consumer) 135,450 1,016,070
- -------------------------------------------------------------------------------
Bodycote International PLC (Chemicals - Specialty) 40,500 717,232
- -------------------------------------------------------------------------------
Boots Co., PLC (Retail - Drug Stores) 75,000 1,244,254
- -------------------------------------------------------------------------------
British Aerospace PLC (Aerospace/Defense) 168,000 1,288,310
- -------------------------------------------------------------------------------
British Petroleum Co. PLC (Oil & Gas - Refining &
Marketing) 40,400 589,917
- -------------------------------------------------------------------------------
Cable & Wireless PLC (Telecommunications -
Cellular/Wireless) 165,000 2,006,845
- -------------------------------------------------------------------------------
Compass Group PLC (Services - Commercial & Consumer) 156,000 1,795,735
- -------------------------------------------------------------------------------
EMAP PLC (Publishing) 94,000 1,903,395
- -------------------------------------------------------------------------------
General Electric Co. PLC (Manufacturing - Diversified) 168,100 1,450,563
- -------------------------------------------------------------------------------
GKN PLC (Manufacturing - Diversified) 100,000 1,275,579
- -------------------------------------------------------------------------------
Granada Group PLC (Leisure Time - Products) 43,000 791,678
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
105
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - (CONTINUED)
Hays PLC (Services - Commercial & Consumer) 104,000 $ 1,746,216
- --------------------------------------------------------------------------------
Kingfisher PLC (Retail - Department Stores) 94,000 1,515,492
- --------------------------------------------------------------------------------
Ladbroke Group PLC (Leisure Time - Products) 234,000 1,286,205
- --------------------------------------------------------------------------------
Lloyds TSB Group PLC (Banks - Major Regional) 57,000 798,503
- --------------------------------------------------------------------------------
Misys PLC (Services - Commercial & Consumer) 38,000 2,161,719
- --------------------------------------------------------------------------------
Pearson PLC (Specialty Printing) 95,000 1,742,707
- --------------------------------------------------------------------------------
Provident Financial PLC (Consumer Finance) 89,544 1,406,249
- --------------------------------------------------------------------------------
Railtrack Group PLC (Shipping) 146,144 3,586,751
- --------------------------------------------------------------------------------
Rentokil Initial PLC (Services - Commercial &
Consumer) 274,000 1,972,996
- --------------------------------------------------------------------------------
Royal & Sun Alliance Insurance Group PLC (Insurance -
Multi-Line) 133,000 1,376,548
- --------------------------------------------------------------------------------
Sage Group PLC (The) (Computers - Software & Services) 22,100 625,238
- --------------------------------------------------------------------------------
SEMA Group PLC (Services - Commercial & Consumer) 68,000 800,934
- --------------------------------------------------------------------------------
Smiths Industries PLC (Machinery - Diversified) 26,000 360,537
- --------------------------------------------------------------------------------
Stagecoach Holdings PLC (Shipping) 16,350 348,278
- --------------------------------------------------------------------------------
Thomson Travel Group PLC (Travel Services)(a) 225,900 705,759
- --------------------------------------------------------------------------------
Unilever PLC (Foods) 208,000 2,217,086
- --------------------------------------------------------------------------------
Vodafone Group PLC (Telecommunications -
Cellular/Wireless) 185,000 2,350,550
- --------------------------------------------------------------------------------
WPP Group PLC (Services - Advertising/Marketing) 240,000 1,574,801
- --------------------------------------------------------------------------------
40,656,147
- --------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$165,355,369) 238,300,906
- --------------------------------------------------------------------------------
PRINCIPAL
AMOUNT
FOREIGN CONVERTIBLE BONDS - 0.57%
FRANCE - 0.57%
AXA-UAP (Insurance - Multi-Line), Conv. Sr. Deb.,
4.50%, 01/01/99(c) (Cost $854,817) FRF 3,307,500 $ 1,452,044
- --------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 6.45%(d)
Dean Witter Reynolds Inc., 6.10%, 07/01/98(e)
(Cost $16,297,113) $16,297,113 16,297,113
- --------------------------------------------------------------------------------
TOTAL INVESTMENTS - 101.29% 256,050,063
- --------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (1.29%) (3,258,317)
- --------------------------------------------------------------------------------
NET ASSETS - 100.00% $252,791,746
===============================================================================
</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 this security has been determined in
accordance with procedures established by the Board of Directors. The
market value at 06/30/98 represented 0.23% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d) Collateral on repurchase aggreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(e) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,889. Collateralized by $203,366,000 U.S. Government obligations,
0% to 9.375% due 07/01/98 to 09/21/04 with an aggregate market value at
06/30/98 of $209,153,696.
Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
FRF - French Franc
GDR. - Global Depositary Receipt
Sr. - Senior
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
106
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $182,507,299) $256,050,063
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $1,507,064) 1,525,070
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 120,749
- ----------------------------------------------------------------------
Investments sold 805,936
- ----------------------------------------------------------------------
Dividends and interest 619,439
- ----------------------------------------------------------------------
Investment for deferred compensation plan 18,856
- ----------------------------------------------------------------------
Total assets 259,140,113
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 13,600
- ----------------------------------------------------------------------
Investments purchased 6,121,937
- ----------------------------------------------------------------------
Deferred compensation plan 18,856
- ----------------------------------------------------------------------
Accrued advisory fees 153,352
- ----------------------------------------------------------------------
Accrued administrative services fees 8,286
- ----------------------------------------------------------------------
Accrued directors' fees 2,114
- ----------------------------------------------------------------------
Accrued operating expenses 30,222
- ----------------------------------------------------------------------
Total liabilities 6,348,367
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $252,791,746
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 12,421,555
======================================================================
Net asset value, offering and redemption price per share $20.35
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $311,053 foreign withholding tax) $ 2,149,303
- ----------------------------------------------------------------------------
Interest 445,443
- ----------------------------------------------------------------------------
Total investment income 2,594,746
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 861,655
- ----------------------------------------------------------------------------
Administrative services fees 8,287
- ----------------------------------------------------------------------------
Custodian fees 110,060
- ----------------------------------------------------------------------------
Directors' fees and expenses 3,173
- ----------------------------------------------------------------------------
Organizational costs 964
- ----------------------------------------------------------------------------
Other 66,295
- ----------------------------------------------------------------------------
Total expenses 1,050,434
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,513)
- ----------------------------------------------------------------------------
Net expenses 1,048,921
- ----------------------------------------------------------------------------
Net investment income 1,545,825
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 4,245,320
- ----------------------------------------------------------------------------
Foreign currencies (211,491)
- ----------------------------------------------------------------------------
4,033,829
- ----------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 33,321,825
- ----------------------------------------------------------------------------
Foreign currencies (14,445)
- ----------------------------------------------------------------------------
33,307,380
- ----------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 37,341,209
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $38,887,034
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
107
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,545,825 $ 1,372,766
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities
and foreign currencies 4,033,829 (743,433)
- --------------------------------------------------------------------------------
Net unrealized appreciation of investment
securities and foreign currencies 33,307,380 11,878,346
- --------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 38,887,034 12,507,679
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (955,397)
- --------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (3,362,028)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 2,882,127 37,094,253
- --------------------------------------------------------------------------------
Net increase in net assets 41,769,161 45,284,507
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 211,022,585 165,738,078
- --------------------------------------------------------------------------------
End of period $252,791,746 $211,022,585
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $173,165,191 $170,283,064
- --------------------------------------------------------------------------------
Undistributed net investment income 2,680,679 1,134,854
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities and foreign currencies 3,453,049 (580,780)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 73,492,827 40,185,447
- --------------------------------------------------------------------------------
$252,791,746 $211,022,585
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to AIM V.I. International Equity Fund (the "Fund"). The Fund's investment
objective is to seek to provide long-term growth of capital by investing in a
diversified portfolio of international equity securities the issuers of which
are considered by AIM to have strong earnings momentum. Currently, shares of
the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date or absent a last sales price, at the mean of the closing bid and asked
prices. Debt obligations (including convertible bonds) are valued on the
basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on
quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices
are not provided by any of the above methods are valued at the mean between
last bid and asked prices based upon quotes furnished by independent
sources. Securities for which market quotations either are not readily
available or are questionable are valued at fair value as determined in
good faith by or under the supervision of the Company's
AIM V.I. INTERNATIONAL EQUITY FUND
108
<PAGE>
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in foreign
securities is substantially completed each day at various times prior to the
close of the New York Stock Exchange. The values of such securities used in
computing the net asset value of the Fund's shares are determined as of such
times. Foreign currency exchange rates are also generally determined prior to
the close of the New York Stock Exchange. Occasionally, events affecting the
values of such securities and such exchange rates may occur between the times
at which they are determined and the close of the New York Stock Exchange
which will not be reflected in the computation of the Fund's net asset value.
If events materially affecting the value of such securities occur during such
period, then these securities will be valued at their fair value as
determined in good faith by or under the supervision of the Board of
Directors.
B. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
C. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the amount of a purchase or sale of a security denominated in
a foreign currency in order to "lock in" the U.S. dollar price of that
security. The Fund could be exposed to risk if counterparties to the
contracts are unable to meet the terms of their contracts or if the value
of the foreign currency changes unfavorably.
D. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on an accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
E. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $8,287 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,158 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $1,513 under an expense
offset arrangement. The effect of the above arrangement resulted in a
reduction of the Fund's total expenses of $1,513 during the six months ended
June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who is
not an "interested person" of AIM. The Company may invest directors' fees, if
so elected by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the six months ended June
30, 1998 was $75,292,854 and $73,236,498, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, on a tax basis, as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $78,216,450
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,673,686)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $73,542,764
==========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30, 1998
and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 1,107,484 $ 21,680,487 2,963,552 $ 50,938,182
- ------------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 257,449 4,317,425
- ------------------------------------------------------------------------------
Reacquired (1,005,485) (18,798,360) (1,031,143) (18,161,354)
- ------------------------------------------------------------------------------
101,999 $ 2,882,127 2,189,858 $ 37,094,253
==============================================================================
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
109
<PAGE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, --------------------------- -------------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49 $ 10.00
- --------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.12 0.10 0.07 0.07 0.06 --
- --------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 3.10 1.03 2.67 2.58 (1.49) 2.49
- --------------------------------------------------------------------------------------------------
Total from investment
operations 3.22 1.13 2.74 2.65 (1.43) 2.49
- --------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- (0.08) (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.28) -- -- -- --
- --------------------------------------------------------------------------------------------------
Total distributions -- (0.36) (0.04) (0.02) (0.03) --
- --------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 20.35 $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
==================================================================================================
Total return(a) 18.80% 6.94% 20.05% 24.04% (11.48)% 24.90%
==================================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $252,792 $211,023 $165,738 $82,257 $55,019 $23,533
==================================================================================================
Ratio of expenses to
average net assets 0.91%(b) 0.93% 0.96% 1.15%(c) 1.27%(d) 1.98%(c)(d)
==================================================================================================
Ratio of net investment
income to average net
assets 1.35%(b) 0.68% 0.78% 0.75%(c) 0.60%(e) (0.15)%(c)(e)
==================================================================================================
Portfolio turnover rate 34% 57% 59% 67% 64% 26%
==================================================================================================
Average brokerage
commission rate paid(f) $ 0.0228 $ 0.0173 $ 0.0209 N/A N/A N/A
==================================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $231,678,745.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.28% and 3.06% (annualized), for January 1995 and 1994 respectively.
(e) After fee waivers and/or expense reimbursements. Ratios of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursements were 0.59% and (1.23)% (annualized), for January 1995 and
1994 respectively.
(f) The average brokerage commission rate paid is the total brokerage
commissions paid on applicable purchases and sales of securities for the
period divided by the total number of related shares purchased and sold,
which is required to be disclosed for fiscal years beginning September 1,
1995 and thereafter.
AIM V.I. INTERNATIONAL EQUITY FUND
110
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
MONEY MARKET FUND
OFFERS COMPETITIVE YIELD
IN UNCERTAIN MARKETS
A roundtable discussion with the Fund management team for AIM V.I. Money Market
Fund for the six months ended June 30, 1998.
- --------------------------------------------------------------------------------
<S> <C> <C>
Q. WHAT WERE MARKET CONDITIONS Asia situation continued to unfold, the
LIKE DURING THE REPORTING PERIOD? Fed remained hesitant to raise rates. As a -----------------
A. The fixed-income markets continued result, the Federal Funds target remained
to be buffeted by overseas turmoil during at 5.5% throughout the reporting period. Fueled by
the first half of 1998, the period covered
by this report. Early in January, the mar- Q. HOW DID YOU MANAGE THE FUND low interest rates and
ket was expecting an imminent reduction IN THIS ENVIRONMENT?
in rates by the Federal Reserve Board (the A. In light of the continued asset volatility strong stock and labor markets,
Fed) to counteract the negative effects and uncertainty in the markets, the Fund
from the Asian economic crises. However, maintained a weighted average maturity the U.S. economy continued
as it became apparent that the U.S. (WAM) in the 13- to 29-day range. As of
economy was going to shrug off the Asian June 30, the WAM stood at 21 days. This its solid growth in the
influence and continue its strong growth, strategy produced competitive yields. At
interest rates rose. The one-year Treasury the end of the reporting period, the seven- first quarter of 1998.
bill, whose yield had dropped as low as day yield for the Fund was 5.12%.
5.10% in January, backed up to the 5.45% ----------------
area by late February. Q. WHAT IS YOUR MARKET OUTLOOK?
Fueled by low interest rates and strong A. As the third quarter opened, most
stock and labor markets, the U.S. market participants were expecting the
economy continued its solid growth in the Fed to remain on the sidelines for the AIM V.I. Money Market Fund seeks
first quarter of 1998, rising at a 5.4% foreseeable future, though opinion re- to provide as high a level of current
annual rate. Despite this rapid growth, mained divided about its next move. Some income as possible consistent with
inflation remained contained, the annual- were concerned that strong U.S. growth preservation of capital and liquidity by
ized rate running between 1% and 2%. would generate inflationary pressures, investing in high-quality money market
During the 12 months ended May 31, the leading to a tighter Fed policy. Others instruments including commercial
Consumer Price Index rose 1.7%. As the remained concerned that Asia's dampen- paper, repurchase agreements, and U.S.
second quarter came to a close, it ing effects on the U.S. would eventually Treasury and U.S. government agency
appeared that the economy was finally encourage the Fed to lower rates. With securities. An investment in the Fund is
slowing in response to the Asian influence the flat yield curve and all the uncertainty neither insured nor guaranteed by the
and the strike at General Motors. about the future direction of rates and U.S. government, and there can be no
During this reporting period the Fed where the stock market is headed, Fund assurance that the Fund will be able to
remained on watch for signs of incipient managers will continue to maintain the WAM maintain a stable net asset value of
inflation, which never appeared. As the toward the shorter end of the spectrum. $1.00 per share.
</TABLE>
AIM V.I. MONEY MARKET FUND 111
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
COMMERCIAL PAPER - 53.37%(a)
ASSET-BACKED SECURITIES - COMMERCIAL LOANS/LEASES - 4.62%
Centric Capital Corp.
5.50%, 07/17/98 $ 750 $ 748,166
- -----------------------------------------------------------------------------
5.50%, 08/14/98 1,000 993,278
- -----------------------------------------------------------------------------
5.52%, 10/02/98 1,000 985,740
- -----------------------------------------------------------------------------
2,727,184
- -----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - MULTI PURPOSE - 23.77%
Clipper Receivables Corp.
5.59%, 08/10/98 3,000 2,981,367
- -----------------------------------------------------------------------------
Edison Asset Securitization, LLC
5.58%, 08/04/98 1,400 1,392,622
- -----------------------------------------------------------------------------
Falcon Asset Securitization Corp.
5.53%, 07/16/98 2,210 2,204,908
- -----------------------------------------------------------------------------
Monte Rosa Capital Corp.
5.60%, 08/14/98 3,000 2,979,466
- -----------------------------------------------------------------------------
Receivables Capital Corp.
5.53%, 07/06/98 1,000 999,232
- -----------------------------------------------------------------------------
5.51%, 07/07/98 468 467,570
- -----------------------------------------------------------------------------
Sheffield Receivables Corp.
5.56%, 07/08/98 3,000 2,996,757
- -----------------------------------------------------------------------------
14,021,922
- -----------------------------------------------------------------------------
BEVERAGES - 5.05%
Diageo Capital PLC
5.50%, 07/31/98 1,000 995,416
- -----------------------------------------------------------------------------
5.48%, 08/31/98 2,000 1,981,429
- -----------------------------------------------------------------------------
2,976,845
- -----------------------------------------------------------------------------
COMPUTER SOFTWARE & SERVICES - 1.68%
First Data Corp.
5.52%, 08/18/98 1,000 992,640
- -----------------------------------------------------------------------------
DRUGS - 5.07%
Novartis Finance Corp.
5.50%, 07/17/98 3,000 2,992,667
- -----------------------------------------------------------------------------
FINANCE (BUSINESS CREDIT) - 5.06%
National Rural Utilities Cooperative Finance Corp.
5.50%, 08/07/98 3,000 2,983,042
- -----------------------------------------------------------------------------
MACHINERY - 1.74%
Dover Corp.
5.59%, 08/18/98 1,034 1,026,293
- -----------------------------------------------------------------------------
METAL MINING - 4.69%
RTZ America, Inc.
5.54%, 08/18/98 1,000 992,613
- -----------------------------------------------------------------------------
5.46%, 09/04/98 1,000 990,142
- -----------------------------------------------------------------------------
5.50%, 11/04/98 800 784,600
- -----------------------------------------------------------------------------
2,767,355
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
OIL & GAS (INTEGRATED) - 1.69%
Shell Martinez Refining Co.
5.60%, 07/14/98(b) $1,000 $ 1,000,000
- ---------------------------------------------------------------------------
Total Commercial Paper 31,487,948
- ---------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 17.80%(c)
Citicorp Securities, Inc.
6.75%, 01/25/99(d) 2,000 2,000,000
- ---------------------------------------------------------------------------
The Goldman Sachs Group, L.P.
5.6523%, 10/19/98(e) 2,500 2,500,000
- ---------------------------------------------------------------------------
Merrill Lynch Mortgage Capital Inc.
6.80%, 08/17/98(f) 3,000 3,000,000
- ---------------------------------------------------------------------------
Morgan Stanley Dean Witter & Co.
6.60%, 11/23/98(g) 3,000 3,000,000
- ---------------------------------------------------------------------------
Total Master Note Agreements 10,500,000
- ---------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 4.24%
Federal National Mortgage Association
5.261%, 06/02/99(h) 2,000 2,000,000
- ---------------------------------------------------------------------------
Student Loan Marketing Association
5.321%, 08/20/98(h) 500 499,996
- ---------------------------------------------------------------------------
Total U.S. Government Agency Securities 2,499,996
- ---------------------------------------------------------------------------
Total Investments, excluding Repurchase Agreements 44,487,944
- ---------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 25.06%(i)
BZW Securities Inc.
6.10%, 07/01/98(j) 2,900 2,900,000
- ---------------------------------------------------------------------------
Dresdner Kleinwort Benson North America LLC
5.85%, 07/01/98(k) 1,087 1,087,171
- ---------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
6.00%, 07/01/98(l) 2,900 2,900,000
- ---------------------------------------------------------------------------
Salomon Smith Barney Holdings, Inc.
6.125%(m) 5,000 5,000,000
- ---------------------------------------------------------------------------
UBS Securities LLC
6.25%, 07/01/98(n) 2,900 2,900,000
- ---------------------------------------------------------------------------
Total Repurchase Agreements 14,787,171
- ---------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.47% 59,275,115(o)
- ---------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.47)% (276,458)
- ---------------------------------------------------------------------------
NET ASSETS - 100.00% $58,998,657
===========================================================================
</TABLE>
AIM V.I. MONEY MARKET FUND
112
<PAGE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(b) Trust certificates representing an interest in a trust (comprised of
eligible debt obligations) entitling the Fund to receive interest. The Fund
has the right, upon seven calendar days' notice to the trustee, to put its
certificates to the trust at par value plus accrued interest. Because trust
certificates involve a trust and a third party put feature, they involve
complexities and potential risks that may not be present where the debt
obligation is owned directly. Interest rates are redetermined periodically.
Rates shown are the rates in effect on 06/30/98.
(c) The investments in master note agreements are through participation in
joint accounts with other mutual funds, private accounts, and certain
nonregistered investment companies managed by the investment advisor or its
affiliates.
(d) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon three business days' notice. Interest rates on
master notes are redetermined periodically. Rate shown is the rate in
effect on 06/30/98.
(e) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon seven days' prior notice. Interest rates on master
notes are redetermined periodically. Rate shown is the rate in effect on
06/30/98.
(f) The Fund may demand prepayment of notes purchased under the Master Note
Purchase Agreement upon 2 business days' notice to the issuer. Interest
rates on master notes are redetermined periodically. Rate shown is the rate
in effect on 06/30/98.
(g) Master Note Purchase Agreement may be terminated by any party upon three
business days' prior written notice. Interest rates on master notes are
redetermined periodically. Rate shown is the rate in effect on 06/30/98.
(h) Interest rates are redetermined weekly. Rate shown is the rate in effect on
06/30/98.
(i) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102 % of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(j) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$300,050,833. Collateralized by $301,403,000 U.S. Government obligations,
0% to 6.70% due 08/20/98 to 05/06/08 with an aggregate market value at
06/30/98 of $306,002,831.
(k) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
(l) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,033,333. Collateralized by $205,565,153 U.S. Government obligations,
6.00% to 12.25% due 09/01/01 to 06/01/28 with an aggregate market value at
06/30/98 of $204,004,737.
(m) Open repurchase agreement entered into 06/30/98. Collateralized by
$622,412,000 U.S. Government obligations, 0% to 9.65% due 09/18/98 to
12/15/43 with an aggregate market value at 06/30/98 of $612,000,396.
(n) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$500,086,806. Collateralized by $585,571,930 U.S. Government obligations,
0% to 11% due 06/22/00 to 02/01/28 with an aggregate market value at
06/30/98 of $510,079,125.
(o) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
113
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at
value (amortized cost) $ 44,487,944
- ----------------------------------------------------------------------
Repurchase agreements 14,787,171
- ----------------------------------------------------------------------
Interest receivable 81,820
- ----------------------------------------------------------------------
Investment for deferred compensation plan 18,306
- ----------------------------------------------------------------------
Other assets 290
- ----------------------------------------------------------------------
Total assets 59,375,531
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 324,007
- ----------------------------------------------------------------------
Deferred compensation plan 18,306
- ----------------------------------------------------------------------
Accrued advisory fees 20,869
- ----------------------------------------------------------------------
Accrued administrative services fees 2,942
- ----------------------------------------------------------------------
Accrued directors' fees 1,983
- ----------------------------------------------------------------------
Accrued operating expenses 8,767
- ----------------------------------------------------------------------
Total liabilities 376,874
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 58,998,657
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 58,998,600
======================================================================
Net asset value, offering and redemption price per share $ 1.00
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $1,655,675
- ----------------------------------------------------------------
EXPENSES:
Advisory fees 117,321
- ----------------------------------------------------------------
Administrative services fees 17,652
- ----------------------------------------------------------------
Custodian fees 10,845
- ----------------------------------------------------------------
Directors' fees and expenses 4,367
- ----------------------------------------------------------------
Legal fees 9,235
- ----------------------------------------------------------------
Organizational costs 964
- ----------------------------------------------------------------
Other 10,018
- ----------------------------------------------------------------
Total expenses 170,402
- ----------------------------------------------------------------
Net investment income 1,485,273
- ----------------------------------------------------------------
Net increase in net assets resulting from operations $1,485,273
================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
114
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,485,273 $ 3,190,054
- ---------------------------------------------------------------------------
Net increase in net assets resulting from
operations 1,485,273 3,190,054
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,485,273) (3,190,054)
- ---------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions 364,036 (4,894,872)
- ---------------------------------------------------------------------------
Net increase (decrease) in net assets 364,036 (4,894,872)
- ---------------------------------------------------------------------------
NET ASSETS:
Beginning of period 58,634,621 63,529,493
- ---------------------------------------------------------------------------
End of period $58,998,657 $58,634,621
===========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $58,998,600 $58,634,564
- ---------------------------------------------------------------------------
Undistributed net realized gain from investment
securities 57 57
- ---------------------------------------------------------------------------
$58,998,657 $58,634,621
===========================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Money Market Fund (the "Fund"). The Fund's investment
objective is to seek to provide as high a level of current income as is
consistent with the preservation of capital and liquidity. Currently, shares
of the Fund are sold only to insurance company separate accounts to fund the
benefits of variable annuity contracts and variable life insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income, adjusted for amortization of premiums and
discounts on investments, is recorded as earned from settlement date and is
recorded on the accrual basis. Distributions to shareholders are declared
and paid daily.
C. Federal Income Taxes - It is the Fund's policy to continue to comply with
the requirements of the Internal Revenue Code applicable to regulated
investment companies and to distribute all of its taxable income and
capital gains to its shareholders. Therefore, no provision for federal
income taxes is recorded in the financial statements. The Fund has a
capital loss carryforward (which may be carried forward to offset future
taxable gains, if any) of $846 which expires, if not previously utilized,
in the year 2003. The Fund cannot distribute capital gains to shareholders
until the tax loss carryforwards have been utilized.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.40% of
the first $250 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
AIM V.I. MONEY MARKET FUND
115
<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 six months ended June 30, 1998, AIM was reimbursed $17,652 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,349 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest directors' fees,
if so elected by a director, in mutual fund shares in accordance with a
deferred compensation plan.
NOTE 4 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
----------- ------------ ----------- ------------
<S> <C> <C> <C> <C>
Sold 44,191,285 $ 44,191,285 88,948,357 $ 88,948,357
- ---------------------- ----------- ------------ ----------- ------------
Issued as reinvestment
of distributions 1,485,273 1,485,273 3,190,054 3,190,054
- ---------------------- ----------- ------------ ----------- ------------
Reacquired (45,312,522) (45,312,522) (97,033,283) (97,033,283)
- ---------------------- ----------- ------------ ----------- ------------
364,036 $ 364,036 (4,894,872) $ (4,894,872)
=========== ============ =========== ============
</TABLE>
NOTE 5 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995 and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, ------------------------- -------------------
1998 1997 1996 1995 1995 1994
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- ----------------------- ------- ------- ------- ------- ------- -------
Income from investment
operations:
Net investment income 0.03 0.05 0.05 0.05 0.04 0.02
- ----------------------- ------- ------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income (0.03) (0.05) (0.05) (0.05) (0.04) (0.02)
- ----------------------- ------- ------- ------- ------- ------- -------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
======================= ======= ======= ======= ======= ======= =======
Total return 5.13%(a) 5.14% 4.97% 5.69%(a) 3.98% 2.27%(a)
======================= ======= ======= ======= ======= ======= =======
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $58,999 $58,635 $63,529 $65,506 $31,017 $13,891
======================= ======= ======= ======= ======= ======= =======
Ratio of expenses to
average net assets 0.58%(b) 0.59% 0.55% 0.53%(a) 0.63%(c) 0.95%(a)(d)
======================= ======= ======= ======= ======= ======= =======
Ratio of net investment
income to average net
assets 5.06%(b) 5.01% 4.84% 5.40%(a) 4.14%(c) 2.29%(a)(d)
======================= ======= ======= ======= ======= ======= =======
</TABLE>
(a) Annualized.
(b) Ratios are annualized and based on average daily net assets of
$59,146,701.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 0.70% and 4.07%, respectively.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 1.53% (annualized) and 1.70%
(annualized), respectively.
AIM V.I. MONEY MARKET FUND
116
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
FUND PRODUCES IMPRESSIVE
RETURNS SEEKING OUT REASONABLY
PRICED GROWTH
A roundtable discussion with the Fund management team for AIM V.I. Value Fund
for the six months ended June 30, 1998.
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Q. HOW DID THE FUND PERFORM DURING went into companies with rapidly growing certain retailers--industries that do
THE SIX-MONTH REPORTING PERIOD? sales and earnings but with generally well in a healthy economy. We have been
A. Performance was very good, outper- higher price tags. Investors looking for enjoying declining unemployment, rising
forming a number of relevant indexes. the stability of large companies with house- wages, and falling mortgage rates. Retail
Total return was 18.43%. During the same hold names appeared willing to pay what- sales rose every month during the report-
six months, the widely followed Dow Jones ever it takes to own them. ing period. Simultaneously, wholesale
Industrial Average rose 14.16%, the Stan- prices dropped--another positive for
dard & Poor's 500 was up 17.72%, and the Q. HOW DID THIS AFFECT THE FUND? retailers. Consumer cyclicals represented
Russell 1000 Value Index gained 12.16%. A. As we have explained in previous re- 13% of net assets at the close of the
The Fund continues to provide excellent ports, AIM V.I. Value Fund looks for what reporting period, up from about 8% six
long-term performance, as shown on the we call "growth at a reasonable price." months earlier.
following page. The decision to buy takes account of a For example, we added positions in
company's earnings and earnings momen- Lowe's and Home Depot, two stars of the
Q. WHAT WERE EQUITY MARKETS LIKE tum, but we add a price filter. So we look home-improvement segment of the retail
DURING THIS REPORTING PERIOD? at stocks from two perspectives: some- industry. And we raised our holdings of
A. Though there were some uncertain times we examine earnings first and then Carnival Corp., operator of Holland
moments, on balance it was a good period determine how much we are willing to pay America Line and Windstar Cruises as well
for investors. Early in the six-month for the stock; sometimes we just look at a as Carnival Cruise Lines. Carnival has
period, market participants were stock that seems to be underperforming been enjoying record earnings.
pessimistic about the worldwide impact and try to decide whether there is a cata-
of Asia's currency and market crises. lyst in place that will change the
This dampened stock performance and situation and lead to better earnings. TOP 10 EQUITY HOLDINGS
increased volatility. The widely fol- Typically, we will take a small position As of 6/30/98, based on total net assets
lowed Dow Jones Industrial Average in the stock and increase that only after
dropped 222 points (2.8%) on January 9. we are confident our expectations are 1. Time Warner Inc. 3.07%
But as the new year unfolded, the markets justified. 2. WorldCom, Inc. 2.75
shrugged off these difficulties for a The decision to sell a stock is the 3. American International
while, and the Dow proceeded to record mirror image of this. If we think a Group, Inc. 2.67
highs. stock has gotten too high in price, we will 4. Pharmacia & Upjohn, Inc. 2.42
Toward the end of the period, a reduce our position in it. We don't 5. Guidant Corp. 2.27
more cautious climate prevailed as it be- simply eliminate it from the portfolio--we 6. Royal Bank of Canada 2.25
came obvious that economies in Asia were want to take some of our profits, but not 7. Allstate Corp. (The) 2.16
not going to recover quickly and that necessarily all. 8. Dayton Hudson Corp. 2.14
the slowdown in Japan, that continent's 9. Case Manhattan Corp. (The) 2.03
major economy, could be prolonged. Q. WHAT KINDS OF STOCKS HAS 10. Freddie Mac 1.94
Markets worldwide became more volatile THIS PROCESS LED YOU TO DURING THIS
and uncertain. SIX MONTHS? Please keep in mind that the Fund's port-
For the period as a whole, market A. We own quite a few consumer cyclical folio composition is subject to change
narrowness continued. Investors favored stocks, a broad category that includes and there is no assurance the Fund will
well-known, widely traded stocks. Money hotels, household furnishings, and continue to hold any particular security.
</TABLE>
AIM V.I. VALUE FUND 117
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Entertainment is another area where we Q. DID ANY OTHER SECTORS PROVIDE worldwide provider of a diverse line of
have expanded our holdings; we added a GOOD OPPORTUNITIES? insurance products.
sizable position in Time Warner Inc., A. Our largest sector weighting is financial The Fund also holds both insurance
which also has reported record earnings. stocks--about 30% of net assets. A lot of giant Travelers Group, Inc. and money-
We also expanded our holdings in the these are insurance companies. Insurance center bank Citicorp, the parties to the
broadcasting industry. Some of this companies are lagging the banks when largest proposed corporate merger in
reflects the fact that the cable TV it comes to restructuring, but they are history. The merger aims to expand
industry has built its networks and now undergoing a wave of consolidation that client base with wide variety of
has an opportunity to reduce debt. It should improve balance sheets and, ulti- products and to cut costs simul-
also reflects industry consolidation going mately, share value. American International taneously.
on in the wake of the Telecommunications Group, Inc. is a prime participant in this With financial markets buoyant,
Deregulation Act of 1996, which relaxed process. Through acquisitions and strategic interest rates stable, and the trend
restrictions on ownership of broadcast alliances, it has established itself as a toward globalization and consolida-
stations. tion unabated, financial stocks have
been performing very well, often at
GROWTH OF $10,000 INVESTMENT reasonable valuations.
From 5/5/93-6/30/98 AVERAGE ANNUAL TOTAL RETURN
As of 6/30/98 Q. WHAT IS YOUR MARKET OUTLOOK?
AIM V.I. Lipper Growth S&P 500 A. We remain cautious. Domestically,
Value Fund Fund Index Stock Index inflation seems likely to remain con-
(In thousands) 1 Year 26.33% tained as global competition and lower
5/5/93 $10,000 $10,000 $10,000 5 Years 20.73 energy costs offset the inflationary
7/31/93 10,690 10,417 10,254 Inception (5/5/93) 21.62 potential of tight labor markets.
10/31/93 11,370 11,111 10,778 Earnings growth, especially for
1/31/94 12,193 11,564 11,169 large companies, has slowed, but
4/30/94 11,793 10,930 10,532 earnings disappointments have tended
7/31/94 11,592 10,906 10,783 to be company specific rather than
10/31/94 12,163 11,338 11,193 across the board. Nevertheless, as
1/31/95 11,945 11,042 11,227 the reporting period closed, the
4/30/95 13,400 12,131 12,365 market finally seemed to be showing
7/31/95 15,833 13,691 13,591 some concern about lagging earnings
10/31/95 16,146 14,057 14,147 for the second quarter of the year.
1/31/96 16,346 14,946 15,561 The worst storm clouds looming at
4/30/96 16,750 15,634 16,093 the end of the reporting period were in
7/31/96 16,387 14,904 15,835 Asia, especially the seemingly intract-
10/31/96 17,862 16,437 17,550 able economic slump in Japan. Concern
1/31/97 19,342 18,044 19,659 was increasing about the contradiction
4/30/97 19,331 17,838 20,133 of Asian economies becoming a signifi-
7/31/97 23,304 21,425 24,081 cant drag on economic activity world-
10/31/97 22,705 21,108 23,181 wide. Markets lost much of their
12/31/97 23,311 22,106 24,945 upward momentum late in the reporting
4/30/98 26,201 24,940 28,393 period.
6/30/98 27,424 25,380 29,029
Q. AND WHAT DO YOU FORESEE FOR
Past performance cannot guarantee comparable future THE FUND?
A. By our standards the markets are
The performance figures shown represent the AIM V.I. Value Fund and are not intended to very highly priced. There are not that
reflect actual annuity values, and do not reflect charges at the separate account level many companies in whose earnings we
which, if applied, would lower the performance results. The Fund's performance figures have enough confidence to pay the
are historical and reflect reinvestment of all distributions and changes in the net asset prices they now command. The number
value. The Fund's investment return and principal value will fluctuate so that Fund of holdings in the portfolio declined
shares, when redeemed, may be worth more or less than their original cost. Source: during the reporting period from 164 to
Towers Data Systems HYPO/registered trademark/. 145. We held just under 7% of assets
The Standard & Poor's Composite Index of 500 Stocks (S&P 500) is a group of unmanaged in cash--we think of it as keeping some
securities widely regarded by investors to be representative of the stock market in of our powder dry in uncertain markets
general. so that when circumstances change, we
The Dow Jones Industrial Average (DJIA) is an unmanaged composite of the performance of can take advantage of the opportunities
30 large-company stocks. that arise.
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 Russell 1000 Value Index measures performance of those Russell 1000 companies with
lower price-to-book ratios and lower forecasted growth values.
An investment cannot be made in the indexes listed. Index results include reinvested
dividends.
</TABLE>
118 AIM V.I. VALUE FUND
<PAGE>
SCHEDULE OF INVESTMENTS
June 30, 1998
(Unaudited)
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 79.61%
AEROSPACE/DEFENSE - 0.18%
Orbital Sciences Corp.(a) 48,400 $ 1,808,950
- -------------------------------------------------------------------------
AIR FREIGHT - 0.29%
Airborne Freight Corp. 83,400 2,913,787
- -------------------------------------------------------------------------
AIRLINES - 1.88%
AMR Corp.(a) 76,000 6,327,000
- -------------------------------------------------------------------------
Continental Airlines, Inc.(a) 159,900 9,733,913
- -------------------------------------------------------------------------
US Airways Group, Inc.(a) 31,900 2,528,075
- -------------------------------------------------------------------------
18,588,988
- -------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.10%
Lear Corp.(a) 20,000 1,026,250
- -------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.29%
U.S. Bancorp 67,000 2,881,000
- -------------------------------------------------------------------------
BANKS (MONEY CENTER) - 2.84%
BankAmerica Corp. 55,000 4,754,063
- -------------------------------------------------------------------------
Chase Manhattan Corp. (The) 266,000 20,083,000
- -------------------------------------------------------------------------
Citicorp(b) 22,000 3,283,500
- -------------------------------------------------------------------------
28,120,563
- -------------------------------------------------------------------------
BEVERAGES (NON-ALCOHOLIC) - 1.17%
Coca-Cola Co. (The) 135,300 11,568,150
- -------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.40%
Cox Communications, Inc.-Class A(a) 251,500 12,182,031
- -------------------------------------------------------------------------
MediaOne Group Inc.(a) 382,000 16,784,125
- -------------------------------------------------------------------------
Tele-Communications, Inc.-Class A(a) 122,000 4,689,375
- -------------------------------------------------------------------------
33,655,531
- -------------------------------------------------------------------------
BUILDING MATERIALS - 0.52%
Masco Corp. 85,000 5,142,500
- -------------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.17%
Cytec Industries Inc.(a) 38,800 1,716,900
- -------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.73%
Comverse Technology, Inc.(a) 139,000 7,210,625
- -------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.43%
Dell Computer Corp.(a) 39,000 3,619,687
- -------------------------------------------------------------------------
International Business Machines Corp.(b) 64,000 7,348,000
- -------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 300,900 13,070,344
- -------------------------------------------------------------------------
24,038,031
- -------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 3.28%
American Management Systems, Inc.(a) 41,000 1,227,437
- -------------------------------------------------------------------------
BMC Software, Inc.(a) 95,000 4,934,063
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - (CONTINUED)
Cadence Design Systems, Inc.(a) 14,600 $ 456,250
- ---------------------------------------------------------------------
Computer Sciences Corp.(a) 77,000 4,928,000
- ---------------------------------------------------------------------
J.D. Edwards & Co.(a) 46,100 1,979,419
- ---------------------------------------------------------------------
Microsoft Corp.(a)(b) 37,700 4,085,738
- ---------------------------------------------------------------------
Network Associates, Inc.(a) 1 57
- ---------------------------------------------------------------------
Sterling Commerce, Inc.(a) 86,300 4,185,550
- ---------------------------------------------------------------------
Unisys Corp.(a) 378,500 10,692,625
- ---------------------------------------------------------------------
32,489,139
- ---------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.27%
American Greetings Corp.-Class A 53,000 2,699,687
- ---------------------------------------------------------------------
CONSUMER FINANCE - 2.09%
Household International, Inc. 95,000 4,726,250
- ---------------------------------------------------------------------
MBNA Corp. 119,000 3,927,000
- ---------------------------------------------------------------------
Providian Financial Corp. 152,500 11,980,781
- ---------------------------------------------------------------------
20,634,031
- ---------------------------------------------------------------------
ELECTRIC COMPANIES - 0.13%
Wisconsin Energy Corp. 43,600 1,324,350
- ---------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.76%
General Electric Co. 191,000 17,381,000
- ---------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.13%
Waters Corp.(a) 21,900 1,290,731
- ---------------------------------------------------------------------
ENTERTAINMENT - 3.46%
Time Warner Inc. 355,000 30,330,313
- ---------------------------------------------------------------------
Viacom, Inc.-Class B(a) 67,000 3,902,750
- ---------------------------------------------------------------------
34,233,063
- ---------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 6.94%
Ambac Financial Group, Inc. 90,000 5,265,000
- ---------------------------------------------------------------------
American General Corp. 27,000 1,922,062
- ---------------------------------------------------------------------
Associates First Capital Corp.-Class A 83,011 6,381,471
- ---------------------------------------------------------------------
Fannie Mae 283,000 17,192,250
- ---------------------------------------------------------------------
Freddie Mac 408,000 19,201,500
- ---------------------------------------------------------------------
MBIA, Inc. 63,000 4,717,125
- ---------------------------------------------------------------------
MGIC Investment Corp. 28,900 1,649,106
- ---------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co. 116,000 10,599,500
- ---------------------------------------------------------------------
PMI Group, Inc. (The) 23,500 1,724,313
- ---------------------------------------------------------------------
68,652,327
- ---------------------------------------------------------------------
FOODS - 0.46%
Interstate Bakeries Corp. 22,100 733,439
- ---------------------------------------------------------------------
Quaker Oats Co. (The) 69,900 3,840,131
- ---------------------------------------------------------------------
4,573,570
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
119
<PAGE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HARDWARE & TOOLS - 0.55%
Black & Decker Corp. (The) 90,000 $ 5,490,000
- -------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 1.22%
Bristol-Myers Squibb Co. 56,000 6,436,500
- -------------------------------------------------------------------------
Warner-Lambert Co. 81,000 5,619,375
- -------------------------------------------------------------------------
12,055,875
- -------------------------------------------------------------------------
HEALTH CARE (DRUGS-GENERIC & OTHER) - 0.93%
ICN Pharmaceuticals, Inc. 136,290 6,226,748
- -------------------------------------------------------------------------
Watson Pharmaceuticals, Inc.(a) 64,200 2,997,338
- -------------------------------------------------------------------------
9,224,086
- -------------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 4.28%
Merck & Co., Inc. 137,000 18,323,750
- -------------------------------------------------------------------------
Pharmacia & Upjohn, Inc. 520,000 23,985,000
- -------------------------------------------------------------------------
42,308,750
- -------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.34%
Quorum Health Group, Inc.(a) 126,050 3,340,325
- -------------------------------------------------------------------------
HEALTH CARE (LONG TERM CARE) - 0.15%
Health Care and Retirement Corp.(a) 38,400 1,514,400
- -------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.23%
PhyCor, Inc.(a) 139,500 2,310,466
- -------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.79%
Allegiance Corp. 26,500 1,358,125
- -------------------------------------------------------------------------
Guidant Corp. 315,100 22,470,569
- -------------------------------------------------------------------------
Sybron International Corp.(a) 149,600 3,777,400
- -------------------------------------------------------------------------
27,606,094
- -------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.19%
Omnicare, Inc. 50,000 1,906,250
- -------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.81%
Colgate-Palmolive Co. 91,000 8,008,000
- -------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.61%
Conseco, Inc. 50,000 2,337,500
- -------------------------------------------------------------------------
Provident Companies, Inc. 106,000 3,657,000
- -------------------------------------------------------------------------
5,994,500
- -------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 4.65%
Ace, Ltd. 194,300 7,577,700
- -------------------------------------------------------------------------
American International Group, Inc. 181,200 26,455,200
- -------------------------------------------------------------------------
Hartford Financial Services Group Inc. (The) 63,000 7,205,625
- -------------------------------------------------------------------------
Travelers Group, Inc. 78,000 4,728,750
- -------------------------------------------------------------------------
45,967,275
- -------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 3.88%
Allstate Corp. (The) 233,500 21,379,844
- -------------------------------------------------------------------------
EXEL Ltd. 122,000 9,493,125
- -------------------------------------------------------------------------
Progressive Corp. 53,000 7,473,000
- -------------------------------------------------------------------------
38,345,969
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT BANKING/BROKERAGE - 0.85%
Edwards (A.G.), Inc. 57,800 $ 2,467,338
- ----------------------------------------------------------------
Merrill Lynch & Co., Inc. 64,200 5,922,450
- ----------------------------------------------------------------
8,389,788
- ----------------------------------------------------------------
LODGING-HOTELS - 2.30%
Carnival Corp. 310,000 12,283,750
- ----------------------------------------------------------------
Marriott International, Inc.-Class A 102,500 3,318,438
- ----------------------------------------------------------------
Royal Caribbean Cruises Ltd. 90,000 7,155,000
- ----------------------------------------------------------------
22,757,188
- ----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.00%
Hillenbrand Industries, Inc. 22,000 1,320,000
- ----------------------------------------------------------------
Tyco International Ltd. 136,000 8,568,000
- ----------------------------------------------------------------
9,888,000
- ----------------------------------------------------------------
NATURAL GAS - 1.52%
El Paso Natural Gas Co. 156,000 5,967,000
- ----------------------------------------------------------------
Enron Corp. 77,300 4,179,031
- ----------------------------------------------------------------
Williams Companies, Inc. (The) 143,600 4,846,500
- ----------------------------------------------------------------
14,992,531
- ----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.28%
Halliburton Co.(b) 62,000 2,762,875
- ----------------------------------------------------------------
OIL & GAS (REFINING & MARKETING) - 0.27%
Tosco Corp. 92,080 2,704,850
- ----------------------------------------------------------------
PERSONAL CARE - 0.25%
Avon Products, Inc. 31,700 2,456,750
- ----------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.75%
Xerox Corp. 73,000 7,418,625
- ----------------------------------------------------------------
PUBLISHING - 0.10%
Meredith Corp. 22,000 1,032,625
- ----------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.06%
Gannett Co., Inc. 49,000 3,482,063
- ----------------------------------------------------------------
New York Times Co.-Class A (The) 39,000 3,090,750
- ----------------------------------------------------------------
Washington Post Co.-Class B (The) 6,800 3,916,800
- ----------------------------------------------------------------
10,489,613
- ----------------------------------------------------------------
RAILROADS - 0.67%
Burlington Northern Santa Fe Corp. 20,500 2,012,844
- ----------------------------------------------------------------
Kansas City Southern Industries, Inc. 93,700 4,649,862
- ----------------------------------------------------------------
6,662,706
- ----------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.09%
Mack-Cali Realty Corp. 26,500 910,937
- ----------------------------------------------------------------
RESTAURANTS - 0.20%
Cracker Barrel Old Country Store, Inc. 41,800 1,327,150
- ----------------------------------------------------------------
Papa John's International, Inc.(a) 15,800 623,112
- ----------------------------------------------------------------
1,950,262
- ----------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
120
<PAGE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (BUILDING SUPPLIES) - 0.53%
Home Depot, Inc. (The) 31,200 $ 2,591,550
- -----------------------------------------------------------------------
Lowe's Companies, Inc. 66,100 2,681,181
- -----------------------------------------------------------------------
5,272,731
- -----------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.57%
Federated Department Stores, Inc.(a) 104,000 5,596,500
- -----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.09%
Kroger Co.(a) 156,600 6,714,225
- -----------------------------------------------------------------------
Safeway, Inc.(a) 99,800 4,060,613
- -----------------------------------------------------------------------
10,774,838
- -----------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 3.13%
Costco Companies, Inc.(a) 89,000 5,612,563
- -----------------------------------------------------------------------
Dayton Hudson Corp. 435,800 21,136,300
- -----------------------------------------------------------------------
Fred Meyer, Inc.(a) 99,000 4,207,500
- -----------------------------------------------------------------------
30,956,363
- -----------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.24%
Gap, Inc. (The) 38,000 2,341,750
- -----------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.14%
Charter One Financial, Inc. 39,900 1,344,131
- -----------------------------------------------------------------------
SERVICES (ADVERTISTING/MARKETING) - 0.77%
Omnicom Group, Inc. 152,000 7,581,000
- -----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.04%
Galileo International, Inc. 54,000 2,433,375
- -----------------------------------------------------------------------
Service Corp. International 48,100 2,062,288
- -----------------------------------------------------------------------
Stewart Enterprises, Inc.-Class A 216,000 5,751,000
- -----------------------------------------------------------------------
10,246,663
- -----------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.13%
National Data Corp. 29,000 1,268,750
- -----------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.16%
AccuStaff, Inc.(a) 51,000 1,593,750
- -----------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.89%
AirTouch Communications, Inc.(a) 70,000 4,090,625
- -----------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 188,800 4,696,400
- -----------------------------------------------------------------------
8,787,025
- -----------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 4.05%
MCI Communications Corp. 222,000 12,903,750
- -----------------------------------------------------------------------
WorldCom, Inc.(a) 561,219 27,184,045
- -----------------------------------------------------------------------
40,087,795
- -----------------------------------------------------------------------
TELEPHONE - 1.42%
BellSouth Corp. 71,000 4,765,875
- -----------------------------------------------------------------------
Century Telephone Enterprises, Inc. 13,800 633,075
- -----------------------------------------------------------------------
SBC Communications, Inc. 120,000 4,800,000
- -----------------------------------------------------------------------
US West, Inc. 80,784 3,796,856
- -----------------------------------------------------------------------
13,995,806
- -----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION> MARKET
SHARES VALUE
<S> <C> <C>
TOBACCO - 0.92%
Philip Morris Companies, Inc. 231,200 $ 9,103,500
- ------------------------------------------------------------------------------
WASTE MANAGEMENT - 2.04%
USA Waste Services, Inc.(a) 217,000 10,714,375
- ------------------------------------------------------------------------------
Waste Management, Inc. 271,200 9,492,000
- ------------------------------------------------------------------------------
20,206,375
- ------------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $628,557,518) 787,594,890
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 8.57%
AUSTRALIA - 0.21%
News Corp. Ltd.-ADR (The) (Publishing-Newspapers) 68,300 2,194,137
- ------------------------------------------------------------------------------
CANADA - 2.25%
Royal Bank of Canada (Banks-Major Regional) 370,000 22,259,611
- ------------------------------------------------------------------------------
DENMARK - 0.18%
Novo Nordisk A/S (Health Care-Drugs-Generic & Other) 13,000 1,794,278
- ------------------------------------------------------------------------------
FINLAND - 1.31%
Nokia Oyj A.B.-Class A (Communications Equipment) 1,000 73,898
- ------------------------------------------------------------------------------
Nokia Oyj A.B.-Class A-ADR (Communications Equipment) 177,000 12,843,563
- ------------------------------------------------------------------------------
12,917,461
- ------------------------------------------------------------------------------
ITALY - 0.68%
Credito Italiano S.p.A. (Banks-Major Regional) 650,000 3,379,963
- ------------------------------------------------------------------------------
Istituto Mobiliare Italiano S.p.A. (Banks-Major
Regional) 106,000 1,669,809
- ------------------------------------------------------------------------------
Telecom Italia S.p.A. (Telephone) 225,000 1,644,618
- ------------------------------------------------------------------------------
6,694,390
- ------------------------------------------------------------------------------
SWEDEN - 2.61%
ForeningsSparbanken A.B.-Class A (Banks-Major
Regional) 131,000 3,942,320
- ------------------------------------------------------------------------------
Nordbanken Holding A.B. (Banks-Major Regional) 547,500 4,016,144
- ------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Communications
Equipment) 47,200 1,379,009
- ------------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-Class B
(Communications Equipment) 577,200 16,522,350
- ------------------------------------------------------------------------------
25,859,823
- ------------------------------------------------------------------------------
SWITZERLAND - 0.74%
Nestle S.A. (Foods) 3,400 7,286,195
- ------------------------------------------------------------------------------
UNITED KINGDOM - 0.59%
Railtrack Group PLC (Shipping) 114,000 2,797,854
- ------------------------------------------------------------------------------
SmithKline Beecham PLC-ADR (Health Care-Drugs-Major
Pharmaceuticals 50,000 3,025,000
- ------------------------------------------------------------------------------
5,822,854
- ------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$34,670,960) 84,828,749
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
121
<PAGE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES - 4.95%
U.S. TREASURY BILLS(c) - 4.95%
4.995%, 09/24/98 (Cost $48,974,916) $49,560,000(d) $ 48,974,916
- -------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 7.16%(e)
Dresdner Kleinwort Benson North America LLC
5.85%, 07/01/98(f) 10,739,395 10,739,395
- -------------------------------------------------------------------------
UBS Securities LLC
5.60%, 07/01/98(g) 60,126,054 60,126,054
- -------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $70,865,449) 70,865,449
- -------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.29% 992,264,004
- -------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.29%) (2,906,458)
- -------------------------------------------------------------------------
TOTAL NET ASSETS - 100.00% $989,357,546
=========================================================================
</TABLE>
(a) Non-income producing security.
(b) A portion of this security is subject to open call options written. See
Note 8.
(c) U.S. Treasury bills are traded on a discount basis. In such cases the
interest rate shown represents the rate of discount paid or received at the
time of purchase by the Fund.
(d) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 7.
(e) Collateral on repurchase agreements, including the Fund's pro-rata interest
in joint repurchase agreeements, is taken into possession by the Fund upon
entering into the repurchase agreement. The collateral is marked to market
daily to ensure its market value as being 102% of the sales price of the
repurchase agreement. The investments in some repurchase agreements are
through participation in joint accounts with other mutual funds, private
accounts, and certain non-registered investment companies managed by the
investment advisor or its affiliates.
(f) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$70,011,375. Collateralized by $71,382,000 U.S. Government obligations, 0%
to 6.30% due 07/02/98 to 12/03/01 with an aggregate market value at
06/30/98 of $71,404,458.
(g) Joint repurchase agreement entered into 06/30/98 with a maturing value of
$200,031,111. Collateralized by $290,091,354 U.S. Government obligations,
0% to 12.75% due 03/31/99 to 03/01/33 with an aggregate market value at
06/30/98 of $204,000,924.
Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. VALUE FUND
122
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements at market
value (cost $783,068,843) $ 992,264,004
- -----------------------------------------------------------------------
Foreign currencies, at value (cost $503) 519
- -----------------------------------------------------------------------
Receivables for:
Investments sold 6,534,980
- -----------------------------------------------------------------------
Capital stock sold 1,401,932
- -----------------------------------------------------------------------
Dividends and interest 548,173
- -----------------------------------------------------------------------
Investment for deferred compensation plan 20,861
- -----------------------------------------------------------------------
Other assets 3,164
- -----------------------------------------------------------------------
Total assets 1,000,773,633
- -----------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 9,832,707
- -----------------------------------------------------------------------
Options purchased 669,375
- -----------------------------------------------------------------------
Variation margin 371,875
- -----------------------------------------------------------------------
Deferred compensation 20,861
- -----------------------------------------------------------------------
Accrued advisory fees 463,935
- -----------------------------------------------------------------------
Accrued directors' fees 2,700
- -----------------------------------------------------------------------
Accrued administrative services fees 4,578
- -----------------------------------------------------------------------
Accrued operating expenses 50,056
- -----------------------------------------------------------------------
Total liabilities 11,416,087
- -----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 989,357,546
=======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- -----------------------------------------------------------------------
Outstanding 40,104,344
=======================================================================
Net asset value, offering and redemption price per share $24.67
=======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the six months ended June 30, 1998
(Unaudited)
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $123,950 foreign withholding tax) $ 3,531,118
- ------------------------------------------------------------------------------
Interest 2,401,809
- ------------------------------------------------------------------------------
Total investment income 5,932,927
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,477,805
- ------------------------------------------------------------------------------
Administrative services fees 27,468
- ------------------------------------------------------------------------------
Custodian fees 53,821
- ------------------------------------------------------------------------------
Directors' fees and expenses 5,924
- ------------------------------------------------------------------------------
Organizational costs 964
- ------------------------------------------------------------------------------
Other 75,736
- ------------------------------------------------------------------------------
Total expenses 2,641,718
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (218)
- ------------------------------------------------------------------------------
Net expenses 2,641,500
- ------------------------------------------------------------------------------
Net investment income 3,291,427
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 26,277,193
- ------------------------------------------------------------------------------
Foreign currencies 6,508
- ------------------------------------------------------------------------------
Futures contracts 102,604
- ------------------------------------------------------------------------------
Option contracts (56,275)
- ------------------------------------------------------------------------------
26,330,030
- ------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of:
Investment securities 108,103,222
- ------------------------------------------------------------------------------
Futures contracts 493,500
- ------------------------------------------------------------------------------
Foreign currencies 8,975
- ------------------------------------------------------------------------------
Option contracts (476,286)
- ------------------------------------------------------------------------------
108,129,411
- ------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies,
futures and option contracts 134,459,441
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $137,750,868
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
123
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS
For the six months ended June 30, 1998 and the year ended December 31, 1997
(Unaudited)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,291,427 $ 5,578,959
- -----------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, futures and option contracts 26,330,030 47,871,104
- -----------------------------------------------------------------------------
Net unrealized appreciation of investment
securities, foreign currencies, futures and
option contracts 108,129,411 51,486,076
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 137,750,868 104,936,139
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment
income -- (6,026,082)
- -----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (18,500,854)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 160,765,185 240,697,144
- -----------------------------------------------------------------------------
Net increase in net assets 298,516,053 321,106,347
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 690,841,493 369,735,146
- -----------------------------------------------------------------------------
End of period $989,357,546 $690,841,493
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $697,149,191 $536,384,006
- -----------------------------------------------------------------------------
Undistributed net investment income 8,871,054 5,579,627
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies, futures and
option contracts 73,905,527 47,575,497
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, futures and option contracts 209,431,774 101,302,363
- -----------------------------------------------------------------------------
$989,357,546 $690,841,493
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
124
<PAGE>
NOTES TO FINANCIAL STATEMENTS
June 30, 1998
(Unaudited)
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM Variable Insurance Funds, Inc. (the "Company"), is a Maryland corporation
organized on January 22, 1993, and is registered under the Investment Company
Act of 1940 (the "1940 Act"), as amended, as an open-end, series, management
investment company consisting of thirteen portfolios. Matters affecting each
portfolio are voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the AIM V.I. Value Fund (the "Fund"). The Fund's investment objective is to
achieve long-term growth of capital by investing primarily in equity
securities judged by AIM to be undervalued relative to the current or
projected earnings of the companies issuing the securities or relative to
current market values of assets owned by the companies issuing the securities
or relative to the equity market generally. Income is a secondary objective.
Currently, shares of the Fund are sold only to insurance company separate
accounts to fund the benefits of variable annuity contracts and variable life
insurance policies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the presentation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the mean between the closing bid and asked
prices on that day. Each security traded in the over-the-counter market
(but not including securities reported on the NASDAQ National Market
System) is valued at the mean between the last bid and asked prices based
upon quotes furnished by market makers for such securities. If a mean is
not available, as is the case in some foreign markets, the closing bid will
be used absent a last sales price. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation
date, or absent a last sales price, at the mean of the closing bid and
asked prices. Debt obligations (including convertible bonds) are valued on
the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued at
the mean between last bid and asked prices based upon quotes furnished by
independent sources. Securities for which market quotations are either not
readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. Generally, trading in
foreign securities is substantially completed each day at various times
prior to the close of the New York Stock Exchange. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the New York Stock Exchange.
Occasionally, events affecting the values of such securities and such
exchange rates may occur between the times at which they are determined and
the close of the New York Stock Exchange which will not be reflected in the
computation of the Fund's net asset value. If events materially affecting
the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith
by or under the supervision of the Board of Directors.
B. Securities Transactions, Investment Income and Distributions - Securities
transactions are accounted for on a trade date basis. Realized gains or
losses on sales are computed on the basis of specific identification of the
securities sold. Interest income is recorded as earned from settlement date
and is recorded on the accrual basis. Dividend income and distributions to
shareholders are recorded on the ex-dividend date.
C. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
D. Stock Index Futures Contracts - The Fund may purchase or sell stock index
futures contracts as a hedge against changes in market conditions. Initial
margin deposits required upon entering into futures contracts are satisfied
by the segregation of specific securities or cash, and/or by securing a
standby letter of credit from a major commercial bank, as collateral, for
the account of the broker (the Fund's agent in acquiring the futures
position). During the period the futures contract is open, changes in the
value of the contract are recognized as unrealized gains or losses by
"marking to market" on a daily basis to reflect the market value of the
contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are
incurred. When the contract is closed, the Fund records a realized gain or
loss equal to the difference between the proceeds from (or cost of) the
closing transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and the change in the value of the
contract may not correlate with changes in the securities being hedged.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a currency contract for
the amount of a purchase or sale of a security denominated in a foreign
currency in order to "lock-in" the U.S. dollar price of that security. The
Fund could be exposed to risk if
AIM V.I. VALUE FUND
125
<PAGE>
counterparties to the contracts are unable to meet the terms of their
contracts or if the value of the foreign currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, but only on a
covered basis; that is, the Fund will own the underlying security. Options
written by the Fund normally will have expiration dates between three and
nine months from the date written. The exercise price of a call option may
be below, equal to, or above the current market value of the underlying
security at the time the option is written. When the Fund writes a covered
call option, an amount equal to the premium received by the Fund is
recorded as an asset and an equivalent liability. The amount of the
liability is subsequently "market-to-market" to reflect the current market
value of the option written. The current market value of a written option
is the mean between the last bid and asked prices on that day. If a written
call option expires on the stipulated expiration date, or if the Fund
enters into a closing purchase transaction, the Fund realizes a gain (or a
loss if the closing purchase transaction exceeds the premium received when
the option was written) without regard to any unrealized gain or loss on
the underlying security, and the liability related to such option is
extinguished. If a written option is exercised, the Fund realizes a gain or
a loss from the sale of the underlying security and the proceeds of the
sale are increased by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - INVESTMENT ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with
A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at an annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
Pursuant to a master administrative services agreement between the Company
and AIM, with respect to the Fund, the Company has agreed to reimburse certain
administrative costs incurred in providing accounting services to the Fund.
During the six months ended June 30, 1998, AIM was reimbursed $27,468 for such
services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor of the
Fund's shares.
Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the six months ended June 30, 1998, the Fund incurred legal fees of
$1,847 for services rendered by Kramer, Levin, Naftalis & Frankel as counsel
to the Board of Directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
The Fund received reductions in custodian fees of $218 under an expense
offset arrangement. The effect of the above arrangement resulted in a
reduction of the Fund's total expenses of $218 during the six months ended
June 30, 1998.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid or accrued to each director who
is not an "interested person" of AIM. The Company may invest a director's
fees, if so elected by such director, in mutual fund shares in accordance with
a deferred compensation plan.
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold during the six months ended June 30, 1998 was
$643,698,071 and $444,683,418, respectively.
The amount of unrealized appreciation (depreciation) of investment securities
on a tax basis as of June 30, 1998 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $211,880,973
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (4,734,237)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $207,146,736
===========================================================================
</TABLE>
Cost of investments for tax purposes is $785,117,268.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the six months ended June 30,
1998 and the year ended December 31, 1997 were as follows:
<TABLE>
<CAPTION>
JUNE 30, 1998 DECEMBER 31, 1997
----------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
--------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 7,905,074 $182,607,840 12,245,239 $244,753,656
- -----------------------------------------------------------------------------
Issued as reinvestment of
distributions -- -- 1,188,320 24,526,936
- -----------------------------------------------------------------------------
Reacquired (962,524) (21,842,655) (1,424,104) (28,583,448)
- -----------------------------------------------------------------------------
6,942,550 $160,765,185 12,009,455 $240,697,144
=============================================================================
</TABLE>
NOTE 7 - FUTURES CONTRACTS
On June 30, 1998, $1,931,911 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACTS CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
- ------------- --------- ---------------- --------------
<S> <C> <C> <C>
S&P 500 Index 175 Sep. 98/Buy $(371,875)
===========================================================================================
</TABLE>
AIM V.I. VALUE FUND
126
<PAGE>
NOTE 8 - CALL OPTIONS CONTRACTS WRITTEN
Transactions in call option contracts written during the six months ended
June 30, 1998 are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of period 2,102 $ 941,588
- -------------------------------------------
Written 4,230 1,809,420
- -------------------------------------------
Closed (1,628) (714,557)
- -------------------------------------------
Exercised (1,772) (960,642)
- -------------------------------------------
Expired (2,082) (660,913)
- -------------------------------------------
End of period 850 $ 414,896
====== ===========
</TABLE>
Open call option contracts written at June 30, 1998 were as follows:
<TABLE>
<CAPTION>
JUNE 30, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUM 1998 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ----- -------- ------ --------- -------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Citicorp Jul. 98 175 100 $ 60,948 $ 1,562 $ 59,386
Halliburton Co. Jul. 98 45 400 166,232 47,500 118,732
International Business
Machines Corp. Jul. 98 100 100 80,907 150,000 (69,093)
Microsoft Corp. Jul. 98 90 250 106,809 470,313 (363,504)
--- -------- -------- ---------
850 $414,896 $669,375 $(254,479)
=== ======== ======== =========
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the six months ended June 30, 1998, each of the years in the two-year
period ended December 31, 1997, the eleven months ended December 31, 1995, the
year ended January 31, 1995, and the period May 5, 1993 (date operations
commenced) through January 31, 1994.
<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 31,
JUNE 30, ---------------------------- ------------------
1998 1997 1996 1995 1995 1994
-------- -------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17 $ 10.00
- ------------------------ -------- -------- -------- -------- -------- -------
Income from investment
operations:
Net investment income 0.05 0.08 0.30 0.11 0.10 0.02
- ------------------------ -------- -------- -------- -------- -------- -------
Net gains (losses) on
securities (both
realized and
unrealized) 3.79 4.05 2.09 4.18 (0.35) 2.17
- ------------------------ -------- -------- -------- -------- -------- -------
Total from investment
operations 3.84 4.13 2.39 4.29 (0.25) 2.19
- ------------------------ -------- -------- -------- -------- -------- -------
Less distributions:
Dividends from net
investment income -- (0.19) (0.10) (0.01) (0.09) (0.02)
- ------------------------ -------- -------- -------- -------- -------- -------
Distributions from net
realized gains -- (0.59) (0.92) -- -- --
- ------------------------ -------- -------- -------- -------- -------- -------
Total distributions -- (0.78) (1.02) (0.01) (0.09) (0.02)
- ------------------------ -------- -------- -------- -------- -------- -------
Net asset value, end of
period $ 24.67 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
======================== ======== ======== ======== ======== ======== =======
Total return(a) 18.43% 23.69% 15.02% 36.25% (2.03)% 21.94%
======================== ======== ======== ======== ======== ======== =======
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $989,358 $690,841 $369,735 $257,212 $109,257 $38,255
======================== ======== ======== ======== ======== ======== =======
Ratio of expenses to
average net assets 0.66%(b) 0.70% 0.73% 0.75%(c) 0.82% 1.00%(c)(d)
======================== ======== ======== ======== ======== ======== =======
Ratio of net investment
income to average net
assets 0.82%(b) 1.05% 2.00% 1.11%(c) 1.17% 0.51%(c)(d)
======================== ======== ======== ======== ======== ======== =======
Portfolio turnover rate 61% 127% 129% 145% 143% 87%
======================== ======== ======== ======== ======== ======== =======
Average brokerage
commission rate paid(e) $ 0.0539 $ 0.0487 $ 0.0429 N/A N/A N/A
======================== ======== ======== ======== ======== ======== =======
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $811,946,530.
(c) Annualized.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.35% (annualized) and 0.16% (annualized),
respectively.
(e) The average commission rate paid is the total brokerage commissions paid
on applicable purchases and sales of securities for the period divided by
the total number of related shares purchased and sold, which is required
to be disclosed for fiscal years beginning September 1, 1995 and
thereafter.
AIM V.I. VALUE FUND
127
<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 and A I M Advisors, Inc.
Chief Executive Officer 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 and Trust Company
Edward K. Dunn Jr. Senior Vice President 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman and President, Dana R. Sutton
Mercantile-Safe Deposit & Trust Co.; Vice President and COUNSEL TO THE FUNDS
and President, Mercantile Bankshares Assistant Treasurer
Freedman, Levy, Kroll &
Jack Fields Robert G. Alley Simonds
Chief Executive Officer Vice President 1050 Conn. Avenue, N.W.
Texana Global Inc.; Washington, D.C. 20036
Formerly, Member of the Stuart W. Coco
U.S. House of Representatives Vice President COUNSEL TO THE DIRECTORS
Carl Frischling Melville B. Cox Kramer, Levin, Naftalis & Frankel
Partner Vice President 919 Third Avenue
Kramer, Levin, Naftalis & Frankel New York, NY 10022
Karen Dunn Kelley
Robert H. Graham Vice President DISTRIBUTOR
President and Chief Executive Officer
A I M Management Group Inc. Jonathan C. Schoolar A I M Distributors, Inc.
Vice President 11 Greenway Plaza
Lewis F. Pennock Suite 100
Attorney Renee A. Friedli Houston, TX 77046
Assistant Secretary
Ian W. Robinson
Consultant; Formerly, Executive P. Michelle Grace
Vice President and Assistant Secretary
Chief Financial Officer
Bell Atlantic Management Jeffery H. Kupor
Services, Inc. Assistant Secretary
Louis S. Sklar Nancy L. Martin
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
Mary J. Benson
Assistant Treasurer
</TABLE>
128
