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As filed with the Securities and Exchange Commission on February 17, 2000
1933 Act Registration No. 33-57340
1940 Act Registration No. 811-7452
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
Pre-Effective Amendment No.
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Post-Effective Amendment No. 16 X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No.
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(Check appropriate box or boxes.)
AIM VARIABLE INSURANCE FUNDS
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(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code (713) 626-1919
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Charles T. Bauer
11 Greenway Plaza, Suite 100, Houston, TX 77046-1173
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(Name and Address of Agent for Service)
Copy to:
Nancy L. Martin, Esquire
A I M Advisors, Inc.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Approximate Date of Proposed Public Offering: Continuous
It is proposed that this filing will become effective (check appropriate box)
immediately upon filing pursuant to paragraph (b)
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on (date) pursuant to paragraph (b)
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60 days after filing pursuant to paragraph (a)(1)
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X on April 17, 2000 pursuant to paragraph (a)(1)
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75 days after filing pursuant to paragraph (a)(2)
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on (date) pursuant to paragraph (a)(2) of Rule 485.
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If appropriate, check the following:
This post-effective amendment designates a new effective date for
----- a previously filed post-effective amendment.
Title of Securities Being Registered: Shares of Beneficial Interest
THE REGISTRANT IS THE SUCCESSOR ISSUER TO AIM VARIABLE INSURANCE FUNDS, INC.
(THE "PREDECESSOR FUND"). PURSUANT TO RULE 414 UNDER THE SECURITIES ACT OF
1933, AS AMENDED, BY FILING THIS POST-EFFECTIVE AMENDMENT TO CURRENTLY EFFECTIVE
REGISTRATION STATEMENT NO. 33-57340 OF THE PREDECESSOR FUND, THE REGISTRANT
EXPRESSLY ADOPTS THE REGISTRATION STATEMENT OF THE PREDECESSOR FUND AS ITS OWN
REGISTRATION STATEMENT FOR ALL PURPOSES OF THE SECURITIES ACT AND THE SECURITIES
EXCHANGE ACT OF 1934.
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AIM VARIABLE
INSURANCE FUNDS
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--Registered Trademark--
<TABLE>
<S> <C>
AIM V.I. Aggressive Growth Fund AIM V.I. Government Securities Fund
AIM V.I. Balanced Fund AIM V.I. Growth Fund
AIM V.I. Blue Chip Fund AIM V.I. Growth and Income Fund
AIM V.I. Capital Appreciation Fund AIM V.I. High Yield Fund
AIM V.I. Capital Development Fund AIM V.I. International Equity Fund
AIM V.I. Dent Demographic Trends Fund AIM V.I. Money Market Fund
AIM V.I. Diversified Income Fund AIM V.I. Telecommunications and
AIM V.I. Global Growth and Income Fund Technology Fund
AIM V.I. Global Utilities Fund AIM V.I. Value Fund
</TABLE>
Shares of the funds are currently offered only to insurance company
separate accounts. The investment objective of each fund is described
under the heading "Investment Objectives and Strategies."
PROSPECTUS
APRIL 17, 2000
This prospectus contains important
information. Please
read it before investing and keep it
for future reference.
As with all other mutual fund
securities, the Securities and
Exchange Commission has not approved
or disapproved these securities or
determined whether the information
in this Prospectus is adequate or
accurate. Anyone who tells you
otherwise is committing a crime.
There can be no assurance that the
AIM V.I. Money Market Fund will be
able to maintain a stable net asset
value of $1.00 per share.
Investments in the funds:
- are not FDIC insured;
- may lose value; and
- are not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
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AIM VARIABLE INSURANCE FUNDS
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TABLE OF CONTENTS
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<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
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PRINCIPAL RISKS OF INVESTING IN THE FUNDS 5
- - - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 9
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Annual Total Returns 9
Performance Tables 17
FUND MANAGEMENT 22
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The Advisor 22
Advisor Compensation 22
Portfolio Managers 22
OTHER INFORMATION 25
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Purchase and Redemption of Shares 25
Pricing of Shares 25
Taxes 25
Dividends and Distributions 25
Future Fund Closure 25
FINANCIAL HIGHLIGHTS 26
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OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with
Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM
Funds and Design, AIM Internet Connect and AIM Investor are service marks of
A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
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AIM VARIABLE INSURANCE FUNDS
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INVESTMENT OBJECTIVES AND STRATEGIES
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The investment objective of each fund may be changed by the Board of Trustees
without shareholder approval. Any percentage limitations with respect to a fund
are applied at the time of purchase.
AIM V.I. AGGRESSIVE GROWTH FUND
The fund's investment objective is to achieve long-term growth of capital.
The fund seeks to meet its objective by investing primarily in common stocks,
convertible bonds, convertible preferred stocks and warrants of small- and
medium-sized companies whose earnings the fund's portfolio managers expect to
grow more than 15% per year. The fund may also invest up to 25% of its total
assets in foreign securities.
The portfolio managers focus on companies they believe are likely to benefit
from new or innovative products, services or processes as well as those that
have experienced above-average, long-term growth in earnings and have excellent
prospects for future growth. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes.
AIM V.I. BALANCED FUND
The fund's investment objective is to achieve as high a total return as
possible, consistent with preservation of capital.
The fund seeks to meet its objective by investing in a broadly diversified
portfolio of high-yielding securities, including common stocks, preferred
stocks, convertible securities and bonds. The fund normally invests a minimum of
30% and a maximum of 70% of its total assets in equity securities and a minimum
of 30% and a maximum of 70% of its total assets in non-convertible debt
securities. The fund may also invest up to 25% of its total assets in
convertible securities. The fund may invest up to 10% of its total assets in
lower-quality debt securities, i.e., "junk bonds." The fund may also invest up
to 25% of its total assets in foreign securities.
In selecting the percentages of assets to be invested in equity or debt
securities, the portfolio managers consider such factors as general market and
economic conditions, as well as trends, yields, interest rates and changes in
fiscal and monetary policies. The portfolio managers will primarily purchase
equity securities for growth of capital and debt securities for income purposes.
However, the portfolio managers will focus on companies whose securities have
the potential for both growth of capital and income generation. The portfolio
managers consider whether to sell a particular security when they believe that
security no longer has that potential.
AIM V.I. BLUE CHIP FUND
The fund's primary investment objective is long-term growth of capital with a
secondary objective of current income.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in the common stocks of blue chip companies. Blue chip companies are
those companies that the fund's portfolio managers believe have the potential
for above-average growth in earnings and that are well-established in their
respective industries. The portfolio managers consider whether to sell a
particular security when they believe the security no longer has that potential.
The fund may invest in United States government securities, convertible
securities and high-quality debt securities when the portfolio managers believe
securities other than common stocks offer the opportunity for long-term growth
of capital and current income. The fund may also invest up to 25% of its total
assets in foreign securities.
AIM V.I. CAPITAL APPRECIATION FUND
The fund's investment objective is growth of capital.
The fund seeks to meet its objective by investing principally in common stocks
of companies the portfolio managers believe are likely to benefit from new or
innovative products, services or processes as well as those that have
experienced above-average, long-term growth in earnings and have excellent
prospects for future growth. The portfolio managers consider whether to sell a
particular security when any of those factors materially changes. The fund may
also invest up to 25% of its total assets in foreign securities.
AIM V.I. CAPITAL DEVELOPMENT FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing primarily in securities,
including common stocks, convertible securities and bonds, of small- and
medium-sized companies. The fund may also invest up to 25% of its total assets
in foreign securities.
Among factors which the portfolio managers may consider when purchasing these
securities are: (1) the growth prospects for a company's products; (2) the
economic outlook for its industry; (3) a company's new product development; (4)
its operating management capabilities; (5) the relationship between the price of
the security and its estimated fundamental value; (6) relevant market, economic
and political environments; and (7) financial characteristics, such as balance
sheet analysis and return on assets. The portfolio managers sell a particular
security when any one of these factors materially changes.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing in securities of companies
that are likely to benefit from changing demo-
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AIM VARIABLE INSURANCE FUNDS
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graphic, economic and lifestyle trends. These securities may include common
stocks, convertible bonds, convertible preferred stocks and warrants of
companies within a broad range of market capitalizations. The fund may also
invest up to 25% of its total assets in foreign securities.
The portfolio managers purchase securities of companies that have experienced,
or that they believe have the potential for, above-average, long-term growth in
revenues and earnings. The portfolio managers consider whether to sell a
particular security when they believe the security no longer has that potential.
AIM V.I. DIVERSIFIED INCOME FUND
The fund's investment objective is to achieve a high level of current income.
The fund seeks to meet its objective by investing primarily in (1) domestic
and foreign corporate debt securities; (2) U.S. Government securities, including
U.S. Government agency mortgage-backed securities; (3) securities issued by
foreign governments, their agencies or instrumentalities; and (4) lower-quality
debt securities, i.e., "junk bonds," of U.S. and foreign companies. The fund's
assets will normally be invested in each of these four sectors, however the fund
may invest up to 100% of its total assets in U.S. Government securities.
The fund may invest up to 50% of its total assets in foreign securities,
including securities of issuers located in developing countries. The fund may
invest up to 25% of its total assets in government securities of any one foreign
country. The fund may also invest up to 10% of its total assets in equity
securities and convertible debt securities of U.S. and foreign companies. The
fund may invest in debt obligations issued by certain supranational entities,
such as the World Bank.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, whether denominated in the U.S. dollar or in other
currencies. The portfolio managers consider whether to sell a particular
security when any of those factors materially changes.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
The fund's investment objectives are long-term growth of capital together with
current income.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in a combination of blue chip equity securities and high-quality
government bonds of U.S. and foreign issuers. "Blue chip" equity securities are
those which (1) offered, during the issuer's most recent fiscal year, an above
average dividend yield relative to the latest reported dividend yield on the
Morgan Stanley Capital International World Index, and (2) are issued by a
company with total equity market capitalization of at least $1 billion.
High-quality government bonds are rated within one of the two highest ratings
categories of Moody's Investors Service, Inc. or Standard & Poor's Ratings
Services, or are deemed by the portfolio managers to be of comparable quality.
The fund may invest up to 35% of its total assets in other equity securities,
convertible securities and government and corporate debt securities that are
investment grade, i.e., rated within one of the four highest ratings categories
of Moody's or S&P. The fund may purchase debt obligations issued or guaranteed
by the U.S. or foreign governments, including foreign states, provinces or
municipalities, or their agencies, authorities or instrumentalities and debt
obligations of supranational organizations, such as the World Bank. The fund may
invest up to 100% of its total assets in either equity or debt securities in
response to general economic changes and market conditions around the world.
The fund will normally invest in securities of issuers in at least three
countries, including the United States. However, the fund may not invest more
than 40% of its assets in securities of issuers in any one country, other than
the U.S. The fund may invest in the securities of issuers located in developing
countries, i.e., those that are in the initial stages of their industrial
cycles.
The portfolio managers allocate assets among securities of countries and in
currency denominations where opportunities for meeting the fund's investment
objectives are expected to be the most attractive. The portfolio managers
consider whether to sell a particular security when opportunities for meeting
the fund's investment objectives are no longer considered attractive.
AIM V.I. GLOBAL UTILITIES FUND
The fund's investment objective is to achieve a high total return.
The fund seeks to meet its objective by investing, normally, at least 65% of
its total assets in securities of domestic and foreign public utility companies.
The fund may also invest in non-utility securities, but generally will invest in
securities of companies that derive revenues from utility-related activities
such as providing services, equipment or fuel sources to utilities. Such
companies may include those that provide maintenance services to electric,
telephone or natural gas utilities, companies that provide energy sources such
as coal or uranium, fuel service and equipment companies, companies that provide
pollution control for water utilities, and companies that build pipelines or
turbines which help produce electricity.
The fund may invest up to 80% of its total assets in foreign securities,
including securities of issuers located in developing countries. Developing
countries are those countries that are in the initial stages of their industrial
cycles. The fund will normally invest in the securities of companies located in
at least four different countries, including the United States. The fund may
invest up to 25% of its total assets in convertible securities. The fund may
also invest up to 25% of its total assets in non-convertible bonds. The fund may
invest up to 10% of its total assets in lower-quality debt securities, i.e.,
"junk bonds."
The fund is a non-diversified portfolio. With respect to 50% of its total
assets, it is permitted to invest more than 5% of its assets in the securities
of any one issuer.
In anticipation of or in response to adverse market conditions the fund may
invest up to 100% of its total assets in securities of U.S. issuers.
2
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AIM VARIABLE INSURANCE FUNDS
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AIM V.I. GOVERNMENT SECURITIES FUND
The fund's investment objective is to achieve a high level of current income
consistent with reasonable concern for safety of principal.
The fund seeks to meet its objective by investing in debt securities issued,
guaranteed or otherwise backed by the United States Government. The fund may
invest in securities of all maturities issued or guaranteed by the U.S.
Government or its agencies and instrumentalities, including: (1) U.S. Treasury
obligations, and (2) obligations issued or guaranteed by U.S. Government
agencies and instrumentalities and supported by (a) the full faith and credit of
the U.S. Treasury, (b) the right of the issuer to borrow from the U.S. Treasury,
or (c) the credit of the agency or instrumentality. The fund intends to maintain
a dollar-weighted average portfolio maturity of between three and ten years. The
fund may invest in high-coupon U.S. Government agency mortgage-backed
securities, which consist of interests in underlying mortgages with maturities
of up to thirty years. The fund may also invest up to 20% of its total assets in
foreign securities.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, consistent with their concern for safety of
principal. The portfolio managers consider whether to sell a particular security
when any of those factors materially changes.
AIM V.I. GROWTH FUND
The fund's investment objective is to seek growth of capital.
The fund seeks to meet its objective by investing principally in seasoned and
better capitalized companies considered to have strong earnings momentum. The
fund may also invest up to 25% of its total assets in foreign securities.
The portfolio managers focus on companies that have experienced above-average
growth in earnings and have excellent prospects for future growth. The portfolio
managers consider whether to sell a particular security when any of those
factors materially changes.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
AIM V.I. GROWTH AND INCOME FUND
The fund's primary investment objective is growth of capital with a secondary
objective of current income.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in securities of established companies that have long-term above-average
growth in earnings and dividends, and growth companies that the portfolio
managers believe have the potential for above-average growth in earnings and
dividends. The portfolio managers consider whether to sell a particular security
when they believe the security no longer has that potential. The fund may also
invest up to 25% of its total assets in foreign securities.
AIM V.I. HIGH YIELD FUND
The fund's investment objective is to achieve a high level of current income.
The fund seeks to meet its objective by investing at least 65% of the value of
its assets in publicly traded, lower-quality debt securities, i.e., "junk
bonds." The fund will invest principally in junk bonds rated B or above by
Moody's Investors Service, Inc. or Standard & Poor's Ratings Services or deemed
by the portfolio managers to be of comparable quality. The fund will invest at
least 80% of its total assets in debt securities, including convertible debt
securities and/or cash or cash equivalents. The fund may also invest in
preferred stock. The fund may invest up to 25% of its total assets in foreign
securities.
Although the portfolio managers focus on debt securities that they believe
have favorable prospects for high current income, they also consider the
possibility of growth of capital of the security. The portfolio managers
consider whether to sell a particular security when any of those factors
materially changes.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
AIM V.I. INTERNATIONAL EQUITY FUND
The fund's investment objective is to provide long-term growth of capital.
The fund seeks to meet its objective by investing in a diversified portfolio
of international equity securities whose issuers are considered to have strong
earnings momentum. The fund intends to invest at least 70% of its total assets
in marketable equity securities of foreign companies that are listed on a
recognized foreign securities exchange or traded in a foreign over-the-counter
market. The fund will normally invest in companies located in at least four
countries outside of the United States, emphasizing investment in companies in
the developed countries of Western Europe and the Pacific Basin. The fund may
invest up to 20% of its total assets in securities of issuers located in
developing countries, i.e., those that are in the initial stages of their
industrial cycles. The fund may invest up to 20% of its total assets in
securities exchangeable for or convertible into equity securities of foreign
companies.
The portfolio managers focus on companies that have experienced above-average,
long-term growth in earnings and have strong prospects for future growth. In
selecting countries in which the fund will invest, the portfolio managers also
consider such factors as the prospect for relative economic growth among
countries or regions, economic or political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. The
portfolio managers consider whether to sell a particular security when any of
those factors materially changes.
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AIM VARIABLE INSURANCE FUNDS
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AIM V.I. MONEY MARKET FUND
The fund's investment objective is to provide as high a level of current income
as is consistent with the preservation of capital and liquidity.
The fund seeks to meet its objective by investing only in high-quality U.S.
dollar-denominated short-term obligations, including:
- - securities issued by the U.S. Government or its agencies
- - foreign government obligations
- - bankers' acceptances, certificates of deposit, and time deposits from U.S. or
foreign banks
- - repurchase agreements
- - commercial paper
- - taxable municipal securities
- - master notes
- - cash equivalents
The fund may invest up to 50% of its total assets in U.S. dollar-denominated
securities of foreign issuers. The fund may invest up to 100% of its total
assets in obligations issued by banks.
The portfolio managers focus on securities that they believe have favorable
prospects for current income, consistent with their concerns for preservation of
capital and liquidity. The portfolio managers usually hold portfolio securities
to maturity, but may sell a particular security when they deem it advisable,
such as when any of the factors above materially changes.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash or shares of affiliated money market
funds. As a result, the fund may not achieve its investment objective.
AIM V.I. TELECOMMUNICATIONS AND
TECHNOLOGY FUND (FORMERLY, AIM V.I. TELECOMMUNICATIONS FUND)
The fund's investment objective is long-term growth of capital.
The fund seeks to meet its objective by investing primarily in equity
securities of companies throughout the world engaged in the development,
manufacture or sale of telecommunications and technology services or equipment.
The fund will invest, normally, at least 65% of its total assets in securities
issued by companies in the telecommunications and technology industries. Such
companies include those that develop, manufacture, or sell computer and
electronic components and equipment, software, semiconductors, Internet
technology, communications services and equipment, mobile communications, and
broadcasting. The fund may invest up to 35% of its assets in debt securities
issued by domestic and foreign telecommunications and technology companies, or
in equity or debt securities of other companies the portfolio managers believe
will benefit from developments in the telecommunications and technology
industries. The fund may invest in companies located in developing countries,
i.e., those that are in the initial stages of their industrial cycles. The fund
may also invest up to 5% of its total assets in lower-quality debt securities,
i.e. "junk bonds."
The fund may invest up to 75% of its total assets in foreign securities. The
fund will normally invest in the equity securities of companies located in at
least three different countries, including the United States, and may invest a
significant portion of its assets in the securities of U.S. issuers. However,
the fund will not invest more than 40% of its total assets in the securities of
issuers in any one country, other than the U.S. The fund may invest
substantially in securities denominated in one or more currencies.
The portfolio managers allocate the fund's assets among countries, sectors and
in currency denominations that are expected to provide the best opportunities
for long-term growth of capital. The portfolio managers consider whether to sell
a particular security when any of those factors materially changes.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objective. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
AIM V.I. VALUE FUND
The fund's investment objective is to achieve long-term growth of capital.
Income is a secondary objective.
The fund seeks to meet its objectives by investing primarily in equity
securities judged by the fund's investment advisor to be undervalued relative to
the investment advisor's appraisal of 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. The fund also may invest in preferred stocks and debt instruments
that have prospects for growth of capital. The fund also may invest up to 25% of
its total assets in foreign securities.
The portfolio managers focus on undervalued equity securities of (1)
out-of-favor cyclical growth companies; (2) established growth companies that
are undervalued compared to historical relative valuation parameters; (3)
companies where there is early but tangible evidence of improving prospects that
are not yet reflected in the price of the company's equity securities; and (4)
companies whose equity securities are selling at prices that do not reflect the
current market value of their assets and where there is reason to expect
realization of this potential in the form of increased equity values. The
portfolio managers consider whether to sell a particular security when they
believe the company no longer fits into any of the above categories.
ALL FUNDS (EXCEPT AIM V.I. MONEY MARKET
FUND)
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, each fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, each
fund may not achieve its investment objectives.
4
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AIM VARIABLE INSURANCE FUNDS
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PRINCIPAL RISKS OF INVESTING IN THE FUNDS
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AIM V.I. AGGRESSIVE GROWTH FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to common stocks of smaller companies, whose prices
may go up and down more than common stocks of larger, more-established
companies. Also, since common stocks of smaller companies may not be traded as
often as common stocks of larger, more-established companies, it may be
difficult or impossible for the fund to sell securities at a desirable price.
AIM V.I. BALANCED FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from the fund may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Interest rate increases may
cause the price of a debt security to decrease; the longer a debt security's
duration, the more sensitive it is to this risk. The issuer of a security may
default or otherwise be unable to honor a financial obligation.
The values of convertible securities in which the fund invests may also be
affected by market interest rates, the risk that the issuer may default on
interest or principal payments and the value of the underlying stock into which
these securities may be converted. Specifically, since these types of
convertible securities pay fixed interest or dividends, their values may fall if
interest rates rise. Additionally, an issuer may have the right to buy back
certain of the convertible securities at a time and at a price that is
unfavorable to the fund.
AIM V.I. BLUE CHIP FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer of the stock, the value of its assets, general economic conditions,
interest rates, investor perceptions and market liquidity.
AIM V.I. CAPITAL APPRECIATION FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to common stocks of smaller companies, whose prices
may go up and down more than common stocks of larger, more-established
companies. Also, since common stocks of smaller companies may not be traded as
often as common stocks of larger, more-established companies, it may be
difficult or impossible for the fund to sell securities at a desirable price.
AIM V.I. CAPITAL DEVELOPMENT FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to common stocks of smaller companies, whose prices
may go up and down more than common stock of larger, more-established companies.
Also, since common stock of smaller companies may not be traded as often as
common stock of larger, more-established companies, it may be difficult or
impossible for the fund to sell securities in the fund at a desirable price.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity. This is
especially true with respect to equity securities of small- and medium-sized
companies, whose prices may go up and down more than the prices of equity
securities of larger, more established companies. Also, since equity securities
of small- and medium-sized companies may not be traded as often as equity
securities of larger, more established companies, it may be difficult or
impossible for the fund to sell securities at a desired price.
The values of the convertible securities in which the fund may invest also
will be affected by market interest rates, the risk that
5
<PAGE> 9
----------------------------
AIM VARIABLE INSURANCE FUNDS
----------------------------
the issuer may default on interest or principal payments and the value of the
underlying common stock into which these securities may be converted.
Specifically, since these types of convertible securities pay fixed interest and
dividends, their values may fall if market interest rates rise and rise if
market interest rates fall. Additionally, an issuer may have the right to buy
back certain of the convertible securities at a time and at a price that is
unfavorable to the fund.
AIM V.I. DIVERSIFIED INCOME FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. Interest rate
increases may cause the price of a debt security to decrease. The longer a debt
security's duration, the more sensitive it is to this risk. Junk bonds are less
sensitive to this risk than are higher-quality bonds. Some of the securities
purchased by the fund are not guaranteed by the U.S. Government. The agency or
instrumentality issuing such security may default or otherwise be unable to
honor a financial obligation.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors'
claims. The value of junk bonds often fluctuates in response to company,
political or economic developments and can decline significantly over short
periods of time or during periods of general or regional economic difficulty.
During those times the bonds could be difficult to value or sell at a fair
price. Credit ratings on junk bonds do not necessarily reflect their actual
market risk.
U.S. Government agency mortgage-backed securities provide a higher coupon at
the time of purchase than current prevailing market interest rates. The fund may
purchase such securities at a premium, which means that a faster principal
prepayment rate than expected will reduce both the market value of and income
from such securities.
The prices of equity securities fluctuates in response to many factors,
including the historical and prospective earnings of the issuer, the value of
its assets, general economic conditions, interest rates, investor perceptions
and market liquidity.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions, and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases may cause the price of a debt security to decrease. The longer a
debt security's duration, the more sensitive it is to this risk.
AIM V.I. GLOBAL UTILITIES FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from the fund may vary. The value of
your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Interest rate increases may
cause the price of a debt security to decrease; the longer a debt security's
duration, the more sensitive it is to this risk. The issuer of a security may
default or otherwise be unable to honor a financial obligation.
The value of the fund's shares is particularly vulnerable to factors affecting
the utility company industry, such as substantial economic, operational or
regulatory changes. Such changes may, among other things, increase compliance
costs or the costs of doing business. In addition, increases in fuel, energy and
other prices have historically limited the growth potential of utility
companies. Because the fund focuses its investments in the public utility
industry, the value of your shares may rise and fall more than the value of
shares of a fund that invests more broadly.
Because it is non-diversified, the fund may invest in fewer issuers than if it
were a diversified fund. The value of the fund's shares may vary more widely,
and the fund may be subject to greater investment and credit risk, than if the
fund invested more broadly.
AIM V.I. GOVERNMENT SECURITIES FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. Debt securities are particularly
vulnerable to credit risk and interest rate fluctuations. Interest rate
increases can cause the price of a debt security to decrease. The longer a debt
security's duration, the more sensitive it is to this risk. The prices of
high-coupon U.S. Government agency mortgage-backed securities fall more slowly
when interest rates rise than do prices of other fixed-rate securities. Some of
the securities purchased by the fund are not guaranteed by the U.S. Government.
The agency or instrumentality issuing such security may default or otherwise be
unable to honor a financial obligation.
High-coupon U.S. Government agency mortgage-backed securities provide a higher
coupon at the time of purchase than current prevailing market interest rates.
The fund may purchase such securities at a premium. If the securities experience
a faster principal prepayment rate than expected, both the market value of, and
income from, such securities will decrease.
6
<PAGE> 10
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. GROWTH FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity.
AIM V.I. GROWTH AND INCOME FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the fund.
AIM V.I. HIGH YIELD FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases can cause the price of a debt security to decrease. Junk bonds
are less sensitive to this risk than are higher-quality bonds.
Compared to higher-quality debt securities, junk bonds involve greater risk of
default or price changes due to changes in the credit quality of the issuer
because they are generally unsecured and may be subordinated to other creditors
claims. The value of junk bonds often fluctuates in response to company,
political or economic growth developments and can decline significantly over
short periods of time or during periods of general or regional economic
difficulty. During those times, the bonds could be difficult to value or to sell
at a fair price. Credit ratings on junk bonds do not necessarily reflect their
actual market risk.
AIM V.I. INTERNATIONAL EQUITY FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the securities in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer, the value of its assets, general economic
conditions, interest rates, investor perceptions and market liquidity.
AIM V.I. MONEY MARKET FUND
An investment in the fund is not a deposit of a bank and is not insured or
guaranteed by the Federal Deposit Insurance Corporation or any other government
agency. Although the fund seeks to preserve the value of your investment at
$1.00 per share, it is possible to lose money by investing in the fund.
Additionally, the fund's yield will vary as the short-term securities in its
portfolio mature and the proceeds are reinvested in securities with different
interest rates.
The following factors could reduce the fund's income and/or share price:
- - interest rates could rise sharply, causing the value of the fund's securities,
and share price, to drop
- - any of the fund's holdings could have its credit rating downgraded or could
default
- - the risks generally associated with concentrating investments in the banking
industry, such as interest rate risk, credit risk and regulatory developments
relating to the banking and financial services industries
- - the risks generally associated with U.S. dollar-denominated foreign
investments, including political and economic upheaval, seizure or
nationalization of deposits, imposition of taxes or other restrictions on the
payment of principal and interest.
AIM V.I. TELECOMMUNICATIONS AND
TECHNOLOGY FUND
There is a risk that you could lose all or a portion of your investment in the
fund. The value of your investment in the fund will go up and down with the
prices of the common stocks in which the fund invests. The prices of equity
securities change in response to many factors, including the historical and
prospective earnings of the issuer of the stock, the value of its assets,
general economic conditions, interest rates, investor perceptions, and market
liquidity.
The value of the fund's shares is particularly vulnerable to factors affecting
the telecommunications industry, such as substantial government regulation.
Because the fund focuses its investments in the telecommunications industry, the
value of your fund shares may rise and fall more than the value of shares of a
fund that invests more broadly.
7
<PAGE> 11
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. VALUE FUND
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity.
ALL FUNDS (EXCEPT AIM V.I. MONEY MARKET FUND)
The prices of foreign securities may be further affected by other factors,
including:
- - Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- - Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- - Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- - Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
ALL FUNDS
If the seller of a repurchase agreement in which the fund invests defaults on
its obligation or declares bankruptcy, the fund may experience delays in selling
the securities underlying the repurchase agreement. As a result, the fund may
incur losses arising from decline in the value of those securities, reduced
levels of income and expenses of enforcing its rights.
Some of the funds (except AIM V.I. Diversified Income Fund, AIM V.I.
Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market
Fund) may participate in the initial public offering (IPO) market. For AIM V.I.
Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM
V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I.
Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Telecommunications and Technology Fund
(funds that have a small asset base) any investment a fund may make in IPOs
may significantly increase its total returns. As a fund's assets grow, the
impact of IPO investments will decline, which may reduce its total returns.
8
<PAGE> 12
-----------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
The bar charts and tables shown below provide an indication of the risks of
investing in each fund. A fund's past performance is not necessarily an
indication of its future performance. The bar charts and performance tables
shown below do not reflect charges at the separate account level. If they did,
the performance shown would be lower. Total return information in the bar charts
and tables below may be affected by special market factors, including
investments by certain funds in initial public offerings, which may have a
magnified impact on those funds that have a small asset base. There is no
guarantee that, as those funds' assets grow, they will continue to experience
substantially similar performance. SEC Rules do not allow us to provide a bar
chart and performance table for funds that do not have at least a full calendar
year of performance.
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL TOTAL RETURNS
- --------------------------------------------------------------------------------
The following bar chart shows the performance of the fund's shares.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- --------
<S> <S>
1999 ...................................44.67%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
29.55% (quarter ended December 31, 1999) and the lowest quarterly return was
- -4.67% (quarter ended March 31, 1999).
9
<PAGE> 13
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. BALANCED FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows the performance of the fund's shares.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ----------- --------
<S> <S>
1999 .................................... 19.31%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
15.67% (quarter ended December 31, 1999) and the lowest quarterly return was
- -2.38% (quarter ended September 30, 1999).
AIM V.I. CAPITAL APPRECIATION FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Total
Year Ended Annual
December 31 Return
- ----------- -------
<S> <S>
1994 .................................... 2.50%
1995 .................................... 35.69%
1996 .................................... 17.58%
1997 .................................... 13.50%
1998 .................................... 19.30%
1999 .................................... 44.61%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
35.78% (quarter ended December 31, 1999) and the lowest quarterly return was
- -14.75% (quarter ended September 30, 1998).
10
<PAGE> 14
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
The following bar chart shows the performance of the fund's shares.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1999 ..................................... 29.10%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
29.66% (quarter ended December 31, 1999) and the lowest quarterly return was
- -7.60% (quarter ended January 31, 1999).
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... (5.07)%
1995 .................................... 19.02%
1996 .................................... 10.19%
1997 .................................... 9.39%
1998 .................................... 3.58%
1999 .................................... (1.92)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
5.54% (quarter ended June 30, 1995) and the lowest quarterly return was -3.16%
(quarter ended March 31, 1994).
11
<PAGE> 15
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. GLOBAL GROWTH AND INCOME FUND
ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... (2.85)%
1995 .................................... 15.49%
1996 .................................... 16.33%
1997 .................................... 16.22%
1998 .................................... 19.60%
1999 .................................... (0.13)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
12.21% (quarter ended December 31, 1998) and the lowest quarterly return was
- -7.64% (quarter ended September 30, 1998). Performance prior to October 15, 1999
was for a predecessor fund.
AIM V.I. GLOBAL UTILITIES FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1995 .................................... 26.74%
1996 .................................... 12.07%
1997 .................................... 21.63%
1998 .................................... 16.49%
1999 .................................... 33.56%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
25.88% (quarter ended December 31, 1999) and the lowest quarterly return was
- -4.98% (quarter ended September 30, 1998).
12
<PAGE> 16
----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... (3.73)%
1995 .................................... 15.56%
1996 .................................... 2.29%
1997 .................................... 8.16%
1998 .................................... 7.73%
1999 .................................... (1.32)%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
5.48% (quarter ended June 30, 1995) and the lowest quarterly return was -2.82%
(quarter ended March 31, 1994).
AIM V.I. GROWTH FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... (2.48)%
1995 .................................... 34.77%
1996 .................................... 18.09%
1997 .................................... 26.87%
1998 .................................... 34.12%
1999 .................................... 35.24%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
27.80% (quarter ended December 31, 1998) and the lowest quarterly return was
- -11.71% (quarter ended September 30, 1998).
13
<PAGE> 17
-----------------------------
AIM VARIABLE INSURANCE FUNDS
-----------------------------
AIM V.I. GROWTH AND INCOME FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1995 .................................... 33.86%
1996 .................................... 19.95%
1997 .................................... 25.72%
1998 .................................... 27.68%
1999 .................................... 34.25%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
26.48% (quarter ended December 31, 1998) and the lowest quarterly return was
- -11.76% (quarter ended September 30, 1998).
AIM V.I. HIGH YIELD FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows the performance of the fund's shares.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1999 .................................... 10.52%
</TABLE>
During the period shown in the bar chart, the highest quarterly return was
5.06% (quarter ended December 31, 1999) and the lowest quarterly return was
- -0.85% (quarter ended September 30, 1999).
14
<PAGE> 18
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... (1.61)%
1995 .................................... 17.24%
1996 .................................... 20.05%
1997 .................................... 6.94%
1998 .................................... 15.49%
1999 .................................... 55.04%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
41.88% (quarter ended December 31, 1999) and the lowest quarterly return was
- -13.81% (quarter ended September 30, 1998).
AIM V.I. MONEY MARKET FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... 3.64%
1995 .................................... 5.70%
1996 .................................... 4.97%
1997 .................................... 5.14%
1998 .................................... 5.06%
1999 .................................... 4.66%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
1.45% (quarter ended September 30, 1995) and the lowest quarterly return was
0.60% (quarter ended March 31, 1994).
15
<PAGE> 19
----------------------------
AIM VARIABLE INSURANCE FUNDS
----------------------------
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... 7.15%
1995 .................................... 23.66%
1996 .................................... 19.34%
1997 .................................... 14.56%
1998 .................................... 22.11%
1999 .................................... 106.52%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
63.10% (quarter ended December 31, 1999) and the lowest quarterly return was
- -23.31% (quarter ended September 30, 1998). For periods prior to October 15,
1999, the performance shown relates to a predecessor fund. In addition, the
performance shown above relates to periods before the fund changed its
investment strategy to include securities of companies in the technology
industry.
AIM V.I. VALUE FUND
ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
Annual
Year Ended Total
December 31 Return
- ------------- --------
<S> <S>
1994 .................................... 4.04%
1995 .................................... 36.25%
1996 .................................... 15.02%
1997 .................................... 23.69%
1998 .................................... 32.41%
1999 .................................... 29.90%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
27.04% (quarter ended December 31, 1998) and the lowest quarterly return was
- -12.00% (quarter ended September 30, 1998).
16
<PAGE> 20
----------------------------
AIM VARIABLE INSURANCE FUNDS
----------------------------
PERFORMANCE TABLES
- --------------------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended INCEPTION SINCE
December 31, 1999) 1 YEAR DATE INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund 44.67% 24.07% 05/01/98
Russell 2000--Registered Trademark--
Index(1) 21.26% 4.01%(2) 04/30/98(2)
- -----------------------------------------------------------------------------
</TABLE>
(1) The Russell 2000--Registered Trademark-- Index is a widely recognized,
unmanaged index of common stocks that measures the performance of the 2,000
smallest companies in the Russell 3000--Registered Trademark-- Index, which
measures the performance of the 3,000 largest U.S. companies based on total
market capitalization.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. BALANCED FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended INCEPTION SINCE
December 31, 1999) 1 YEAR DATE INCEPTION
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. Balanced Fund 19.31% 19.62% 05/01/98
Standard & Poor's 500 Index(1) 21.03% 19.81%(2) 04/30/98(2)
- -------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. CAPITAL APPRECIATION FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
(for the periods SINCE INCEPTION
December 31, 1999 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Capital Appreciation Fund 44.61% 25.59% 22.33% 05/05/93
Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
17
<PAGE> 21
----------------------------
AIM VARIABLE INSURANCE FUNDS
----------------------------
AIM V.I. CAPITAL DEVELOPMENT FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended INCEPTION SINCE
December 31, 1999) 1 YEAR DATE INCEPTION
- -----------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. Capital Development Fund 29.10% 11.22% 05/01/98
Standard & Poor's 500 Index(1) 21.03% 19.81%(2) 04/30/98(2)
- -----------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. DIVERSIFIED INCOME FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Diversified Income Fund -1.92% 7.83% 5.93% 05/05/93
Lehman Aggregate Bond Index(1) -0.82% 7.73% 6.00%(2) 04/30/93(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Aggregate Bond Index is an unmanaged index generally considered
representative of treasury issues, agency issues, corporate bond issues and
mortgage-backed securities.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Global Growth and
Income Fund(1) -0.13% 13.28% 11.63% 02/10/93
MSCI World Index(2) 24.93% 19.76% 18.11%(3) 01/31/93(3)
- --------------------------------------------------------------------------------
</TABLE>
(1) Performance prior to October 15, 1999 was for a predecessor fund.
(2) MSCI World Index measures the performance of 1,578 securities listed on
major world stock exchanges.
(3) The average annual total return given is since the date closest to the
inception date of the fund.
18
<PAGE> 22
----------------------------
AIM VARIABLE INSURANCE FUNDS
----------------------------
AIM V.I. GLOBAL UTILITIES FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Global Utilities Fund 33.56% 21.87% 18.45% 05/02/94
Lipper Utility Fund Index(1) 14.53% 18.83% 15.58%(2) 04/30/94(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) Lipper Utility Fund Index measures the performance of the 30 largest
utilities funds charted by Lipper Inc., an independent mutual funds
performance monitor.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. GOVERNMENT SECURITIES FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Government Securities
Fund -1.32% 6.33% 4.67% 05/05/93
Lehman Intermediate Government
Bond Index(1) 0.49% 6.93% 5.41%(2) 04/30/93(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Lehman Intermediate Government Bond Index is an unmanaged composite
generally considered representative of intermediate publicly issued debt of
U.S. Government agencies and quasi-federal corporations, and corporate debt
guaranteed by the U.S. Government.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. GROWTH FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth Fund 35.24% 29.64% 22.93% 05/05/93
Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
19
<PAGE> 23
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
AIM V.I. GROWTH AND INCOME FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and Income Fund 34.25% 28.18% 24.49% 05/02/94
Standard & Poor's 500 Index(1) 21.03% 28.54% 25.65%(2) 04/30/94(2)
- --------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. HIGH YIELD FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR INCEPTION DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. High Yield Fund 10.52% 1.26% 05/01/98
Lehman High Yield Index(1) 2.39% 0.31%(2) 04/30/98(2)
- -------------------------------------------------------------------------------
</TABLE>
(1) The Lehman High Yield Index is a rules-based index that includes all
fixed-income securities having a maximum quality rating of Ba1 (including
defaulted issues), a minimum amount outstanding of $100 mm, and at least one
year to maturity.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. INTERNATIONAL EQUITY FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- ----------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. International Equity Fund 55.04% 21.93% 18.82% 05/05/93
Morgan Stanley Capital
International EAFE Index(1) 26.96% 12.83% 12.01%(2) 04/30/93(2)
- ------------------------------------------------------------------------------
</TABLE>
(1) The Morgan Stanley Capital International Europe, Australasia and Far East
Index measures performance of global stock markets in 20 developed
countries.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
20
<PAGE> 24
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
AIM V.I. MONEY MARKET FUND
The following performance table reflects the fund's performance over the periods
indicated.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Money Market Fund 4.66% 5.10% 4.60% 05/05/93
- -------------------------------------------------------------------------------
</TABLE>
The AIM V.I. Money Market Fund's seven day yield on December 31, 1999 was
4.90%. For the current seven day yield, call (800) 347-4246.
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- ------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Telecommunications and
Technology Fund(1) 106.52% 33.65% 29.52% 10/18/93
The Standard & Poor's 500 Index(2) 21.03% 28.54% 22.89%(3) 10/31/93(3)
- --------------------------------------------------------------------------------
</TABLE>
(1) For periods prior to October 15, 1999, the performance shown relates to a
predecessor fund. In addition, the performance shown above relates to
periods before the fund changed its investment strategy to include
securities of companies in the technology industry.
(2) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(3) The average annual total return given is since the date closest to the
inception date of the fund.
AIM V.I. VALUE FUND
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- -------------------------------------------------------------------------------
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Value Fund 29.90% 27.23% 23.07% 05/05/93
Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2)
- -------------------------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
21
<PAGE> 25
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
FUND MANAGEMENT
- --------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of each fund's operations and provides
investment advisory services to the funds, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the funds.
The advisor has acted as an investment advisor since its organization in 1976.
Today, the advisor, together with its subsidiaries, advises or manages over 120
investment portfolios, including the funds, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fiscal year ended December 31, 1999, the advisor received
compensation from the following funds as a percentage of each fund's average
daily net assets as follows:
<TABLE>
<CAPTION>
ADVISORY
FUND FEE
- ---- --------
<S> <C>
AIM V.I. Aggressive Growth Fund 0.09%
AIM V.I. Balanced Fund 0.75%
AIM V.I. Capital Appreciation Fund 0.62%
AIM V.I. Capital Development Fund 0.00%
AIM V.I. Diversified Income Fund 0.60%
AIM V.I. Global Growth and Income Fund 1.00%
AIM V.I. Global Utilities Fund 0.65%
AIM V.I. Government Securities Fund 0.50%
AIM V.I. Growth Fund 0.63%
AIM V.I. Growth and Income Fund 0.61%
AIM V.I. High Yield Fund 0.61%
AIM V.I. International Equity Fund 0.75%
AIM V.I. Money Market Fund 0.40%
AIM V.I. Telecommunications and
Technology Fund 1.00%
AIM V.I. Value Fund 0.61%
</TABLE>
The advisor is to receive a fee from AIM V.I. Blue Chip Fund calculated at the
annual rate of 0.75% of the first $350 million of average daily net assets and
0.625% of average daily net assets over $350 million.
The advisor is to receive a fee from AIM V.I. Dent Demographic Trends Fund
calculated at the annual rate of 0.85% of the first $2 billion of average daily
net assets and 0.80% of average daily net assets over $2 billion.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of each fund's portfolio, all of whom are officers (except for the AIM V.I.
Global Growth and Income Fund) of A I M Capital Management, Inc. a wholly owned
subsidiary of the advisor, are as follows:
AIM V.I. AGGRESSIVE GROWTH FUND
- - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1994.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1989.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, Mr. Scavone was Associate Portfolio Manager for
Van Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1998 and has been associated with the advisor and/or its
affiliates since 1990.
AIM V.I. BALANCED FUND
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Claude C. Cody, IV, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1999. From 1997 to 1999, he was global fixed-income portfolio manager for
Nicholas-Applegate Capital Management. From 1994 to 1997, he was international
fixed-income trader and analyst for Strong Capital Management.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1989.
- - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1991.
AIM V.I. BLUE CHIP FUND
- - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, she was Senior Financial Analyst for Shell Oil
Co. Pension Trust.
- - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1990.
22
<PAGE> 26
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1986.
AIM V.I. CAPITAL APPRECIATION FUND
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1982.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1989.
- - Christopher P. Perras, Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1999. From 1997 to 1999 Mr. Perras was an equity analyst at Van Wagoner
Capital Management. From 1995 to 1997 he was an Associate Portfolio Manager at
Van Kampen American Capital Asset Management, Inc.
- - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996, Mr. Scavone was an Associate Portfolio Manager
for Van Kampen American Capital Asset Management, Inc.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
AIM V.I. CAPITAL DEVELOPMENT FUND
- - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1996. From 1981 to 1996, Mr. Larsen was, among other offices, Senior
Vice President of John Hancock Advisers, Inc. and its predecessors.
- - Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1994.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
- - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1981 to 1996, he was, among other offices, Senior Vice
President of John Hancock Advisers, Inc. and its predecessors.
- - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1987.
- - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1992.
AIM V.I. DIVERSIFIED INCOME FUND
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since
1999 and has been associated with the advisor and/or its affiliates since
1999. From 1997 to 1999, he was global fixed-income portfolio manager for
Nicholas-Applegate Capital Management. From 1994 to 1997, he was international
fixed-income trader and analyst for Strong Capital Management.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1995 and has been associated with the advisor and/or its affiliates
since 1992.
- - Kevin E. Rogers, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1991.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
- - Paul Griffiths, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
1994.
- - Michael Lindsell, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Michael McDonagh, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1977.
- - John Nadell, Portfolio Manager, who has been responsible for the fund since
1998 and has been associated with the advisor and/or its affiliates since
1994.
AIM V.I. GLOBAL UTILITIES FUND
- - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the
fund since 1994 and has been associated with the advisor and/or its affiliates
since 1992.
- - Claude C. Cody, IV, Senior Portfolio Manager, who has been responsible for the
fund since 1994 and has been associated with the advisor and/or its affiliates
since 1992.
- - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1992.
- - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the
fund since 1996 and has been associated with the advisor and/or its affiliates
since 1989.
- - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund
since 1998 and has been associated with the advisor and/or its affiliates
since 1991.
23
<PAGE> 27
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
AIM V.I. GOVERNMENT SECURITIES FUND
- - Laurie F. Bignac, who has been responsible for the fund since 1999 and has
been associated with the advisor and/or its affiliates since 1992.
- - Scot W. Johnson, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1994.
- - Karen Dunn Kelley, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1989.
AIM V.I. GROWTH FUND
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1993 and has been associated with the advisor and/or its affiliates
since 1982.
- - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for
Shell Oil Co. Pension Trust.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1993 and has been associated with the advisor and/or its
affiliates since 1986.
AIM V.I. GROWTH AND INCOME FUND
- - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for
Shell Oil Co. Pension Trust.
- - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1994, and has been associated with the advisor and/or its
affiliates since 1987.
AIM V.I. HIGH YIELD FUND
- - John L. Pessarra, Senior Portfolio Manager, who has been responsible for the
fund since 1998, and has been associated with the advisor and/or its
affiliates since 1990.
- - Kevin E. Rogers, Senior Portfolio Manager, who has been responsible for the
fund since 1998, and has been associated with the advisor and/or its
affiliates since 1991.
AIM V.I. INTERNATIONAL EQUITY FUND
- - A. Dale Griffin, III, Senior Portfolio Manager, who has been responsible for
the fund since 1993 and has been associated with the advisor and/or its
affiliates since 1989.
- - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996 he was an associate with JMB Realty.
- - Clas G. Olsson, Senior Portfolio Manager, who has been responsible for the
fund since 1997 and has been associated with the advisor and/or its affiliates
since 1994.
- - Barrett K. Sides, Portfolio Manager, who has been responsible for the fund
since 1995 and has been associated with the advisor and/or its affiliates
since 1990.
AIM V.I. TELECOMMUNICATIONS AND
TECHNOLOGY FUND
- - David P. Barnard, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1982.
- - Claude C. Cody IV, Portfolio Manager, who has been responsible for the fund
since 1999 and has been associated with the advisor and/or its affiliates
since 1992.
- - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund
since 2000 and has been associated with the advisor and/or its affiliates
since 1996. From 1994 to 1996 he was an associate with JMB Realty.
- - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the
fund since 1999 and has been associated with the advisor and/or its affiliates
since 1989.
- - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1986.
- - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for
the fund since 1999 and has been associated with the advisor and/or its
affiliates since 1990.
AIM V.I. VALUE FUND
- - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the
fund since 1993, and has been associated with the advisor and/or its
affiliates since 1990.
- - Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the
fund since 1998 and has been associated with the advisor and/or its affiliates
since 1998. From 1994 to 1998, Mr. Harrel was Vice President and portfolio
manager of Van Kampen American Capital Asset Management, Inc. and portfolio
manager of various growth and equity funds.
- - Robert A. Shelton, Portfolio Manager, who has been responsible for the fund
since 1997 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, Mr. Shelton was a financial analyst for CS
First Boston.
24
<PAGE> 28
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
OTHER INFORMATION
- --------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
Each fund ordinarily effects orders to purchase and redeem shares at the fund's
next computed net asset value after it receives an order. Life insurance
companies participating in each fund serve as the fund's designee for receiving
orders of separate accounts that invest in the fund.
PRICING OF SHARES
Each of the funds prices its shares based on its net asset value. The funds,
except AIM V.I. Money Market Fund, value portfolio securities for which market
quotations are readily available at market value. The funds value short-term
investments maturing within 60 days at amortized cost, which approximates market
value. AIM V.I. Money Market Fund values all of its securities based on the
amortized cost method. The funds, except AIM V.I. Money Market Fund, value all
other securities and assets at their fair value. Securities and other assets
quoted in foreign currencies are valued in U.S. dollars based on the prevailing
exchange rates on that day. In addition, if, between the time trading ends on a
particular security and the close of the New York Stock Exchange (NYSE), events
occur that materially affect the value of the security, the funds may value the
security at its fair value as determined in good faith by or under the
supervision of the Board of Trustees. The effect of using fair value pricing is
that a fund's net asset value will be subject to the judgment of the Board of
Trustees or its designee instead of being determined by the market. Because some
of the funds may invest in securities that are primarily listed on foreign
exchanges, the value of those funds' shares may change on days when the separate
account will not be able to purchase or redeem shares. The fund determines the
net asset value of its shares as of the close of the NYSE on each day the NYSE
is open for business.
TAXES
The amount, timing and character of distributions to the separate account may be
affected by special tax rules applicable to certain investments purchased by the
funds. Holders of variable contracts should refer to the prospectus for their
contracts for information regarding the tax consequences of owning such
contracts and should consult their tax advisers before investing.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
Each fund other than AIM V.I. Money Market Fund generally declares and pays
dividends, if any, annually to separate accounts of participating life insurance
companies. AIM V.I. Money Market Fund generally declares and pays dividends, if
any, daily. All of the fund's distributions will consist primarily of capital
gains, except for AIM V.I. Diversified Income Fund, AIM V.I. Global Growth and
Income Fund, AIM V.I. Government Securities Fund, AIM V.I. High Yield Fund and
AIM V.I. Money Market Fund which consist primarily of ordinary income.
CAPITAL GAINS DISTRIBUTIONS
Each fund other than AIM V.I. Money Market Fund generally distributes long-term
and short-term capital gains (including any net gains from foreign currency
transactions), if any, annually to separate accounts of participating life
insurance companies. AIM V.I. Money Market Fund may distribute net realized
short-term gains, if any, more frequently.
At the election of participating life insurance companies, dividends and
distributions are automatically reinvested at net asset value in shares of that
fund.
FUTURE FUND CLOSURE
Due to the sometime limited availability of common stocks of small-cap companies
that meet the investment criteria for AIM V.I. Aggressive Growth Fund, the fund
may periodically suspend or limit the offering of its shares and it will be
closed to new participants when fund assets reach $200 million.
During closed periods, the fund will accept additional investments from
existing participants.
25
<PAGE> 29
--------------------------------
AIM VARIABLE INSURANCE FUNDS
--------------------------------
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The financial highlights table is intended to help you understand each fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in each fund (assuming reinvestment of all
dividends and distributions).
The table shows the financial highlights for a share of each fund outstanding
during each of the fiscal years (or periods) indicated.
This information has been audited by Tait, Weller & Baker, whose report, along
with the fund's financial statements, is included in each fund's annual report,
which is available upon request.
Total return information in the following tables may be affected by special
market factors, including investments by certain funds in initial public
offerings, which may have a magnified impact on those funds that have a small
asset base. There is no guarantee that, as those funds' assets grow, they will
continue to experience substantially similar performance.
AIM V.I. AGGRESSIVE GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1,
YEAR ENDED THROUGH
DECEMBER 31, 1999(a) DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.85 $10.00
Income from investment operations:
Net investment income (loss) (0.04) 0.04
Net gains (losses) on securities (both realized and
unrealized) 4.44 (0.14)
Total from investment operations 4.40 (0.10)
Less distributions:
Dividends from net investment income -- (0.05)
Net asset value, end of period $ 14.25 $ 9.85
Total return(b) 44.67% (0.94)%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $17,326 $4,399
Ratio of expenses to average net assets(c) 1.19%(d) 1.16%(e)
Ratio of net investment income (loss) to average net
assets(f) (0.41)%(d) 0.96%(e)
Portfolio turnover rate 89% 30%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a)Calculated using average shares outstanding.
(b)Total return is not annualized for periods less than one year.
(c)After fee waivers and/or expense reimbursements. Ratio of expenses to average
net assets prior to fee waivers and/or expense reimbursements were 2.42% and
4.62% (annualized) for 1999 and 1998, respectively.
(d)Ratios are based on average net assets of $8,345,480.
(e)Annualized.
(f)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 were (1.64)% and (2.50)% (annualized) for 1999 and 1998,
respectively.
26
<PAGE> 30
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. BALANCED FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1,
YEAR ENDED THROUGH
DECEMBER 31, 1999(a) DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 11.14 $ 10.00
Income from investment operations:
Net investment income 0.31 0.12
Net gains on securities (both realized and unrealized) 1.83 1.18
Total from investment operations 2.14 1.30
Less Distributions:
Dividends from net investment income (0.17) (0.14)
Distributions from net realized gains (0.07) (0.02)
Total Distributions (0.24) (0.16)
Net asset value, end of period $ 13.04 $ 11.14
Total return(b) 19.31% 13.02%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $48,307 $10,343
Ratio of expenses to average net assets(c) 1.21%(d) 1.18%(e)
Ratio of net investment income to average net assets(f) 2.66%(d) 3.71%(e)
Portfolio turnover rate 57% 9%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.31% and 2.83% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $28,037,647.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 2.56% and 2.07% (annualized) for 1999 and 1998,
respectively.
AIM V.I. BLUE CHIP FUND
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 29,
THROUGH
DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.00
Less distributions:
Dividends from net investment income --
Net asset value, end of period $10.00
Total return(a) 0.00%
- -------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,000
Ratio of expenses to average net assets(b):
With expense waivers and reimbursement 1.30%
Without expense waivers and reimbursement 12.49%
- -------------------------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets(b):
- -------------------------------------------------------------------------------------------
With expense waivers and reimbursement 3.07%
Without expense waivers and reimbursement (8.12)%
Portfolio turnover rate --
- -------------------------------------------------------------------------------------------
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(d) Ratios are annualized and based on average net assets of $666,531.
27
<PAGE> 31
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. CAPITAL APPRECIATION FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999 1998 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
Income from investment operations:
Net investment income (loss) (0.02) 0.02 0.03 0.02 0.04 0.05
Net gains (losses) on securities (both
realized and unrealized) 11.17 4.12 2.58 2.89 4.46 (0.54)
Total from investment operations 11.15 4.14 2.61 2.91 4.50 (0.49)
Less distributions:
Dividends from net investment income (0.02) (0.04) (0.02) (0.03) -- (0.04)
Distributions from net realized gains (0.75) (0.65) (0.27) -- -- --
Total distributions (0.77) (0.69) (0.29) (0.03) -- (0.04)
Net asset value, end of period $ 35.58 $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05
Total return(a) 44.61% 19.30% 13.51% 17.58% 37.38% (3.91)%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,131,217 $647,248 $522,642 $370,063 $212,152 $88,177
Ratio of expenses to average net assets 0.73%(b) 0.67% 0.68% 0.73% 0.75%(c) 0.84%
Ratio of net investment income to average net
assets (0.06)%(b) 0.11% 0.18% 0.18% 0.39%(c) 0.46%
Portfolio turnover rate 65% 83% 65% 59% 37% 81%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $784,307,675.
(c) Annualized.
AIM V.I. CAPITAL DEVELOPMENT FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1,
YEAR ENDED THROUGH
DECEMBER 31, 1999(a) DECEMBER 31, 1998(a)
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 9.21 $10.00
Income from investment operations:
Net investment income (loss) (0.03) 0.03
Net gains (losses) on securities (both realized and
unrealized) 2.71 (0.78)
Total from investment operations 2.68 (0.75)
Less distributions:
Dividends from net investment income -- (0.04)
Net asset value, end of period $ 11.89 $ 9.21
Total return(b) 29.10% (7.51)%
- -------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $11,035 $3,172
Ratio of expenses to average net assets(c) 1.23%(d) 1.21%(e)
Ratio of net investment income (loss) to average net
assets(f) (0.32)%(d) 0.62%(e)
Portfolio turnover rate 132% 45%
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
3.42% and 5.80% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $4,763,466.
(e) Annualized.
(f) 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 were (2.51)% and (3.97)% (annualized) for 1999 and 1998,
respectively.
28
<PAGE> 32
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
DECEMBER 29
THROUGH
DECEMBER 31, 1999
- -------------------------------------------------------------------------------------------
<S> <C>
Net asset value, beginning of period $10.00
Income from investment operations:
Net investment income 0.00
Less distributions:
Dividends from net investment income --
Net asset value, end of period $10.00
Total return(a) 0.00%
- -------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $1,000
Ratio of expenses to average net assets(b):
With expense waiver and reimbursement 1.40%
Without expense waiver and reimbursement 12.58%
Ratio of net investment income (loss) to average net
assets(b):
With expense waiver and reimbursement 2.96%
Without expense waiver and reimbursement (8.22)%
Portfolio turnover rate --
- -------------------------------------------------------------------------------------------
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $666,528.
AIM V.I. DIVERSIFIED INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999 1998 1997 1996 1995 1995
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
Income from investment operations:
Net investment income 0.64 0.75 0.73 0.73 0.69 0.76
Net gains (losses) on securities (both
realized and unrealized) (0.85) (0.35) 0.24 0.28 0.94 (1.42)
Total from investment operations (0.21) 0.40 0.97 1.01 1.63 (0.66)
Less distributions:
Dividends from net investment income (0.67) (0.57) (0.01) (0.68) (0.75) (0.68)
Distributions from net realized capital gains -- (0.18) -- -- -- --
Total distributions (0.67) (0.75) (0.01) (0.68) (0.75) (0.68)
Net asset value, end of period $ 10.06 $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12
Total return(a) (1.92)% 3.58% 9.39% 10.19% 18.11% (6.35)%
- --------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- --------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $99,509 $96,445 $89,319 $63,624 $44,630 $25,271
Ratio of expenses to average net assets 0.83%(b) 0.77% 0.80% 0.86% 0.88%(c) 0.91%(d)
Ratio of net investment income to average net
assets 7.20%(b) 6.99% 6.90% 7.09% 7.65%(c) 8.07%(d)
Portfolio turnover rate 83% 50% 52% 76% 72% 100%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $92,736,295.
(c) Annualized.
(d) After fee waivers and/or expense reimbursement. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.03% and 7.95%, respectively.
29
<PAGE> 33
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. GLOBAL GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
-----------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99
Income from investment operations:
Net investment income 0.57 0.53 0.41 0.53 0.52
Net gains (losses) on securities (both realized and
unrealized) (1.29) 3.08 2.23 1.81 1.46
Total from investment operations (0.72) 3.61 2.64 2.34 1.98
Less distributions:
Dividends from net investment income (0.61) (0.44) (0.51) (0.35) (0.40)
Distributions from net realized capital gains (6.65) (0.26) (0.04) (0.05) --
Total distributions (7.26) (0.70) (0.55) (0.40) (0.40)
Net asset value, end of period $ 13.53 $ 21.51 $ 18.60 $ 16.51 $ 14.57
Total return (0.13)% 19.60% 16.22% 16.33% 15.49%
- ------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $30,756 $55,580 $50,356 $36,433 $30,565
Ratio of expenses to average net assets including interest
expense:
With reimbursement 1.34%(a) 2.53% 1.13% 1.20% 1.23%
Without reimbursement 1.37%(a) 2.53% 1.27% 1.30% 1.44%
Ratio of expenses to average interests excluding interest
expense:
With reimbursement 1.33%(a) 2.49% 1.13% 1.20% 1.23%
Without reimbursement 1.36%(a) 2.49% 1.27% 1.30% 1.44%
Ratio of net investment income to average net assets:
With reimbursement 2.32%(a) 1.22% 2.86% 3.58% 3.87%
Without reimbursement 2.29%(a) 1.22% 2.72% 3.48% 3.66%
Ratio of interest expense to average net assets 0.01%(a) 0.04% -- -- --
Portfolio turnover rate 91% 72% 60% 57% 73%
- --------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $43,643,834.
AIM V.I. GLOBAL UTILITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 17.36 $ 15.26 $ 12.55 $ 11.64 $ 9.69 $10.00
Income from investment operations:
Net investment income 0.32 0.35 0.32 0.40 0.29 0.27
Net gains (losses) on securities (both
realized and unrealized) 5.49 2.15 2.40 0.99 1.98 (0.33)
Total from investment operations 5.81 2.50 2.72 1.39 2.27 (0.06)
Less distributions:
Dividends from net investment income (0.37) (0.28) -- (0.41) (0.31) (0.25)
Distributions from net realized gains -- (0.12) (0.01) (0.07) (0.01) --
Total distributions (0.37) (0.40) (0.01) (0.48) (0.32) (0.25)
Net asset value, end of period $ 22.80 $ 17.36 $ 15.26 $ 12.55 $11.64 $ 9.69
Total return(b) 33.56% 16.49% 21.63% 12.07% 23.73% (0.56)%
- -----------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $39,772 $28,134 $22,079 $13,576 $8,394 $2,958
Ratio of expenses to average net assets 1.14%(c) 1.11% 1.28% 1.40%(d) 1.47%(d)(e) 1.31%(e)(f)
Ratio of investment income to average net assets 1.72%(c) 2.46% 2.81% 3.56%(d) 3.76%(d)(e) 4.39%(e)(f)
Portfolio turnover rate 45% 32% 28% 47% 58% 69%
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $31,098,057.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses
and net investment income to average net assets prior to fee waivers
and/or expense reimbursements were 1.55% and 3.42% for 1996 and 2.44%
(annualized) and 2.79% (annualized) for 1995.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses
and net investment income to average net assets prior to fee waivers
and/or expense reimbursements were 2.80% (annualized) and 2.09%
(annualized), respectively.
30
<PAGE> 34
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. GOVERNMENT SECURITIES FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $11.18 $10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
Income from investment operations:
Net investment income 0.63 0.63 0.59 0.58 0.54 0.53
Net gains (losses) on securities (both
realized and unrealized) (0.78) 0.20 0.22 (0.35) 0.74 (0.88)
Total from investment operations (0.15) 0.83 0.81 0.23 1.28 (0.35)
Less distributions:
Dividends from net investment income (0.40) (0.32) (0.01) (0.53) (0.50) (0.50)
Net asset value, end of period $10.63 $11.18 $ 10.67 $ 9.87 $ 10.17 $ 9.39
Total return(b) (1.32)% 7.73% 8.16% 2.29% 13.84% (3.42)%
- ---------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ---------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $70,761 $58,185 $33,800 $24,527 $19,545 $12,887
Ratio of expenses to average net assets
including interest expense 0.90%(c) 0.76% 0.87% 0.91% 1.19%(d) 0.95%(e)
Ratio of expenses to average net assets
excluding interest expense 0.80%(c) 0.76% 0.87% 0.91% 1.19%(d) 0.95%(e)
Ratio of net investment income to average net
assets 5.75%(c) 5.70% 5.85% 5.80% 5.78%(d) 5.51%(f)
Ratio of interest expense to average net assets 0.10%(c) -- -- -- -- --
Portfolio turnover rate 41% 78% 66% 32% 41% 29%
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $63,119,520.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.10% for January 1995.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 5.35% for January 1995.
AIM V.I. GROWTH FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
Income from investment operations:
Net investment income 0.01 0.08 0.08 0.07 0.09 0.06
Net gains (losses) on securities (both
realized and unrealized) 8.63 6.57 4.27 2.52 3.65 (0.88)
Total from investment operations 8.64 6.65 4.35 2.59 3.74 (0.82)
Less distributions:
Dividends from net investment income (0.06) (0.09) (0.09) (0.06) (0.01) (0.06)
Distributions from net realized gains (1.13) (1.59) (0.68) (0.72) -- --
Total distributions (1.19) (1.68) (0.77) (0.78) (0.01) (0.06)
- -------------------------------------------------------------------------------------------------------------------------
Net asset value, end of period $ 32.25 $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71
- -------------------------------------------------------------------------------------------------------------------------
Total return(b) 35.24% 34.12% 26.87% 18.09% 34.89% (7.11)%
- -------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $704,096 $371,915 $258,852 $178,638 $102,600 $45,497
Ratio of expenses to average net assets 0.73%(c) 0.72% 0.73% 0.78% 0.84%(d) 0.95%
Ratio of net investment income to average net
assets 0.04%(c) 0.41% 0.54% 0.79% 0.95%(d) 0.71%
Portfolio turnover rate 101% 133% 132% 143% 125% 179%
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $483,567,224.
(d) Annualized.
31
<PAGE> 35
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. GROWTH AND INCOME FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
- ----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
Income from investment operations:
Net investment income 0.06 0.26 0.13 0.16 0.14 0.11
Net gains (losses) on securities (both
realized and unrealized) 8.05 4.95 3.74 2.36 3.11 (0.02)
Total from investment operations 8.11 5.21 3.87 2.52 3.25 0.09
Less distributions:
Dividends from net investment income (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
Distributions from net realized gains (0.11) (0.24) (0.02) (0.03) (0.41) --
Total distributions (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
Net asset value, end of period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
Total return(b) 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
- ----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
Ratio of expenses to average net assets 0.77%(c) 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
Ratio of net investment income to average net
assets 0.22%(c) 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
Portfolio turnover rate 93% 140% 135% 148% 145% 96%
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,718,996,207.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.72% (annualized) and 1.30% (annualized), respectively.
AIM V.I. HIGH YIELD FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FOR THE PERIOD
MAY 1,
YEAR ENDED THROUGH
DECEMBER 31, 1999(a) DECEMBER 31, 1998
- -------------------------------------------------------------------------------------------------------
<S> <C> <C>
Net asset value, beginning of period $ 8.84 $10.00
Income from investment operations:
Net investment income 1.03 0.39
Net gains (losses) on securities (both realized and
unrealized) (0.10) (1.15)
Total from investment operations 0.93 (0.76)
Less dividends from net investment income (0.75) (0.40)
Net asset value, end of period $ 9.02 $ 8.84
Total return(b) 10.52% (7.61)%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $25,268 $7,966
Ratio of expenses to average net assets(c) 1.14%(d) 1.13%(e)
Ratio of net investment income to average net assets(f) 11.07%(d) 9.75%(e)
Portfolio turnover rate 127% 39%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.42% and 2.50% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $16,571,951.
(e) Annualized.
(f) 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 10.80% and 8.36% (annualized) for 1999 and 1998,
respectively.
32
<PAGE> 36
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
Income from investment operations:
Net investment income 0.08 0.15 0.10 0.07 0.07 0.06
Net gains (losses) on securities (both
realized and unrealized) 10.59 2.50 1.03 2.67 2.58 (1.49)
Total from investment operations 10.67 2.65 1.13 2.74 2.65 (1.43)
Less distributions:
Dividends from net investment income (0.19) (0.16) (0.08) (0.04) (0.02) (0.03)
Distributions from net realized gains (0.81) -- (0.28) -- -- --
Total distributions (1.00) (0.16) (0.36) (0.04) (0.02) (0.03)
Net asset value, end of period $ 29.29 $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03
Total return(b) 55.04 15.49% 6.94% 20.05% 24.04% (11.48)%
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $454,060 $240,314 $211,023 $165,738 $82,257 $55,019
Ratio of expenses to average net assets 0.97%(c) 0.91% 0.93% 0.96% 1.15%(d) 1.27%(e)
Ratio of net investment income to average net
assets 0.38%(c) 0.80% 0.68% 0.78% 0.75%(d) 0.60%(e)
Portfolio turnover rate 97% 76% 57% 59% 67% 64%
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $277,307,465.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.28% and 0.59%, respectively.
AIM V.I. MONEY MARKET FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999 1998 1997 1996 1995 1995
- ------------------------------------------------------------------------------------------------------------------
<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 0.05 0.05 0.05 0.05 0.05 0.04
Less distributions:
Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.04)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return 4.66% 5.06% 5.14% 4.97% 5.69%(a) 3.98%
- ------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- ------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $95,152 $64,090 $58,635 $63,529 $65,506 $31,017
Ratio of expenses to average net assets 0.60%(a) 0.58% 0.59% 0.55% 0.53%(b) 0.63%(c)
Ratio of net investment income to average net
assets 4.59%(a) 4.94% 5.01% 4.84% 5.40%(b) 4.14%(c)
- ------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $79,257,738.
(b) Annualized.
(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.
33
<PAGE> 37
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
1999 1998 1997 1996 1995
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 20.66 $ 18.40 $ 18.14 $ 16.87 $ 13.98
Income from investment operations:
Net investment income (loss) (0.14) (0.01) (0.02) (0.05) 0.02
Net gains on securities (both realized and
unrealized) 18.46 3.99 2.59 3.31 3.26
Total from investment operations 18.32 3.98 2.57 3.26 3.28
Less distributions:
Dividends from net investment income -- -- -- (0.02) (0.03)
Distributions from net realized capital gains (6.02) (1.72) (2.31) (1.97) (0.36)
Total distributions (6.02) (1.72) (2.31) (1.99) (0.39)
Net asset value, end of period $ 32.96 $ 20.66 $ 18.40 $ 18.14 $ 16.87
Total return 106.52% 22.11% 14.56% 19.34% 23.66%
- -------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $108,428 $69,459 $68,186 $63,258 $50,778
Ratio of expenses to average net assets
including interest expense:
With waivers 1.27%(a) 1.17% 1.11% 1.12% 1.20%
Without waivers 1.27%(a) 1.18% 1.16% 1.17% 1.26%
Ratio of expenses to average net assets
excluding interest expense:
With waivers 1.26%(a) 1.16% 1.11% 1.12% 1.20%
Without waivers 1.26%(a) 1.17% 1.16% 1.17% 1.26%
Ratio of net investment income to average net
assets:
With waivers (0.62)%(a) (0.04)% (0.10)% (0.26)% 0.16%
Without waivers (0.62)%(a) (0.05)% (0.15)% (0.31)% 0.10%
Ratio of interest expense to average net assets 0.01%(a) 0.01% -- -- --
Portfolio turnover rate 124% 73% 91% 77% 70%
- -------------------------------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $75,606,845.
AIM V.I. VALUE FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
Income from investment operations:
Net investment income 0.06 0.09 0.08 0.30 0.11 0.10
Net gains (losses) on securities (both
realized and unrealized) 7.76 6.59 4.05 2.09 4.18 (0.35)
Total from investment operations 7.82 6.68 4.13 2.39 4.29 (0.25)
Less distributions:
Dividends from net investment income (0.09) (0.13) (0.19) (0.10) (0.01) (0.09)
Distributions from net realized gains (0.48) (1.13) (0.59) (0.92) -- --
Total distributions (0.57) (1.26) (0.78) (1.02) (0.01) (0.09)
Net asset value, end of period $ 33.50 $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83
Total return(b) 29.90% 32.41% 23.69% 15.02% 36.25% (2.03)%
- -----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
- -----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,383,367 $1,221,384 $690,841 $369,735 $257,212 $109,257
Ratio of expenses to average net assets 0.76%(c) 0.66% 0.70% 0.73% 0.75%(d) 0.82%
Ratio of net investment income to average net
assets 0.20%(c) 0.68% 1.05% 2.00% 1.11%(d) 1.17%
Portfolio turnover rate 62% 100% 127% 129% 145% 143%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,709,245,315.
(d) Annualized.
34
<PAGE> 38
------------------------------
AIM VARIABLE INSURANCE FUNDS
------------------------------
OBTAINING ADDITIONAL INFORMATION
- --------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about each fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about each fund's investments. The funds' annual report also
discusses the market conditions and investment strategies that significantly
affected each fund's performance during its last fiscal year.
If you wish to obtain free copies of the funds' current SAI, please send a
written request to A I M Distributors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 or call (800) 410-4246.
You also can review and obtain copies of the funds' SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
----------------------------------
AIM Variable Insurance Funds
SEC 1940 Act file number: 811-7452
----------------------------------
[AIM LOGO
APPEARS HERE] www.aimfunds.com SPVL-PRO-1 INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 39
STATEMENT OF
ADDITIONAL INFORMATION
A I M V A R I A B L E I N S U R A N C E F U N D S
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
<TABLE>
<S> <C>
AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. BALANCED FUND
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. GROWTH AND INCOME FUND AIM V.I. GROWTH FUND
AIM V.I. HIGH YIELD FUND AIM V.I. INTERNATIONAL EQUITY FUND
AIM V.I. MONEY MARKET FUND AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
AIM V.I. VALUE FUND
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P. O. BOX 4739,
HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS)
OR (800) 410-4246 (ALL OTHERS).
-----------
STATEMENT OF ADDITIONAL INFORMATION DATED: APRIL 17, 2000,
RELATING TO PROSPECTUS DATED: APRIL 17, 2000
<PAGE> 40
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE FUNDS...............................................................................1
The Trust and Its Shares.................................................................................1
PERFORMANCE.......................................................................................................3
Total Return Calculations................................................................................3
Historical Portfolio Results.............................................................................3
Yield Information........................................................................................5
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................................................6
General Brokerage Policy.................................................................................6
Allocation of IPO Securities Transactions................................................................8
Section 28(e) Standards..................................................................................8
Portfolio Turnover......................................................................................10
Brokerage Commissions Paid..............................................................................10
INVESTMENT STRATEGIES AND RISKS..................................................................................10
Aggressive Growth Fund..................................................................................11
Balanced Fund...........................................................................................11
Blue Chip Fund..........................................................................................11
Capital Appreciation Fund...............................................................................12
Capital Development Fund................................................................................13
Dent Demographic Trends Fund............................................................................13
Diversified Income Fund.................................................................................13
Global Growth and Income Fund...........................................................................14
Global Utilities Fund...................................................................................14
Government Securities Fund..............................................................................15
Growth Fund.............................................................................................15
High Yield Fund.........................................................................................16
International Equity Fund...............................................................................16
Money Market Fund.......................................................................................17
Telecommunications and Technology Fund..................................................................17
Value Fund..............................................................................................18
INVESTMENT RESTRICTIONS..........................................................................................18
Fundamental Restrictions................................................................................18
Non-fundamental Restrictions............................................................................19
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES.....................................................................20
Money Market Obligations................................................................................21
Repurchase Agreements...................................................................................21
U.S. Government Agency Mortgage-Backed Securities.......................................................22
Convertible Securities..................................................................................22
Real Estate Investment Trusts ("REITs").................................................................22
Foreign Securities......................................................................................23
Foreign Exchange Transactions...........................................................................24
ADRs and EDRs...........................................................................................24
Lending of Portfolio Securities.........................................................................25
Reverse Repurchase Agreements...........................................................................25
</TABLE>
i
<PAGE> 41
<TABLE>
<S> <C>
Delayed Delivery Agreements and When-Issued Securities..................................................25
Dollar Roll Transactions................................................................................26
Illiquid Securities.....................................................................................27
Special Situations......................................................................................27
Warrants................................................................................................27
Short Sales.............................................................................................27
Rule 144A Securities....................................................................................28
Equity-Linked Derivatives...............................................................................28
Investment in Other Investment Companies................................................................28
Temporary Defensive Investments.........................................................................29
Asset Allocation Among Countries........................................................................29
Utilities Industry......................................................................................29
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................30
Introduction............................................................................................30
General Risks of Options, Futures and Currency Strategies...............................................30
Cover...................................................................................................31
Writing Call Options....................................................................................31
Writing Put Options.....................................................................................32
Purchasing Put Options..................................................................................32
Purchasing Call Options.................................................................................32
Over-The-Counter Options................................................................................33
Index Options...........................................................................................33
Limitations on Options..................................................................................34
Interest Rate, Currency and Stock Index Futures Contracts...............................................34
Options on Futures Contracts............................................................................35
Forward Contracts.......................................................................................35
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................35
RISK FACTORS.....................................................................................................36
Small Capitalization Companies..........................................................................36
Non-Investment Grade Debt Securities....................................................................36
Foreign Securities......................................................................................36
Non-diversified Portfolio (Global Utilities Fund Only)..................................................37
MANAGEMENT.......................................................................................................37
Trustees and Officers...................................................................................37
Remuneration of Trustees.......................................................................41
AIM Funds Retirement Plan for Eligible Directors/Trustees......................................42
Deferred Compensation Agreements...............................................................43
Investment Advisory, Sub-Advisory and Administrative Services Agreements................................43
The Distribution Agreement..............................................................................49
DETERMINATION OF NET ASSET VALUE.................................................................................49
PURCHASE AND REDEMPTION OF SHARES................................................................................52
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................52
MISCELLANEOUS INFORMATION........................................................................................54
Audit Reports...........................................................................................54
Legal Matters...........................................................................................55
Custodian and Transfer Agent............................................................................55
Principal Holders of Securities.........................................................................55
Other Information.......................................................................................60
</TABLE>
ii
<PAGE> 42
<TABLE>
<S> <C>
APPENDIX A......................................................................................................A-1
APPENDIX B......................................................................................................B-1
APPENDIX C......................................................................................................C-1
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
iii
<PAGE> 43
INTRODUCTION
AIM Variable Insurance Funds (the "Trust") is a mutual fund. The rules
and regulations of the United States Securities and Exchange Commission (the
"SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information is included in Prospectuses dated April 17, 2000
(referred to collectively as the "Prospectuses" and separately as a
"Prospectus"), which relate to one or more of the seventeen series portfolios of
the Trust (referred to collectively as the "Funds" and separately as a
"Fund"). One or more of the Funds may not be available under a particular
variable annuity contract or variable life insurance policy. Accordingly, this
Statement of Additional Information may contain information that is not relevant
to the investment options under such a contract or policy. Copies of each
Prospectus available under a contract or policy and additional copies of this
Statement of Additional Information may be obtained without charge by contacting
the principal distributor of each Fund's shares, A I M Distributors, Inc. ("AIM
Distributors"), 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 or by
calling (800) 410-4246. Investors must receive a Prospectus before they invest.
To the extent that this Statement of Additional Information contains information
concerning a Fund that is not available under a contract or policy, the
Statement of Additional Information does not constitute the offer of the shares
of that Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Funds' current Prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement filed with the SEC. Copies
of the Registration Statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust was previously organized on January 22, 1993, as a Maryland
corporation. Pursuant to an agreement and plan of reorganization, the Funds were
reorganized on April 17, 2000, as portfolios of AIM Variable Insurance Funds, a
Delaware business trust which is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end series management investment
company. The Trust currently is organized under an Agreement and Declaration of
Trust, dated December 7, 1999, (the "Trust Agreement"). Each Fund is a series of
shares of the Trust. The Trust currently consists of seventeen separate
portfolios: AIM V.I. Aggressive Growth Fund ("Aggressive Growth Fund"), AIM V.I.
Balanced Fund ("Balanced Fund"), AIM V.I. Blue Chip Fund ("Blue Chip Fund"), AIM
V.I. Capital Appreciation Fund ("Capital Appreciation Fund"), AIM V.I. Capital
Development Fund ("Capital Development Fund"), AIM V.I. Dent Demographic Trends
Fund ("Dent Demographic Trends Fund"), AIM V.I. Diversified Income Fund
("Diversified Income Fund"), AIM V.I. Global Growth and Income Fund ("Global
Growth and Income Fund"), AIM V.I. Global Utilities Fund ("Global Utilities
Fund") (formerly known as the AIM V.I. Utilities Fund), AIM V.I. Government
Securities Fund ("Government Fund"), AIM V.I. Growth Fund ("Growth Fund"), AIM
V.I. Growth and Income Fund ("Growth and Income Fund"), AIM V.I. High Yield Fund
("High Yield Fund"), AIM V.I. International Equity Fund ("International Fund"),
AIM V.I. Telecommunications and Technology Fund ("Telecommunications and
Technology Fund"), AIM V.I. Money Market Fund ("Money Market Fund") and AIM V.I.
Value Fund ("Value Fund"). Each Fund, with the exception of the Global Utilities
Fund, is a "diversified management company" as defined in the Investment Company
Act of 1940, as amended (the "1940 Act"). Under the Trust Agreement, the Board
of Trustees is authorized to create new series of shares without the necessity
of a vote of shareholders of the Trust.
1
<PAGE> 44
On April 17, 2000, the Funds succeeded to the assets and assumed the
liabilities of the funds with corresponding names (the "Predecessor Funds") of
AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), pursuant to
an Agreement and Plan of Reorganization between the Trust and AVIF. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to April 17, 2000 relating to the Funds
is that of the Predecessor Funds. Shares of beneficial interest of the Trust are
redeemable at their net asset value at the option of the shareholder or at the
option of the Trust in certain circumstances. For information concerning
redemptions, investors should consult the Prospectuses under the caption
"Purchase and Redemption of Shares."
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such Fund. Any general expenses of the Trust
not readily identifiable as belonging to a particular Fund are allocated by or
under the direction of the Board of Trustees, primarily on the basis of relative
net assets, or other relevant factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Upon any liquidation of the Trust, shareholders of each Fund are entitled
to share pro rata in the net assets belonging to the applicable Fund available
for distribution after satisfaction of outstanding liabilities of the Fund.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
The Trust understands that insurance company separate accounts owning
shares of the Funds will vote their shares in accordance with the instructions
received from Contract owners, annuitants and beneficiaries. Fund shares held by
a registered separate account as to which no instructions have been received
will be voted for or against any proposition, or in abstention, in the same
proportion as the shares of that separate account as to which instructions have
been received. Fund shares held by a registered separate account that are not
attributable to Contracts will also be voted for or against any proposition in
the same proportion as the shares for which voting instructions are received by
that separate account. If an insurance company determines, however, that it is
permitted to vote any such shares of the Funds in its own right, it may elect to
do so, subject to the then current interpretation of the 1940 Act and the rules
thereunder.
Shareholders of each Fund are entitled to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of a Fund. However, on matters affecting an individual
Fund, a separate vote of shareholders of that Fund is required. Shareholders of
a Fund are not entitled to vote on any matter which does not affect that Fund
but which requires a separate vote of another Fund. An example of a matter which
would be voted on separately by shareholders of each Fund is the approval of the
Advisory Agreement. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect trustees, holders of more than 50% of the
shares voting for the election of trustees can elect all of the trustees of the
Trust, and the holders of less than 50% of the shares voting for the election of
trustees will not be able to elect any trustees.
The Trust Agreement provides that the trustees of the Trust shall hold
office during the existence of the Trust, except as follows: (a) any trustee may
resign or retire; (b) any trustee may be removed by a vote of at least
two-thirds of the outstanding shares of the Trust, or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective; or (c) any trustee who has died or become
incapacitated and is unable to serve may be removed by a written instrument
signed by a majority of the trustees.
2
<PAGE> 45
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers
will not be liable for any act, omission or obligation of the Trust or any
trustee or officer. However, nothing in the Trust Agreement protects a trustee
or officer against any liability to the Trust or to the shareholders to which a
trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, the officers and employees or
agents of the Trust, if it is determined that such person acted in good faith
and reasonably believed: (1) in the case of conduct in his or her official
capacity for the Trust, that his or her conduct was in the Trust's best
interests, (2) in all other cases, that his or her conduct was at least not
opposed to the Trust's best interests and (3) in a criminal proceeding, that he
or she had no reason to believe that his or her conduct was unlawful. Such
person may not be indemnified against any liability to the Trust or to the
Trust's shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share (NAV) over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular Fund over a stated period, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a Fund's performance is not constant over time,
but changes from year to year, and that average annual returns do not represent
the actual year-to-year performance of such Fund.
In addition to average annual returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, and/or a series of redemptions, over
any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
HISTORICAL PORTFOLIO RESULTS
The Funds' average annual total returns for the one and five year
periods ended December 31, 1999, and average annual and cumulative total returns
for each of the funds since their inception are as follows:
3
<PAGE> 46
<TABLE>
<CAPTION>
Since
Year Ended Inception
December 31, 1999 ------------------------------
----------------- Average
One Five Inception Annual Cumulative
Year Year Date Return Return
---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
AIM V.I. Aggressive Growth Fund 44.67% N/A 05/01/98 24.07% 43.31%
AIM V.I. Balanced Fund 19.31% N/A 05/01/98 19.62% 34.84%
AIM V.I. Blue Chip N/A N/A 12/29/99 N/A 0%
AIM V.I. Capital Appreciation Fund 44.61% 25.59% 05/05/93 22.33% 282.65%
AIM V.I. Capital Development Fund 29.10% N/A 05/01/98 11.22% 19.41%
AIM V.I. Dent Demographic Trends Fund N/A N/A 12/29/99 N/A 0%
AIM V.I. Diversified Income Fund -1.92% 7.83% 05/05/93 5.93% 46.74%
AIM V.I. Global Growth and Income Fund* -0.13 13.28% 02/10/93 11.63% 113.34%
AIM V.I. Global Utilities Fund 33.56% 21.87% 05/02/94 18.45% 160.94%
AIM V.I. Government Securities Fund -1.32% 6.33% 05/05/93 4.67% 35.50%
AIM V.I. Growth Fund 35.24% 29.64% 05/05/93 22.93% 295.21%
AIM V.I. Growth and Income Fund 34.25% 28.18% 05/02/94 24.49% 245.97%
AIM V.I. High Yield Fund 10.52% N/A 05/01/98 1.26% 2.12%
AIM V.I. International Equity Fund 55.04% 21.93% 05/05/93 18.82% 215.25%
AIM V.I. Money Market Fund 4.66% 5.10% 05/05/93 4.60% 34.90%
AIM V.I. Telecommunications and Technology Fund* 106.52% 33.65% 10/18/93 29.52% 397.56%
AIM V.I. Value Fund 29.90% 27.23% 05/05/93 23.07% 298.25%
</TABLE>
* Performance prior to October 15, 1999 was for a predecessor fund.
The total returns quoted above do not reflect charges levied at the
insurance company separate account level. For a complete description of the
applicable charges, see the fee table in the prospectus for the appropriate
insurance company separate account.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Inc., Morningstar, Inc. and other independent services which
monitor the performance of mutual funds. The Funds may also advertise mutual
fund performance rankings which have been assigned to each respective Fund by
such monitoring services.
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the Consumer Price Index ("CPI"),
the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such
as bank certificates of deposit and/or savings accounts.
The International Fund's performance may also be compared in
advertising to performance of comparative benchmarks such as The Financial
Times-Actuaries World Indices (a wide range of comprehensive measures of stock
price performance for the major stock markets and regional areas), Morgan
Stanley Capital International Indices (including the EAFE Index) Pacific Basin
Index and Pacific Ex Japan Index (a widely recognized series of indices in
international market performance), and indices of stocks comparable to those in
which the Fund invests.
Each Fund's advertising may from time to time include historical
discussions of general economic conditions such as inflation rates and changes
in the stock market, foreign and domestic interest rates and foreign and
domestic political circumstances and events.
From time to time, Dent Demographic Trends Fund sales literature and/or
advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming
decade may offer unprecedented opportunities for investors, including his
opinions on the stock market outlook and where growth may be strongest; (ii)
Harry S. Dent, Jr.'s opinions and theories from his books and publications,
including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring
2000s, including his beliefs that (a) people's spending patterns may help
predict the stock market, (b) the stock market has tended to perform best when a
generation has reached its peak spending years from ages 45-50, and (c) as more
and more baby boomers reach their peak spending age, they could propel stock
prices up for the next decade; and (iii) Harry S. Dent, Jr.'s S-curve analysis,
a forecasting tool used to analyze products that show remarkable growth.
4
<PAGE> 47
In addition, each Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds" detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
Some of the Funds (except AIM V.I. Diversified Income Fund, AIM V.I.
Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market
Fund) may participate in the initial public offering ("IPO") market. For AIM
V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund,
AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM
V.I. Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Telecommunications and Technology Fund
(i.e., funds that have a small asset base) any investment a Fund may make in
IPOs may significantly increase its total returns. There is no guarantee that
as a Fund's assets grow, it will continue to experience substantially similar
performance by investing in IPOs.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information about
mutual funds, variable annuities, variable life insurance, dollar-cost
averaging, stocks, bonds, money markets, certificates of deposit, retirement,
retirement plans, asset allocation, tax-free investing, college planning and
inflation.
YIELD INFORMATION
Quotations of yield on the Money Market Fund may appear from time to
time in the financial press and in advertisements.
The Money Market Fund's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for an identified
period, usually seven days. The yield is expressed as a simple annualized yield
and as a compounded effective yield. The yield does not reflect the fees and
charges imposed on the assets of the insurance company separate account.
The standard formulas prescribed by the SEC for calculating yield and
effective yield for the Money Market Fund are described below:
The simple annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities, unrealized
appreciation and depreciation, and income other than investment income) in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the period, and annualizing the
resulting quotient (base period return) on a 365-day basis. The net change in
account value reflects the value of additional shares purchased with dividends
from the original shares in the account during the period, dividends declared on
such additional shares during the period, and expenses accrued during the
period.
The compounded effective yield is computed by determining the
unannualized base period return, adding one to the base period return, raising
the sum to a power equal to 365 divided by the number of days
5
<PAGE> 48
in the period, and subtracting one from the result. Historical yields are not
necessarily indicative of future yields. Rates of return will vary as interest
rates and other conditions affecting money market instruments change. Yields
also depend on the quality, length of maturity and type of instruments in the
Fund's portfolio and the Fund's operating expenses. Quotations of yield will be
accompanied by information concerning the average weighted maturity of the Fund.
Comparison of the quoted yields of various investments is valid only if yields
are calculated in the same manner and for identical limited periods. When
comparing the yield for a Fund with yields quoted with respect to other
investments, shareholders should consider (a) possible differences in time
periods, (b) the effect of the methods used to calculate quoted yields, (c) the
quality and average-weighted maturity of portfolio investments, expenses,
convenience, liquidity and other important factors, and (d) the taxable or
tax-exempt character of all or part of dividends received.
The simple annualized yield and compounded effective yield for the
Money Market Fund for the 7 days ended December 31, 1999 were 4.90% and
5.02%, respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Trustees of the Trust,
AIM is responsible for decisions to buy and sell securities for each Fund, for
the selection of broker-dealers, for the execution of the Fund's investment
portfolio transactions, for the allocation of brokerage fees in connection with
such transactions and, where applicable, for the negotiation of commissions and
spreads on transactions. AIM's primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution of
the order. While AIM generally seeks reasonably competitive commission rates,
each Fund does not necessarily pay the lowest commission or spread available.
Purchases and sales of portfolio securities for the Diversified Income
Fund, the Money Market Fund and the Government Fund are generally transacted
with the issuer or a primary market maker. In addition, a portion of the
securities in which the Funds invest may be traded in over-the-counter ("OTC")
markets. In such transactions, the Fund deals directly with the dealers who make
markets in the securities involved, except in those circumstances where better
prices and executions are available elsewhere. Portfolio transactions placed
through dealers serving as primary market makers are effected at net prices,
without commissions as such, but which include compensation to the dealer in the
form of mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. In recent years, however, an increasing
number of overseas stock markets have adopted a system of negotiated rates,
although a number of markets continue to be subject to an established schedule
of minimum commission rates.
Foreign equity securities may be held by a Fund in the form of American
Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers, or securities
convertible into foreign equity securities. These securities may not necessarily
be denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for use
in the United States securities markets, and EDRs, in bearer form, are designed
for use in European securities markets. ADRs and EDRs may be listed on stock
exchanges, or traded in OTC markets in the United States or Europe, as the case
may be. ADRs, like other securities traded in the United States, will be subject
to negotiated commission rates.
The Funds are not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers who
provide supplemental investment research to AIM may receive orders for
transactions by a Fund. Information so received will be in addition to and not
in lieu of the services required to be performed by AIM under its agreements
with the Fund, and the expenses of AIM will not necessarily be reduced as a
result of the receipt of such supplemental information. Certain research
services furnished by broker-dealers may be useful to AIM in connection with its
services to other advisory clients, including the other mutual funds advised by
AIM (collectively with the Funds, the "AIM Funds"). Also,
6
<PAGE> 49
a Fund may pay a higher price for securities or higher commissions in
recognition of research services furnished by broker-dealers.
AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Funds) over a certain time period. The target levels will be
determined based upon the following factors, among others: (1) the execution
services provided by the broker; (2) the research services provided by the
broker; and (3) the broker's attitude toward an interest in mutual funds in
general and in the Funds and the other AIM Funds in particular including sales
of the Funds and of the other AIM Funds. No specific formula will be used in
connection with any of the foregoing considerations in determining the target
levels. However, if a broker has indicated a certain level of desired
commissions in return for certain research services provided by the broker, this
factor will be taken into consideration by AIM.
Subject to the overall objective of obtaining best price and execution
for the Funds, AIM may also consider sales of shares by broker-dealers of each
Fund and of the other AIM Funds as well as sales of variable annuity contracts
("Contracts") and variable life insurance policies ("Policies") funded through
the Funds ("selling dealers"), as a factor in the selection of broker-dealers to
execute portfolio transactions for a Fund. Such portfolio transactions may be
executed directly by selling dealers or by other broker-dealers with which
selling dealers have clearing arrangements.
AIM and its affiliates manage several other investment accounts, some
of which may have investment objectives similar to those of the Funds. It is
possible that, at times, identical securities will be appropriate for investment
by one or more of such investment accounts. The position of each account,
however, in the securities of the same issue may vary and the length of time
that each account may choose to hold its investment in the securities of the
same issue may likewise vary. The timing and amount of purchases by each account
will also be determined by its cash position. If the purchase or sale of
securities is consistent with the investment policies of a Fund(s) and one or
more of these accounts is considered at or about the same time, AIM will fairly
allocate transactions in such securities among the Fund(s) and these accounts.
AIM may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable execution.
Simultaneous transactions could, however, adversely affect the ability of a Fund
to obtain or dispose of the full amount of a security which it seeks to purchase
or sell.
These combined transactions, and related brokerage charges, will be
allocated among the Fund(s) and such accounts in a manner consistent with
guidelines and procedures approved by the Trust's Board of Trustees that are
designed to achieve an equitable manner of allocation. In some cases the
procedure for allocating portfolio transactions among the various investment
accounts advised by AIM could have an adverse effect on the price or amount of
securities available to a Fund. In making such allocations, the main factors
considered by AIM are the respective investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the judgments of the persons
responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Trust.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
7
<PAGE> 50
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or accounts may become
interested in participating in security distributions that are available in an
IPO, and occasions may arise when purchases of such securities by one AIM Fund
or account may also be considered for purchase by one or more other AIM Funds or
accounts. In such cases, it shall be AIM's practice to specifically combine or
otherwise bunch indications of interest for IPO securities for all AIM Funds and
accounts participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund or account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's investment
objective, policies and strategies, the liquidity of the AIM Fund or account if
such investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds and accounts in a
manner designed to be fair and equitable for the eligible AIM Funds and
accounts, and so that there is equal allocation of IPOs over the longer term.
Where multiple funds or accounts are eligible, rotational participation may
occur, based on the extent to which an AIM Fund or account has participated in
previous IPOs as well as the size of the AIM Fundor account. Each eligible AIM
Fund or account with an asset level of less than $500 million will be placed on
one of three tiers, depending upon its asset level. The AIM Funds and accounts
in the tier containing funds with the smallest asset levels will participate
first, each receiving a 40 basis point allocation (rounded to the nearest share
round lot that approximates 40 basis points) (the "Allocation"), based on that
AIM Fund's or accounts net assets. This process continues until all of the AIM
Funds and accounts in the three tiers receive their Allocations, or until the
shares are all allocated. Should securities remain after this process, eligible
AIM Funds and accounts will receive their Allocations on a straight pro rata
basis. For the tier of AIM Funds or accounts not receiving a full Allocation,
the Allocation may be made only to certain AIM Funds or accounts so that each
may receive close to or exactly 40 basis points.
Any AIM Funds or accounts with substantially identical investment
objectives and policies will participate in syndicates in amounts that are
substantially proportionate to each other. In these cases, the net assets of the
largest AIM Fund will be used to determine in which tier, as described in the
paragraph above, such group of AIM Funds or accounts will be placed. The price
per share of securities purchased in such syndicate transactions will be the
same for each AIM Fund or account.
SECTION 28(e) STANDARDS
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
AIM may cause a Fund to pay a broker that provides brokerage and research
services to AIM an amount of commission for effecting a securities transaction
for the Fund in excess of the commission another broker would have charged for
effecting that transaction. To obtain the benefit of Section 28(e), AIM must
make a good faith determination that the commissions paid are "reasonable in
relation to the value of the brokerage and research services provided . . .
viewed in terms of either that particular transaction or [its] overall
responsibilities with respect to the accounts as to which [it] exercises
investment discretion" and that the services provided by a broker provide AIM
with lawful and appropriate assistance in the performance of its investment
decision-making responsibilities. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Funds' investment programs. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM)
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to AIM and to the Trust's trustees with respect
to the performance, investment activities and fees and expenses of other mutual
funds. Such information may be communicated electronically, orally, in written
form or on computer software. Research services may also include the providing
of equipment used to communicate research information, the arranging of meetings
with management of companies and the providing of access to consultants who
supply research information.
8
<PAGE> 51
The outside research assistance is useful to AIM since the brokers
utilized by AIM as a group tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, this research provides
AIM with a diverse perspective on financial markets. Research services which are
provided to AIM by brokers are available for the benefit of all accounts managed
or advised by AIM (or by sub-advisors to accounts managed or advised by AIM). In
some cases, the research services are available only from the broker providing
such services. In other cases, the research services may be obtainable from
alternative sources in return for cash payments. AIM is of the opinion that
because the broker research supplements rather than replaces its research, the
receipt of such research does not tend to decrease its expenses, but tends to
improve the quality of its investment advice. However, to the extent that AIM
would have purchased any such research services had such services not been
provided by brokers, the expenses of such services to AIM could be considered to
have been reduced accordingly.
For the fiscal year ended December 31, 1999, certain Funds paid
brokerage commissions to certain brokers for research services. The amount of
such transactions and related commissions paid by each Fund were as follows:
<TABLE>
<CAPTION>
Commissions Transactions
------------ --------------
<S> <C> <C>
AIM V.I. Aggressive Growth Fund $ 2,352 $ 1,602,079
AIM V.I. Balanced Fund $ 1,690 $ 1,424,718
AIM V.I. Capital Appreciation Fund $ 125,531 $ 104,465,850
AIM V.I. Capital Development Fund $ 2,132 $ 1,042,603
AIM V.I. Diversified Income Fund $ 416 $ 224,341
AIM V.I. Global Growth and Income Fund $ 13,369 $ 6,616,895
AIM V.I. Global Utilities Fund $ 1,794 $ 1,016,887
AIM V.I. Growth Fund $ 99,052 $ 103,527,973
AIM V.I. Growth and Income Fund $ 342,607 $ 351,987,293
AIM V.I. International Equity Fund $ 16,910 $ 9,546,491
AIM V.I. Telecommunications and
Technology Fund $ 18,478 $ 21,790,567
AIM V.I. Value Fund $ 244,625 $ 266,257,808
</TABLE>
As of December 31, 1999, the following Funds entered into repurchase
agreements with the following regular brokers, as that term is defined in Rule
10b-1 under the 1940 Act, having the noted market values.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
FUNDS BANK ONE CAPITAL CIBC OPPENHEIMER GOLDMAN SACHS
MARKETS, INC. CORP.
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. Blue Chip Fund $230,000 $ 230,000 $ --
- --------------------------------------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $230,000 $ 230,000 $ --
- --------------------------------------------------------------------------------------------------------------------
AIM V.I. Money Market Fund $ -- $14,862,435 $3,500,000
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
The following information regarding securities acquired by the Funds of
their regular brokers, as defined in Rule 10b-1 under the 1940 Act, is as of
December 31, 1999. The Balanced Fund and the Growth and Income Fund each held an
amount of common stock issued by Merrill Lynch & Co. having a market value of
$200,400 and $12,525,000, respectively. The Balanced Fund, the Capital
Appreciation Fund and the Growth and Income Fund each held an amount of common
stock issued by Goldman Sachs having a market value of $61,222, $9,418,750 and
$21,192,188, respectively. The Balanced Fund, the Growth Fund, the Growth and
Income Fund and the Value Fund each held an amount of common stock issued by
Morgan Stanley Dean Witter having a market value of $314,050, $7,851,250,
$72,674,025 and $57,556,800.
9
<PAGE> 52
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the Prospectus. In any particular year, however, market
conditions could result in portfolio activity at a rate greater or lesser than
anticipated. The estimated portfolio turnover rate for the Blue Chip Fund and
Dent Demographic Trends Fund is less than 100%. Higher portfolio turnover
increases transaction costs to the Fund.
BROKERAGE COMMISSIONS PAID
Brokerage commissions paid by each of the Funds (except the AIM V.I.
Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) listed below were
as follows for the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997. The significant change in commissions paid from year to year
for AIM V.I. Capital Appreciation Fund and AIM V.I. Growth and Income Fund is
due to the increase in asset level.
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 12,853 $ 2,983* $ N/A
AIM V.I. Balanced Fund $ 18,419 $ 2,241* $ N/A
AIM V.I. Capital Appreciation Fund $ 1,028,908 $ 1,017,185 $ 644,279
AIM V.I. Capital Development Fund $ 14,060 $ 3,748* $ N/A
AIM V.I. Diversified Income Fund $ 1,626 $ 282 $ 2,818
AIM V.I. Global Growth and Income Fund $ 96,559 $ 19,966 $ 42,783
AIM V.I. Global Utilities Fund $ 21,661 $ 18,422 $ 12,208
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ 940,142 $ 876,546 $ 621,467
AIM V.I. Growth and Income Fund $ 2,951,259 $ 2,834,451 $ 1,190,597
AIM V.I. High Yield Fund $ -0- $ -0-* $ N/A
AIM V.I. International Equity Fund $ 1,061,593 $ 814,499 $ 605,318
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications and Technology Fund $ 131,019 $ 120,189 $ 123,863
AIM V.I. Value Fund $ 1,978,681 $ 1,920,264 $ 1,503,734
</TABLE>
* Commissions paid are for the period May 1,1998 (date operations commenced)
through December 31, 1998.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment objective
is set forth in the Prospectus under the heading "Investment Objectives and
Strategies." There can be no assurance that any Fund will achieve its objective.
The principal features of each Fund's investment program and the primary risks
associated with that investment program are discussed in the Prospectus under
the following headings: "Investment Objectives and Strategies" and "Principal
Risks of Investing in the Funds". The following discussion of investment
policies supplements the discussion of the investment strategies and risks set
forth in the Prospectus.
Set forth in this section is further information with respect to
certain Fund's investment policies, strategies and practices. The investment
objective(s) of each Fund are non-fundamental policies and may be changed by the
Board of Trustees may be changed by the Board of Trustees without shareholder
approval. Each Fund's investment policies, strategies and practices are also
non-fundamental. The Board of Trustees of the Trust reserves the right to change
any of these non-fundamental investment policies, strategies or practices
without shareholder approval. However, shareholders will be notified before any
material change in the investment policies become effective. Each Fund has
adopted certain investment restrictions, some of which are fundamental and
cannot be changed without shareholder approval. See "Investment Restrictions" in
this Statement of Additional Information. Individuals considering the purchase
of shares of any Fund should recognize that there are risks in the ownership of
any security.
10
<PAGE> 53
AGGRESSIVE GROWTH FUND
The Fund will invest primarily in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies in the small to
medium-sized category (i.e., companies with a market capitalization within the
range of small cap stocks in the Russell 2000 Index). Management of the Fund
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes that should enhance such
companies" prospects for future growth in earnings. As a result of this policy,
the market prices of many of the securities purchased and held by the Fund may
fluctuate widely. Any income received from securities held by the Fund will be
incidental, and an investor should not consider a purchase of shares of the Fund
as equivalent to a complete investment program. The Fund's portfolio is
primarily comprised of securities of two basic categories: (a) "core" companies,
which Fund management considers to have experienced above-average and consistent
long-term growth in earnings and to have excellent prospects for outstanding
future growth, and (b) "earnings acceleration" companies which Fund management
believes are currently enjoying dramatic increase in profits. The Fund's
strategy does not preclude investment in large, seasoned companies which in the
judgement of AIM possess superior potential returns similar to companies with
formative growth profiles. The Fund will also invest in established smaller
companies (under $500 million in market capitalization) which offer exceptional
value based upon substantially above average earnings growth potential relative
to market value. The Fund may invest in non-equity securities, such as corporate
bonds or U.S. Government obligations during periods when, in the opinion of AIM,
prevailing market, financial, or economic conditions warrant, as well as when
such holdings are advisable in light of a change in circumstances of a
particular company or within a particular industry.
BALANCED FUND
The Fund will invest in a broadly diversified portfolio of
common stocks, preferred stocks, convertible securities and bonds. Although
equity securities will be purchased primarily for capital appreciation and fixed
income securities will be purchased primarily for income purposes, income and
capital appreciation potential will be considered in connection with all
investments. Most of such fixed income securities will be rated Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Rating Services ("S&P") or, if unrated, deemed to be of comparable
quality by AIM, although the Fund may invest to a limited extent in lower-rated
securities. (For a description of the various rating categories, see Appendix A
to this Statement of Additional Information.) The fixed income securities in
which the Fund invests may include U.S. Government obligations, mortgage-backed
securities, asset-backed securities, bank obligations, corporate debt
obligations and unrated obligations, including those of foreign issuers. The
Fund may, in pursuit of its objective, invest up to 10% of its total assets in
debt securities rated lower than Baa by Moody's or BBB by S&P, which are
commonly known as "junk bonds." See "Risk Factors -- Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities. The Fund may also invest up to 25% of its total
assets in convertible securities. Compliance with all of the above percentage
requirements may limit the ability of the Fund to maximize total return. The
actual percentage of the assets invested in equity and fixed income securities
will vary from time to time, depending on the judgment of AIM as to general
market and economic conditions and trends, yields and interest rates and changes
in fiscal and monetary policies.
BLUE CHIP FUND
The Fund will invest primarily in common stocks, convertible securities
and bonds of blue chip companies (i.e., companies with leading market positions
and which possess strong financial characteristics, as described below).
The Fund intends to invest at least 65% of its total assets in the
common stocks of blue chip companies as determined by AIM. These companies will
have the potential for above-average growth in earnings or be well-established
in their respective industries. The Fund will generally invest in large and
medium sized companies (i.e., companies which fall in the largest 85% of market
capitalization of publicly traded companies listed in the United States) which
possess the following characteristics:
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o Market Characteristics
Blue chip companies are those which occupy (or in AIM's
judgment have the potential to occupy) leading market
positions that are expected to be maintained or enhanced over
time. Strong market positions, particularly in growing
industries, can give a company pricing flexibility as well as
the potential for strong unit sales. These factors can in turn
lead to higher earnings growth and greater share price
appreciation. Market leaders can be identified within an
industry as those companies which have:
- superior growth prospects compared with other companies in
the same industry;
- possession of proprietary technology with the potential to
bring about major changes within an industry; and/or
- leading sales within an industry, or the potential to become
a market leader.
o Financial Characteristics
Blue chip companies possess at least one of the following
attributes:
- faster earnings growth than its competitors and the market
in general;
- higher profit margins relative to its competitors;
- strong cash flow relative to its competitors; and/or
- a balance sheet with relatively low debt and a high return
on equity relative to its competitors.
When AIM believes securities other than common stocks offer opportunity
for long-term growth of capital and income, the Fund may invest in United States
government securities, corporate bonds and debentures and convertible preferred
stocks and debt securities. The Fund will invest only in debt securities (other
than convertible debt securities) which are rated at "Investment Grade" by
either S&P or Moody's. Debt securities in the lowest investment grade (e.g.,
rated BBB by S&P or Baa by Moody's) have speculative characteristics and changes
in economic conditions and other circumstances are more likely to lead to a
weakened capacity on the part of the issuer to make principal and interest
payments than is the case with higher grade bonds. The Fund will limit its
investments in convertible securities to those in which the underlying common
stock is a suitable investment for the Fund without regard to debt rating
category, but will not invest more than 10% of its total assets in convertible
securities. The Fund may invest in United States government securities and
corporate bonds and debentures when AIM believes interest rates on such
investments may decline thereby potentially increasing the market value of such
securities or to meet the additional investment objective of producing current
income. Under normal market conditions, the Fund expects at all times to have at
least 65% of its total assets invested in securities which AIM believes offer
opportunity for long-term growth of capital or income.
The Fund may invest up to 25% of total assets in securities of issuers
domiciled in foreign countries. For the risks involved in investing in foreign
securities, see "Risk Factors - Foreign Securities" in this Statement of
Additional Information.
CAPITAL APPRECIATION FUND
AIM will be particularly interested in companies that are likely to
benefit from new or innovative products, services or processes that should
enhance such companies" prospects for future growth in earnings. As a result of
this policy, the market prices of many of the securities purchased and held by
the Fund may fluctuate widely. Any income received from securities held by the
Fund will be incidental, and an investor should not consider a purchase of
shares of the Fund as equivalent to a complete investment program. The Capital
Appreciation Fund's portfolio is primarily comprised of securities of two basic
categories of companies: (1) "core"
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companies, which AIM considers to have experienced above-average and consistent
long-term growth in earnings with excellent prospects for outstanding future
growth, and (2) "earnings acceleration" companies which AIM believes are
currently enjoying a dramatic increase in profits.
CAPITAL DEVELOPMENT FUND
The Fund will invest primarily in securities of small and medium-sized
companies (i.e., companies which fall in the smallest 85% by market
capitalization of publicly traded companies in the United States). Among factors
that AIM may consider when selecting investments in a company for the Fund are
(i) the growth prospects for a company's products, (ii) the economic outlook for
its industry, (iii) a company's new product development, (iv) its operating
management capabilities, (v) the relationship between the price of the security
and its estimated fundamental value, (vi) relevant market, economic and
political environments and (vii) financial characteristics such as balance sheet
analysis and return on assets. The Fund may invest in issuers making initial
public offerings of their securities if AIM determines that the issuer has good
prospects for growth.
DENT DEMOGRAPHIC TRENDS FUND
Harry S. Dent, Jr., President of H.S. Dent Advisors, Inc., is an
internationally known strategic consultant and best-selling author who provides
the Fund's portfolio managers with macroeconomic and sector research, along with
investment and market capitalization recommendations. The Fund's portfolio
managers then focus on companies within those sectors and market
capitalizations that have historically experienced or are deemed to have the
potential for above-average, long-term growth in revenues and earnings. The Fund
makes use of a unique investment style that blends AIM's earnings momentum
approach with proprietary guidance from Dent.
The Fund's portfolio managers may sell stocks that experience
decelerated earnings and negative earnings revisions. They actively monitor
valuation targets and may reduce positions that they believe have become too
heavily weighted in the Fund's portfolio.
The Fund may invest in companies of various market capitalizations and
is not limited exclusively to small-, mid- or large-cap stocks, which may help
minimize the risks associated with sector investing.
Demographic, economic and lifestyle trends may occur in different
phases around the world. The Fund is positioned to potentially take advantage of
these differing phases by investing in both domestic and foreign stock issuers.
DIVERSIFIED INCOME FUND
The Fund may invest up to 10% of its total assets in common stocks,
preferred stocks, similar equity securities and convertible securities of U.S.
and foreign companies. The Fund does not intend to invest more than 50% of its
total assets in lower-rated or unrated high yield securities or more than 50% of
its total assets in foreign debt securities. (For a description of the various
rating categories of corporate debt securities in which the Fund may invest, see
Appendix A to this Statement of Additional Information. For a description of
U.S. Government Agency Mortgage-Backed Securities, see Appendix B to this
Statement of Additional Information.) However, the Fund may from time to time
invest up to 100% of its total assets in U.S. Government securities and, as a
defensive measure, may invest up to 100% of its total assets in money market
securities. For a discussion of the investment risks associated with investments
in high yield securities and foreign securities, see "Risk Factors" in this
Statement of Additional Information.
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GLOBAL GROWTH AND INCOME FUND
The Fund will normally invest at least 65% of its total assets in a
combination of blue chip equity securities and high quality government bonds.
Government bonds are deemed to be high quality if at the time of the Fund's
investment they are rated within one of the two highest ratings categories of
Moody's or S&P i.e., rated Aaa or Aa by Moody's or AAA or AA by S&P (or a
comparable rating of any other nationally recognized statistical rating
organizations "NRSROs") or, if unrated, are determined by AIM and INVESCO Asset
Management Limited ("INVESCO") to be of comparable quality. (For a description
of the various rating categories of corporate debt securities in which the Fund
may invest, see Appendix A to this Statement of Additional Information.)
Up to 35% of the Fund's assets may be invested in other equity
securities, convertible securities and investment grade government and corporate
debt obligations which AIM/INVESCO believes will assist the Fund in achieving
its objectives.
Equity securities that the Fund may purchase include common stocks,
preferred stocks, and warrants to acquire such stocks and other equity
securities. Government bonds that the Fund may purchase include debt obligations
issued or guaranteed by the U.S. or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Fund may include debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities.
AIM/INVESCO allocates the Fund's assets among securities of issuers
located in countries where opportunities for meeting the Fund's investment
objectives are expected to be the most attractive. The relative proportions of
equity and debt securities held by the Fund at any one time will vary, and will
depend upon AIM/INVESCO's assessment of global political and economic conditions
and the relative strengths and weaknesses of the world equity and debt markets.
To enable the Fund to respond to general economic changes and market conditions
around the world, the Fund is authorized to invest up to 100% of its assets in
either equity securities or debt securities.
Investments in securities of issuers in any one country other than the
United States, will represent no more than 40% of the Fund's total assets. The
Fund may purchase securities of an issuer located in one country but denominated
in the currency of another country (or a multinational currency unit).
GLOBAL UTILITIES FUND
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in securities of public utility companies (either domestic or
foreign). Public utility companies include companies that produce or supply
electricity, natural gas, water, sanitary services, and telephone, telegraph,
cable, satellite or other communication or information transmission services,
as well as developing utility technology companies and holding companies which
derive at least 40% of their revenues from utility-related activities. The Fund
will seek to position itself to take advantage of deregulation in the utility
industry, and advances in communication and natural gas technology. In addition
to the Fund's investments in common and preferred stocks of public utility
companies, the Fund may invest up to 25% of its total assets in convertible
securities. When AIM deems it appropriate, the Fund may also purchase the bonds
of such companies. Investments in non-convertible bonds, however, will not
exceed 25% of the Fund's total assets. The Fund may invest up to 10% of its
total assets in lower-rated or unrated high yield securities. (For a
description of the various rating categories of corporate debt securities in
which the Fund may invest, see Appendix A to this Statement of Additional
Information.) The Fund may also invest up to 80% of its total assets in
securities of foreign companies, including investments in American Depositary
Receipts ("ADRs"), European Depositary Receipts ("EDRs") and underlying
securities of foreign issuers. For a discussion of the investment risks
associated with investments in non-investment grade debt securities and foreign
securities, see "Risk Factors" in this Statement of Additional Information.
A portfolio of utility company securities is subject to a different
degree of volatility than a more broadly diversified portfolio. Economic,
operational or regulatory changes that affect utility companies will have a
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material impact upon the value of the securities that the Fund owns. Events,
such as changing weather patterns, emergencies involving nuclear power plants,
or rapidly changing fuel prices that have no direct connection with companies
whose securities are owned by the Fund may affect the prices of those
securities.
Moreover, a portfolio of utilities industry securities is subject to
the risks unique to that industry, such as inflationary or other increases in
fuel and operating expenses, possible increases in the interest costs of loans
needed for capital construction programs, compliance with environmental
regulations, possible adverse changes in the regulatory climate and availability
of fuel sources.
GOVERNMENT SECURITIES FUND
The government securities which may be purchased by the Fund include
but are not limited to (1) U.S. Treasury obligations such as Treasury Bills
(maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuers to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not required by law to support the agencies and instrumentalities listed in (b)
and (c), above. Accordingly, such securities may involve risk of loss of
principal and interest; however, historically there have not been any defaults
of such issues. For a listing of some of the types of Agency Securities in which
the Fund may invest, see Appendix B to this Statement of Additional Information.
The Fund's investments include high coupon U.S. Government Agency
Mortgage-Backed Securities, which provide a higher coupon at the time of
purchase than the prevailing market rate yield. The prices of high coupon U.S.
Government Agency Mortgage-Backed Securities do not tend to rise as rapidly as
those of traditional fixed rate securities at times when interest rates are
decreasing, and tend to decline more slowly at times when interest rates are
increasing. The Fund may purchase such securities at a premium, which means that
a faster principal prepayment rate than expected will reduce the market value of
and income from such securities, while a slower prepayment rate will tend to
increase the market value of and income from such securities.
The composition and weighted average maturity of the Fund's portfolio
will vary from time to time, based upon the determination of AIM and how best to
further the Fund's investment objective. The Fund may invest in government
securities of all maturities, short-term, intermediate-term and long-term. The
Fund intends to maintain a dollar-weighted average portfolio maturity of between
three and ten years. This policy regarding portfolio maturity is a
non-fundamental policy of the Fund.
GROWTH FUND
Current income will not be an important criterion of investment
selection, and any such income should be considered incidental. The Fund's
portfolio is primarily comprised of securities of two basic categories of
companies: (1) "core" companies, which AIM considers to have experienced
above-average and consistent long-term growth in earnings and to have excellent
prospects for outstanding future growth, and (2) "earnings acceleration"
companies which Fund management believes are currently enjoying a dramatic
increase in profits.
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HIGH YIELD FUND
The Fund invests principally 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). The Fund will invest over 50% of the value of its total assets in
securities that are rated Baa, Ba or B by Moody's or BBB, BB, or B by S&P, or
securities of comparable quality in the opinion of the fund's portfolio
managers, that are either unrated or rated by other NRSROs. (For a description
of the various rating categories, see Appendix A to this Statement of Additional
Information.) The Fund may also hold, from time to time, securities rated Caa by
Moody's or CCC by S&P, or if unrated or rated by other NRSROs, securities of
comparable quality as determined by AIM. It should be noted, however, that
achieving the Fund's investment objective may be more dependent on the credit
analysis of AIM, and less on that of credit rating agencies, than may be the
case for funds that invest in more highly rated bonds.
While the securities held by the Fund are expected to provide greater
income and, possibly, opportunity for greater gain than investments in more
highly rated securities, they may be subject to greater risk of loss of income
and principal and are more speculative in nature. The Fund's yield and the net
asset value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Risk Factors --
Non-Investment Grade Debt Securities."
The Fund may invest in both illiquid securities and securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933. See "Illiquid Securities" for further
information regarding such investments.
INTERNATIONAL EQUITY FUND
In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to the Growth Fund with respect to that Fund's investment in United
States equities markets. The Fund will utilize to the extent practicable a fully
managed investment policy providing for the selection of securities which meet
certain quantitative standards determined by AIM. AIM will review carefully the
earnings history and prospects for growth of each company considered for
investment by the Fund. It is expected that the Fund's portfolio, when fully
invested, will generally be comprised of two basic categories of foreign
companies: (1) "core" companies, which AIM considers to have experienced
consistent long-term growth in earnings and to have strong prospects for
outstanding future growth, and (2) companies that AIM believes are currently
experiencing a greater than anticipated increase in earnings. If a particular
foreign company meets the quantitative standards determined by AIM, its
securities may be acquired by the Fund regardless of the location of the company
or the percentage of the Fund's investments in the company's country or region.
However, AIM will also consider other factors in making investment decisions for
the Fund, including such factors as the prospects for relative
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economic growth among countries or regions, economic and political conditions,
currency exchange fluctuations, tax considerations and the liquidity of a
particular security. For a discussion of the investment risks associated with
investments in foreign securities, see "Risk Factors" in this Statement of
Additional Information.
MONEY MARKET FUND
The Fund invests in a diversified portfolio of high quality U.S. dollar
denominated money market instruments and other similar instruments with
maturities of 397 days or less from the date of purchase, and will maintain a
dollar weighted-average portfolio maturity of 90 days or less. Securities
subject to repurchase agreements may bear longer maturities.
The Fund invests in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements secured by such obligations. The Money
Market Fund intends to invest in bankers' acceptances, certificates of deposit,
repurchase agreements, time deposits, variable rate master demand notes, taxable
municipal securities and commercial paper, and U.S. Government direct
obligations and U.S. Government agencies' securities. Bankers acceptances,
certificates of deposit and time deposits may be purchased from U.S. or foreign
banks. All of these instruments, which are collectively referred to as "Money
Market Obligations," are briefly described in Appendix C to this Statement of
Additional Information.
The Fund will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule
may be amended from time to time. Generally "First Tier" securities are
securities that are rated in the highest rating category by two NRSROs, or, if
only rated by one NRSRO, are rated in the highest rating category by that NRSRO,
or, if unrated, are determined by AIM (under the supervision of and pursuant to
guidelines established by the Board of Trustees) to be of comparable quality
to a rated security that meets the foregoing quality standards. For a more
complete definition of a "First Tier" security, see "Money Market Obligations"
in this Statement of Additional Information.
The Money Market Fund may invest up to 100% of its total assets in
obligations issued by banks. While the Fund will limit its investments in bank
instruments to U.S. dollar denominated obligations, it may invest in Eurodollar
obligations (i.e., U.S. dollar-denominated obligations issued by a foreign
branch of a domestic bank), Yankee dollar obligations (i.e., U.S.
dollar-denominated obligations issued by a domestic branch of a foreign bank)
and obligations of foreign branches of foreign banks. The Money Market Fund will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 50% of its total assets
at the time of purchase, provided that there is no limitation upon the Fund's
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligation is unconditionally liable in the event that the
foreign branch for any reason fails to pay on the Eurodollar obligation; and (b)
Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to
the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign
bank obligations include time deposits, which are non-negotiable deposits
maintained in a bank for a specified period of time at a stated interest rate.
For a discussion of the risks pertaining to investments in foreign securities,
see "Risk Factors" in this Statement of Additional Information.
TELECOMMUNICATIONS AND TECHNOLOGY FUND
At least 65% of the Fund's total assets normally will be invested in
securities issued by companies in the telecommunications and technology
industries.
Telecommunications and technology companies cover a variety of sectors,
ranging from companies concentrating on established technologies to those
primarily engaged in emerging or developing technologies. The characteristics of
companies focusing on the same technology will vary among countries depending
upon the extent to which the technology is established in the particular
country. AIM will allocate the Fund's investments among these sectors depending
upon its assessment of their relative long-term growth potential.
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Examples of telecommunications/technology companies include those
engaged in designing, developing or providing the following products and
services: communications equipment and services (including equipment and
services for both data and voice transmission); electronic components and
equipment; broadcasting (including television and radio, satellite, microwave
and cable television and narrowcasting); computer equipment, mobile
communications and cellular radio/paging; electronic mail; local and wide area
networking and linkage of word and data processing systems; publishing and
information systems; videotext and teletext; and emerging technologies combining
telephone, television and/or computer systems.
AIM believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications and technology systems.
Accordingly, companies engage in the production of methods for using electronic
and, potentially, video technology to communicate information are expected to be
important in the Fund's portfolio. Older technologies, such as photography and
print, also may be represented, however.
Telecommunications and technology are global industries with
significant, growing markets outside of the United States. A sizeable proportion
of the companies that comprise the telecommunications industry are headquartered
outside of the United States. From time to time, however, a significant portion
of the Fund's assets may be invested in the securities of domestic issuers.
AIM uses its financial expertise in markets located throughout the
world in attempting to identify those countries and telecommunications and
technology companies then providing the greatest potential for long-term capital
appreciation. AIM will allocate the Fund's assets among securities of countries
and in currency denominations and industry sectors where opportunities for
meeting the Fund's investment objective are expected to be the most attractive.
The Fund may, in pursuit of its objective, invest up to 5% of its total
assets in below investment grade debt securities. See "Risk Factors --
Non-Investment Grade Debt Securities" for more information concerning the risk
factors associated with investing in such securities.
VALUE FUND
The Fund invests 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.
The secondary objective of income would be satisfied principally from the income
(interest and dividends) generated by the common stocks, convertible bonds and
convertible preferred stocks held in the Fund's portfolio. The Fund may also
acquire preferred stocks and debt instruments having prospects for growth of
capital.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Each Fund is subject to the following fundamental investment
restrictions, except Global Utilities Fund is not subject to restrictions
(1) or (4):
Fundamental restrictions may be changed only by a vote of the lesser
of (i) 67% or more of the Fund's shares present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or represented by
proxy, or (ii) more than 50% of the Fund's outstanding shares. Consistent with
applicable law and unless otherwise provided, all percentage limitations apply
at the time of purchase.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the 1940 Act Laws and Interpretations) or except
to the extent that the Fund may be permitted to do so by exemptive order or
similar relief (collectively, with the 1940 Act Laws and Interpretations, the
1940 Act Laws, Interpretations and Exemptions). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions;
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions;
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(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the Securities
Act of 1933;
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (ii) tax-exempt obligations
issued by governments or political subdivisions of governments, or (iii) for
Money Market, bank instruments. In complying with this restriction, the Fund
will not consider a bank-issued guaranty or financial guaranty insurance as a
separate security;
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or in investing in securities that are secured by real estate or interests
therein;
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities;
(7) The Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the Fund, except to the
extent permitted by 1940 Act Laws, Interpretations and Exemptions. This
restriction does not prevent the Fund from, among other things, purchasing debt
obligations, entering into repurchase agreements, loaning its assets to
broker-dealers or institutional investors, or investing in loans, including
assignments and participation interests;
(8) The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and limitations as that Fund; and
Global Utilities is also subject to the following fundamental
investment restriction:
The Fund will concentrate (as such term may be defined or
interpreted by the 1940 Act laws, interpretations, and exemptions) its
investments in the securities of domestic and foreign public utility companies.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental investment restrictions apply to all of
the Funds, except Global Utilities Fund is not subject to restrictions (1) or
(3), but are not fundamental. They may be changed for any Fund without approval
of that Fund's voting securities.
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(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets (and
for Money Market Fund, with respect to 100% of its total assets), purchase the
securities of any issuer (other than securities issued or guaranteed by the U.
S. Government or any of its agencies or instrumentalities), if, as a result, (i)
more than 5% of the Fund's total assets would be invested in the securities of
that issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that
issuer. The Fund may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of money market funds and lend money to other investment companies
and their series portfolios that have AIM as an investment advisor, subject to
the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The Fund may borrow from banks,
broker/dealers or other investment companies or their series portfolios that
have AIM or an affiliate of AIM as an investment advisor (an "Advised Fund").
The Fund may not borrow for leveraging, but may borrow for temporary or
emergency purposes, in anticipation of or in response to adverse market
conditions, or for cash management purposes. The Fund may not purchase
additional securities when any borrowing from banks exceeds 5% of the Fund's
total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
(4) In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to
another Advised Fund, on such terms and conditions as the SEC may require in an
exemptive order.
(5) Not withstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment company with
the same fundamental investment objectives, policies and restrictions as the
Fund.
For purposes of Global Utilities Fund's fundamental restriction
regarding industry concentration, public utility companies shall consist of
companies that produce or supply electricity, natural gas, water, sanitary
services, and telephone, cable, satellite, telegraph or other communication or
information transmission services, as well as developing utility technology
companies and holding companies which derive at least 40% of their revenues from
utility-related activities.
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES
Each of the Funds has the flexibility to invest, to the extent
described below, in a variety of instruments designed to enhance its investment
capabilities. Each of the Funds may invest in money market obligations, foreign
securities (including ADRs and EDRs), repurchase agreements, reverse repurchase
agreements, taxable municipal securities, illiquid securities and Rule 144A
securities; the Diversified Income Fund and the Government Fund may invest in
U.S. Government Agency Mortgage-Backed Securities; each of the Funds may
purchase or sell securities on a delayed delivery or when-issued basis and may
borrow money; each of the Funds, other than the Money Market Fund, may lend
portfolio securities and make short sales "against the box." A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the
right to obtain securities identical to those sold short without payment of any
further consideration.
Each of the Funds, other than the Money Market Fund, may write (i.e.,
sell) "covered" put and call options and buy put and call options on domestic
and foreign securities, securities indices and currencies. Each of the Funds,
other than the Money Market Fund, may use exchange-traded financial futures
contracts, options thereon, and forward contracts as a hedge to protect against
possible changes in market values. A brief description of these investment
instruments and their risks appears below. See "Hedging and Other Investment
Techniques" in this Statement of Additional Information for more detailed
information.
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MONEY MARKET OBLIGATIONS
When deemed appropriate for temporary or defensive purposes, each of
the Funds may hold cash or cash equivalent Money Market Obligations. Of course,
the Money Market Fund invests exclusively in Money Market Obligations. While
none of the Funds other than the Money Market Fund is required by regulation or
fundamental policy to limit such investments to those which, at the date of
purchase, are "First Tier" securities as that term is defined in Rule 2a-7 under
the 1940 Act, it is the current intention of AIM to limit such investments to
those securities which, at the time of purchase, are considered "First Tier"
securities or securities which AIM has determined to be of comparable credit
quality. To the extent that a Fund invests to a significant degree in these
instruments, its ability to achieve its investment objective may be adversely
affected.
In addition to the Money Market Obligations described above, as a
temporary or defensive measure, and without regard to their respective
investment objectives, AIM, or AIM/INVESCO for the Global Growth and Income
Fund, may invest all or substantially all of the assets of each Fund (other
than Money Market Fund) in cash or Money Market Obligations, including
repurchase agreements, denominated in foreign currencies.
As set forth in the Prospectus, the Money Market Fund will limit its
purchases of Money Market Obligations to U.S. dollar denominated securities
which are "First Tier" securities, as such term is defined from time to time in
Rule 2a-7 under the 1940 Act. A First Tier Security is generally a security
that: (i) has received a short-term rating, or is subject to a guarantee that
has received a short-term rating, or, in either case, is issued by an issuer
with a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that the
Fund's investment adviser has determined are of comparable quality to a rated
security described in (i); (iii) is a security issued by a registered investment
company that is a money market fund; or (iv) is a Government Security.
Subsequent to its purchase by the Fund, an issue of Money Market
Obligations may cease to be a First Tier security. Subject to certain exceptions
set forth in Rule 2a-7, such an event will not require the elimination of the
security from the Fund, but AIM will consider such an event to be relevant in
its determination of whether the Fund should continue to hold the security.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with
institutions believed by the Trust's Board of Trustees to present minimal credit
risk. A repurchase agreement is an instrument under which the Fund acquires
ownership of a debt security and the seller agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the sellers' failure to repurchase the
obligation in accordance with the terms of the agreement), a Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act. Repurchase agreements will be secured by
U.S. Treasury securities, U.S. Government agency securities (including, but not
limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper.
Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, the Funds will not enter into repurchase
agreements expiring in more than seven days. The Fund may, however, enter into a
"continuing contract" or "open" repurchase agreement under which the seller is
under a continuing obligation to repurchase the underlying obligation from the
Fund on demand and the effective interest rate is negotiated on a daily basis.
Repurchase agreements are considered to be loans by the Fund under the 1940 Act.
Securities subject to repurchase agreements will be held in the custodian's
account with the Federal Book-Entry System on behalf of the Fund.
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U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
The Diversified Income Fund and the Government Fund may invest in U.S.
Government Agency Mortgage-Backed Securities. These securities are obligations
issued or guaranteed by the United States Government or by one of its agencies
or instrumentalities, including but not limited to GNMA, FNMA, or FHLMC. U.S.
Government Agency Mortgage-Backed Certificates provide for the pass-through to
investors of their pro-rata share of monthly payments (including any principal
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and servicers of the
underlying mortgage loans. GNMA, FNMA and FHLMC each guarantee timely
distributions of interest to certificate holders. GNMA and FNMA guarantee timely
distributions of scheduled principal. FHLMC has in the past guaranteed only the
ultimate collection of principal of the underlying mortgage loan; however, FHLMC
Gold Participation Certificates now guarantee timely payment of monthly
principal reductions. Although their close relationship with the U.S. Government
is believed to make them high-quality securities with minimal credit risks, the
U.S. Government is not obligated by law to support either FNMA or FHLMC.
However, historically there have not been any defaults of FNMA or FHLMC issues.
See Appendix B for a more complete description of GNMA securities.
Mortgage-backed securities consist of interests in underlying mortgages
generally with maturities of up to thirty years. However, due to early
unscheduled payments of principal of the underlying mortgages, the securities
have a shorter average life and, therefore, less volatility than a comparable
thirty-year bond. The value of U.S. Government Agency Mortgage-Backed
Securities, like other traditional debt instruments, will tend to move in the
opposite direction compared to interest rates.
CONVERTIBLE SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds (except the Money Market Fund) may invest in convertible
securities. Convertible securities usually consist of corporate debt securities
or preferred stock that may in certain circumstances be converted into a
predetermined number of shares of another form of that issuer's equity, usually
common stock. Convertible securities consequently often involve attributes of
both debt and equity instruments, and investment in such securities requires
analysis of both credit and stock market risks. Convertible securities rank
senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. Convertible securities may
be subject to redemption at the option of the issuer at a price established in
the convertible security's governing instrument. Although the Funds will only
purchase convertible securities that AIM considers to have adequate protection
parameters, including an adequate capacity to pay interest and repay principal
in a timely manner, each applicable Fund invests in such securities without
regard to corporate bond ratings.
REAL ESTATE INVESTMENT TRUSTS ("REITs")
To the extent consistent with their respective investment objectives
and policies, each of the Funds (except the Government Fund and the Money Market
Fund) may invest in equity and/or debt securities issued by REITs. Such
investments will not exceed (i) 25% of the total assets of the Aggressive Growth
Fund, the Balanced Fund, the Blue Chip Fund, the Capital Appreciation Fund, the
Capital Development Fund, the Dent Demographic Trends Fund, the Global Growth
and Income Fund, the Global Utilities Fund, the Growth Fund, the Growth and
Income Fund, the International Fund, the Telecommunications and Technology Fund
and the Value Fund; and (ii) 10% of the total assets of the Diversified Income
Fund and the High Yield Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interest therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the Southeastern United States, or both.
To the extent that the Fund has the ability to invest in REITs, the
Fund could conceivably own real estate directly as a result of a default on the
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, increases in property taxes and operating expenses, changes in
zoning laws,
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casualty or condemnation losses, limitations on rents, changes in neighborhood
values, the appeal of properties to tenants, and increases in interest rates.
In addition to the risks described above, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
FOREIGN SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds may invest in foreign securities. It is not anticipated that
such foreign securities will constitute more than: (i) 20% of the value of the
total assets of the Government Fund; (ii) 25% of the value of the total assets
of the Aggressive Growth Fund, the Balanced Fund, the Blue Chip Fund, the
Capital Appreciation Fund, the Capital Development Fund, the Dent Demographic
Trends Fund, the Growth Fund, the Growth and Income Fund, the High Yield Fund
and the Value Fund; (iii) 50% of the value of the total assets of the
Diversified Income Fund and the Money Market Fund (however, the Money Market
Fund may only invest in foreign securities denominated in U.S. dollars); (iv)
75% of the value of the total assets of the Telecommunications Fund; (v) 80% of
the value of the total assets of the Global Utilities Fund; and (vi) 90% of the
value of the total assets of the Global Growth and Income Fund. The
International Fund intends to invest at least 70% of its total assets in foreign
securities.
The Diversified Income Fund may invest in debt obligations which may be
denominated in the U.S. dollar or in other currencies issued or guaranteed by
foreign corporations, certain supranational entities (such as the World Bank,
Asian Development Bank and European Economic Community), and foreign governments
(including political subdivisions having taxing authority) or their agencies or
instrumentalities. The Diversified Income Fund may also invest in debt
obligations issued by corporations denominated in non-U.S. dollar currencies. No
more than 25% of the Diversified Income Fund's total assets, at the time of
purchase, will be invested in government securities of any one foreign country.
At the present time, AIM does not intend to invest more than 10% of the
Diversified Income Fund's total assets in securities issued by foreign
governments or foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle. Investments in emerging markets or developing countries
involve exposure to economic structures that are generally less diverse and
mature and to political systems which can be expected to have less stability
than those of more developed countries. Such countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets which trade only a small number of securities. Historical experience
indicates that emerging markets have been more volatile than the markets of more
mature economies; such markets have also from time to time provided higher rates
of return and greater risks to investors. AIM believes that these
characteristics of emerging markets can be expected to continue in the future.
The Global Growth and Income Fund may invest up to 90% of its total
assets in securities of foreign companies. Under normal market conditions, the
Global Growth and Income Fund will be invested in securities of issuers located
in at least three different countries. Investments in securities of issuers in
any one country other than the United States, will represent no more than 40% of
the Fund's total assets. The Fund may purchase securities of an issuer located
in one country but denominated in the currency of another country (or a
multinational currency unit).
The Global Utilities Fund may invest up to 80% of its total assets in
securities of foreign companies, including investments in ADRs, EDRs and other
securities representing underlying securities of foreign issuers. Under normal
market conditions, the Global Utilities Fund will be invested in securities of
issuers located in at least four countries, one of which will be the United
States, although for defensive purposes, it may invest 100% of its total assets
in securities of U.S. issuers. In some foreign countries, utility companies are
partially owned by government agencies. In some cases, foreign government
agencies may have significant investments in businesses other than utility
companies. Also, investments in securities of foreign
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issuers may involve other risks which are not ordinarily associated with
investments in domestic issuers. In addition, investors should also be aware
that the Global Utilities Fund may invest in companies located within emerging
or developing countries.
Under normal market conditions the International Fund will invest at
least 70% of its total assets in marketable equity securities (including common
and preferred stock and depositary receipts for stock) and may invest up to 20%
of its total assets in securities exchangeable for or convertible into stock of
foreign companies.
Under normal market conditions, the International Fund intends to
invest in the securities of foreign companies located in at least four countries
outside the United States. The International Fund will emphasize investment in
foreign companies in the developed countries of Western Europe and the Pacific
Basin, but the Fund may also invest to a lesser extent in the securities of
companies located in developing countries in various regions of the world. At
the present time, AIM does not intend to invest more than 20% of the
International Fund's total assets in securities issued by foreign governments or
foreign companies located in developing countries.
For a discussion of the risks pertaining to investments in foreign
obligations, see "Risk Factors" in this Statement of Additional Information.
FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently the Funds (except the Money Market Fund) may from
time to time hold cash balances in the form of foreign currencies and
multinational currency units. Such foreign currencies and multinational currency
units will usually be acquired on a spot (i.e. cash) basis at the spot rate
prevailing in foreign exchange markets and will result in currency conversion
costs to the Fund. A Fund attempts to purchase and sell foreign currencies on as
favorable a basis as practicable; however, some price spread on foreign exchange
transactions (to cover service charges) may be incurred, particularly when the
Fund changes investments from one country to another, or when U.S. Dollars are
used to purchase foreign securities. Certain countries could adopt policies
which would prevent the Fund from transferring cash out of such countries, and
the Fund may be affected either favorably or unfavorably by fluctuations in
relative exchange rates while the Fund holds foreign currencies.
ADRS AND EDRS
To the extent consistent with their respective investment objectives
each of the Funds (except the International Fund which is discussed separately
above) may also invest in securities which are in the form of ADRs, EDRs or
other securities representing underlying securities of foreign issuers. ADRs are
receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe which evidence a similar ownership
arrangement. ADRs, EDRs and other securities representing underlying securities
of foreign issuers are treated as foreign securities for purposes of determining
the applicable limitation on investment in foreign securities.
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LENDING OF PORTFOLIO SECURITIES
Each Fund (except the Money Market Fund) may, from time to time, lend
securities from their respective portfolios, with a value not exceeding 33 1/3%
of their respective total assets, to banks, brokers and other financial
institutions, and receive in return collateral in the form of liquid assets
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The collateral received will
consist of cash, U.S. Government securities, letters of credit or such other
collateral as may be permitted under each such Fund's investment program. While
the securities are being lent, a Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. A Fund
has a right to call each loan and obtain the securities on five business days'
notice or, in connection with securities trading on foreign markets, within such
longer period of time which coincides with the normal settlement period for
purchases and sales of such securities in such foreign markets. A Fund will not
have the right to vote securities while they are being lent, but it will call a
loan in anticipation of any important vote. During the period of the loan, the
applicable Fund receives the income on both the loaned securities and the
collateral (or a fee) and thereby increases its yield. In the event that the
borrower defaults on its obligation to return loaned securities because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the loaned securities. Loans will
only be made to persons deemed by AIM to be of good standing and will not be
made unless, in the judgment of AIM, the consideration to be earned from such
loans would justify the risk.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve the sale by the Fund of portfolio
securities, with an agreement that the Fund will repurchase the securities at an
agreed upon price, date and interest payment. Each Fund may employ reverse
repurchase agreements (i) for temporary emergency purposes, such as to meet
unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
agreement, a Fund will segregate liquid assets having a dollar value equal to
the repurchase price. Each of the Funds may enter into reverse repurchase
agreements in amounts not exceeding 33 1/3% of the value of their respective
total assets. Reverse repurchase agreements involve the risk that the market
value of securities retained by a Fund in lieu of liquidating may decline below
the repurchase price of the securities sold by the Fund which is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. See "Borrowing" in this Statement of Additional
Information for percentage limitations on borrowings.
DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES
Each Fund may enter into delayed delivery agreements and may purchase
securities on a "when-issued" basis.
Delayed delivery agreements involve commitments by each such Fund to
dealers or issuers to acquire securities or instruments at a specified future
date beyond the customary settlement date for such securities. These commitments
fix the payment price and interest rate to be received on the investment.
Delayed delivery agreements will not be used as a speculative or leverage
technique. Rather, from time to time, AIM can anticipate that cash for
investment purposes will result from scheduled maturities of existing portfolio
instruments or from net sales of shares of the Fund and may enter into delayed
delivery agreements to assure that the Fund will be as fully invested as
possible in instruments meeting its investment objective. Until the settlement
date, the Fund will segregate cash or other liquid assets of a dollar value
sufficient at all times to make payment for the delayed delivery securities. The
delayed delivery securities, which will not begin to accrue interest until the
settlement date, will be recorded as an asset of the Fund and will be subject to
the risks of market fluctuation. The purchase price of the delayed delivery
securities is a liability of the Fund until settlement. If cash is not available
to the Fund at the time of settlement, the Fund may be required to dispose of
portfolio securities that it would otherwise hold to maturity in order to meet
its obligation to accept delivery
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under a delayed delivery agreement. The Board of Trustees has determined that
entering into delayed delivery agreements does not present a materially
increased risk of loss to shareholders, but the Board of Trustees may restrict
the use of delayed delivery agreements if the risk of loss is determined to be
material or if it affects the constant net asset value of the Money Market Fund.
Many new issues of debt securities are offered on a "when-issued"
basis, that is, the date for delivery of and payment for the securities is not
fixed at the date of purchase, but is set after the securities are issued
(normally within forty-five days after the date of the transaction). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. The Funds will only make
commitments to purchase such debt securities with the intention of actually
acquiring such securities, but the Funds may each sell these securities before
the settlement date if it is deemed advisable. The Fund holds, and maintains
until the settlement date segregated liquid assets of a dollar value sufficient
at all times to make payment for the when-issued securities. The securities will
be marked-to-market and additional assets will be segregated if necessary to
maintain adequate coverage of the when-issued commitments.
Securities purchased on a when-issued basis and the securities held in
the Funds' portfolios are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates rise). Therefore, if, in order to achieve
higher interest income, a Fund is to remain substantially fully invested at the
same time that it has purchased securities on a when-issued basis, there will be
a possibility that the market value of the Fund's assets will fluctuate to a
greater degree. Furthermore, when the time comes for the Fund to meet its
obligations under when-issued commitments, the Fund will do so by using
then-available cash flow, by sale of the segregated securities, by the sale of
other securities or, although it would not normally expect to do so, by
directing the sale of the when-issued securities themselves (which may have a
market value greater or less than the applicable Fund's payment obligation).
A sale of securities to meet such obligations carries with it a greater
potential for the realization of net short-term capital gains, which are not
exempt from federal income taxes. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
If a Fund enters into a delayed delivery agreement or purchases a
when-issued security, the Fund will direct its custodian bank to segregate
liquid assets in an amount equal to its delayed delivery agreements or
when-issued commitments. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the account will equal the amount of such Fund's delayed
delivery agreements and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Fund's exposure to market fluctuation, or
may increase the possibility that the Fund will incur a short-term loss, if the
Fund must engage in portfolio transactions in order to honor a when-issued
commitment or accept delivery of a security under a delayed delivery agreement.
The Fund may employ techniques designed to minimize these risks. No additional
delayed delivery agreements or when-issued commitments will be made by a Fund
if, as a result, more than 25% of the Fund's net assets would become so
committed.
The Government Fund may engage in buy/sell back transactions (a form of
delayed delivery agreement). In a buy/sell back transaction, the Fund enters a
trade to sell securities at one price and simultaneously enters a trade to buy
the same securities at another price for settlement at a future date.
DOLLAR ROLL TRANSACTIONS
In order to enhance portfolio returns and manage prepayment risk, the
Diversified Income Fund and the Government Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During
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the period between the sale and repurchase, the Fund will not be entitled to
receive interest and principal payments on the securities sold. Proceeds of the
sale will be invested in short-term instruments, and the income from these
investments, together with any additional fee income received on the sale, could
generate income for the Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. See "Borrowing," below for the applicable limitation on dollar
roll transactions.
ILLIQUID SECURITIES
None of the Funds will invest more than 15% of their respective net
assets in illiquid securities, including restricted securities which are
illiquid. The Money Market Fund will not invest more than 10% of its net assets
in illiquid securities.
SPECIAL SITUATIONS
Although the Capital Appreciation Fund does not currently intend to do
so, it may invest in "special situations." A special situation arises when, in
the opinion of the Fund's management, the securities of a particular company
will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development applicable
to that company, and regardless of general business conditions or movements of
the market as a whole. Developments creating special situations might include,
among others: liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical breakthroughs and new management or management
policies. Although large and well known companies may be involved, special
situations more often involve comparatively small or unseasoned companies.
Investments in unseasoned companies and special situations often involve much
greater risk than is inherent in ordinary investment securities.
WARRANTS
The Aggressive Growth Fund, the Blue Chip Fund, the Capital Development
Fund, the Dent Demographic Trends Fund, the Global Growth and Income Fund, the
Growth and Income Fund, the High Yield Fund and the Telecommunications and
Technology Fund may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
SHORT SALES
Each of the Funds (except the Money Market Fund) may enter into short
sales transactions from time to time. None of these Funds will make short sales
of securities nor maintain a short position unless at all times when a short
position is open, the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short. This is a technique known as selling short "against the box." Such short
sales will be used by each of the Funds for the purpose of deferring recognition
of gain or loss for federal income tax purposes. In no event may more than 10%
of the value of any such Fund's total assets be deposited or pledged as
collateral for such sales at any time.
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RULE 144A SECURITIES
Each of the Funds may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred
to as private placements. Although securities which may be resold only to
"qualified institutional buyers" in accordance with the provisions of Rule 144A
under the 1933 Act are technically considered "restricted securities," the Funds
may each purchase Rule 144A securities without regard to the limitation on
investments in illiquid securities described above under "Illiquid Securities,"
provided that a determination is made that such securities have a readily
available trading market. AIM will determine the liquidity of Rule 144A
securities under the supervision of the Trust's Board of Trustees. Determination
of whether a Rule 144A security is liquid or not is a question of fact. In
making this determination AIM will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings to make a market,
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities will be monitored
by AIM and, if as a result of changed conditions, it is determined that a Rule
144A security is no longer liquid, the Fund's holdings of illiquid securities
will be reviewed to determine what, if any, action is required to assure that
the Fund does not exceed its applicable percentage limitation for investments in
illiquid securities.
EQUITY-LINKED DERIVATIVES
Aggressive Growth Fund, Balanced Fund, Blue Chip Fund, Capital
Appreciation Fund, Capital Development Fund, Dent Demographic Trends Fund,
Global Growth and Income Fund, Global Utilities Fund, Growth and Income Fund,
Growth Fund, International Equity Fund, Telecommunications and Technology Fund
and Value Fund may invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. Examples of
such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the equity-linked derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in equity-linked derivatives
may constitute investment in other investment companies. See "Investment in
Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the
extent permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of such Fund. With respect to a Fund's purchase of shares of
the Affiliated Money Market Funds, the Fund will indirectly pay the advisory
fees and other operating expenses of the Affiliated Money Market Funds.
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TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds (except
Money Market Fund) may temporarily hold all or a portion of its assets in cash,
money market instruments, bonds, or other debt securities. The Funds may also
invest up to 25% of their respective total assets in Affiliated Money Market
Funds for these purposes. For a description of the various rating categories of
corporate bonds and commercial paper in which the Funds may invest, see the
Appendix to this Statement of Additional Information.
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, Money Market Fund may
temporarily hold all or a portion of its assets in cash, and may invest up to
25% of its total assets in Affiliated Money Market Funds.
ASSET ALLOCATION AMONG COUNTRIES
The Global Growth and Income Fund currently contemplates that it will
invest principally in securities of issuers in the United States, Canada, Japan,
the Western European nations, New Zealand and Australia, and it may invest in
securities denominated in more than one currency.
UTILITIES INDUSTRY
The following is a general description of the particular types of
utilities industries in which the Global Utilities Fund may invest.
Electric Utility Industry. Electric utilities are heavily regulated.
Local rates are subject to the review of state commissions, and sales either
between companies or that cross state lines are subject to review by the Federal
Energy Regulatory Commission. The industry is also subject to regulation by the
SEC under the Public Utility Holding Company Act of 1935. In addition, companies
constructing or operating nuclear powered generating stations are subject to
extensive regulation by the Nuclear Regulatory Commission.
Electric utility companies are also subject to extensive local
regulation in environmental and site location matters. Future legislation with
regard to the issues of acid rain and toxic and radioactive wastes could have a
significant impact on the manner in which utility companies conduct their
business, and the costs that they incur. Since the late 1970s, investor-owned
utilities have experienced a number of unfavorable regulatory trends, including
increased regulatory resistance to price increases and new legislation
encouraging competition.
Electric utilities have recently become subject to competition in
varying degrees. This competition can have the effect of decreasing revenues and
profit margins.
Natural Gas Industry. The natural gas industry is comprised primarily
of many small distribution companies and a few large interstate pipeline
companies. The Public Utility Holding Company Act of 1935 has generally acted as
a bar to the consolidation of pipeline and distribution companies. Regulation of
these companies is similar to that of electric companies. The performance of
natural gas utilities may also be substantially affected by fluctuations in
energy prices. Competition in the natural gas industry has resulted in the
consolidation of the industry.
Communications Industry. Most of the communications industry capacity
is concentrated in the hands of a few very large publicly-held companies, unlike
the situation in the electric and gas industries. Significant risks for the
investor to overcome still exist, however, including risk relating to pricing at
marginal versus embedded cost. New entrants may have lower costs of material due
to newer technologies or lower standards of reliability than those heretofore
imposed by American Telephone & Telegraph ("AT&T") on the industry. Accordingly,
the marginal cost of incremental service is much lower than the costs embedded
in an existing network. Communications companies are not subject to the Public
Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal
Communications Commission regulation. Local service may be regulated by the
states. In addition, AT&T and its former subsidiaries are
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still subject to judicial review pursuant to the settlement of the antitrust
case brought against them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of
regulated public utilities that are involved in the distribution of drinking
water to densely populated areas. The industry is geographically diverse and
subject to the same rate base and rate of return regulations as are other public
utilities. Demand for water is most heavily influenced by the local weather,
population growth in the service area and new construction. Supplies of clean,
drinkable water are limited and are primarily a function of the amount of past
rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities.
OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
Each of the Funds (except the Money Market Fund) may use forward
contracts, futures contracts, options on securities, options on indices, options
on currencies, and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with each
Fund's investments. These instruments are often referred to as "derivatives,"
which may be defined as financial instruments whose performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability
to correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as an option contract) and
the price movements of the investments being hedged. For example, if a
"protective put" is used to hedge a potential decline in a security and the
security does decline in price, the put option's increased value may not
completely offset the loss in the underlying security. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract, forward contract or option thereon at
any particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when
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it would otherwise be favorable to do so, or require that the Fund sell a
portfolio security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions.
For example, if a Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options
(other than options purchased by a Fund) expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient at all times to cover
its potential obligations not covered as provided in (1) above. Each Fund will
comply with SEC guidelines regarding cover for these instruments and, if the
guidelines so require, set aside cash or liquid securities. To the extent that a
futures contract, forward contract or option is deemed to be illiquid, the
assets used to "cover" the Fund's obligation will also be treated as illiquid
for purposes of determining the Fund's maximum allowable investment in illiquid
securities.
Even though options purchased by the Funds do not expose the Funds to
an obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Fund's
assets is used for cover or otherwise set aside, it could affect portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit the Fund to
write
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another call option on the underlying security, contract or currency with either
a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
A Fund would write a put option at an exercise price that, reduced by
the premium received on the option, reflects the lower price it is willing to
pay for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
put option, a Fund would have the right to sell the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities,
contracts or currencies against which it has written other put options. For
example, where a Fund has written a put option on an underlying security, rather
than entering a closing transaction of the written option, it may purchase a put
option with a different exercise price and/or expiration date that would
eliminate some or all of the risk associated with the written put. Used in
combinations, these strategies are commonly referred to as "put spreads."
Likewise, a Fund may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy
is commonly referred to as a "collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
call option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by a Fund for the purpose of acquiring
the underlying security, contract or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
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Each of the Funds may also purchase call options on underlying
securities, contracts or currencies against which it has written other call
options. For example, where a Fund has written a call option on an underlying
security, rather than entering a closing transaction of the written option, it
may purchase a call option with a different exercise price and/or expiration
date that would eliminate some or all of the risk associated with the written
call. Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase an OTC option unless it
believes that daily valuations for such options are readily obtainable. OTC
options differ from exchange-traded options in that OTC options are transacted
with dealers directly and not through a clearing corporation (which guarantees
performance). Consequently, there is a risk of non-performance by the dealer.
Since no exchange is involved, OTC options are valued on the basis of an average
of the last bid prices obtained from dealers, unless a quotation from only one
dealer is available, in which case only that dealer's price will be used. In the
case of OTC options, there can be no assurance that a liquid secondary market
will exist for any particular option at any specific time. Although a Fund will
enter into OTC options only with dealers that are expected to be capable of
entering into closing transactions with it, there is no assurance that the Fund
will in fact be able to close out an OTC option position at a favorable price
prior to expiration. In the event of insolvency of the dealer, a Fund might be
unable to close out an OTC option position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
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LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
the time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a designated
date, time and place. A stock index future provides for the delivery, at a
designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded
(either domestically or internationally) on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures exchanges and trading thereon are not regulated by the CFTC and
are not subject to the same regulatory controls. For a further discussion of the
risks associated with investments in foreign securities, see "Foreign
Securities" in this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased
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options, the Fund would continue to be required to make daily variation margin
payments and might be required to maintain the position being hedged by the
Future or option or to maintain cash or securities in a segregated account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the purchase or sale of an offsetting
contract. Forward contracts are traded over-the-counter, and not on organized
commodities or securities exchanges. As a result, it may be more difficult to
value such contracts, and it may be difficult to enter into closing
transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a security denominated in a foreign currency for settlement in
the near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transaction. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund, after taking into account unrealized
profits and unrealized losses on any contracts it has entered into. This
guideline may be modified by the Board, without a shareholder vote. This
limitation does not limit the percentage of the Fund's assets at risk to 5%.
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RISK FACTORS
Investors should consider carefully the following special factors
before investing in any of the Funds.
SMALL CAPITALIZATION COMPANIES
Investors should realize that equity securities of small to
medium-sized companies may involve greater risk than is associated with
investing in more established companies. Small to medium-sized companies often
have limited product and market diversification, fewer financial resources or
may be dependent on a few key managers. Any one of the foregoing may change
suddenly and have an immediate impact on the value of the company's securities.
Furthermore, whenever the securities markets are experiencing rapid price
changes due to national economic trends, secondary growth securities have
historically been subject to exaggerated price changes.
NON-INVESTMENT GRADE DEBT SECURITIES
The Balanced Fund, the Diversified Income Fund, the High Yield Fund,
and to a lesser extent the Dent Demographic Trends Fund, the Global Utilities
Fund, and the Telecommunications Fund may seek to meet their respective
investment objectives by investing in non-investment grade debt securities,
commonly known as "junk bonds." While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject to
greater risks than higher-rated securities. Economic downturns tend to disrupt
the market for junk bonds and adversely affect their values. Such economic
downturns may be expected to result in increased price volatility for junk bonds
and of the value of shares of the above-named Funds, and increased issuer
defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, junk
bonds are subordinated to the prior payment of senior indebtedness, which
potentially limits a Fund's ability to fully recover principal or to receive
payments when senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its
market value risk, and ratings may from time to time change to reflect
developments regarding the issuer's financial condition. Junk bonds have
speculative characteristics which are likely to increase in number and
significance with each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in
the absence of readily available market quotations for such securities, the
relative lack of reliable objective data makes it more difficult for the Trust's
trustees to value a Fund's securities, and judgment plays a more important role
in determining such valuations. Increased illiquidity in the junk bond market
also may affect a Fund's ability to dispose of such securities at desirable
prices.
In the event a Fund experiences an unexpected level of net redemptions,
the Fund could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset based upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return. Prices
of junk bonds have been found to be less sensitive to fluctuations in interest
rates, and more sensitive to adverse economic changes and individual corporate
developments, than those of higher-rated debt securities.
FOREIGN SECURITIES
Investments by a Fund in foreign securities whether denominated in U.S.
dollars or foreign currencies, may entail the following risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks described below.
CURRENCY RISK. The value of the Fund's foreign investments (except for
Money Market Fund, which may only invest in U.S. dollar denominated securities)
may be affected by changes in currency exchange rates. The U.S. dollar value of
a foreign security generally decreases when the value of the U.S. dollar rises
against the foreign currency in which the security is denominated, and tends to
increase when the value of the U.S. dollar falls against such currency.
36
<PAGE> 79
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by the Fund.
POLITICAL AND ECONOMIC RISK. The economies of many of the countries in
which the Fund may invest are not as developed as the United States economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Fund's investments.
REGULATORY RISK. Foreign companies are generally not subject to the
regulatory controls imposed on United States issuers and, as a consequence,
there is generally less publicly available information about foreign securities
than is available about domestic securities. Foreign companies are not subject
to uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by a withholding tax at the
source, which tax would reduce dividend income payable to the Fund's
shareholders.
MARKET RISK. The securities markets in many of the countries in which
the Fund invests will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies and
governments may be less liquid and experience more price volatility than
comparable domestic securities. Increased custodian costs as well as
administrative difficulties (such as the need to use foreign custodians) may be
associated with the maintenance of assets in foreign jurisdictions. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers which may make it difficult to enforce contractual
obligations. In addition, transaction costs in foreign securities markets are
likely to be higher, since brokerage commission rates in foreign countries are
likely to be higher than in the United States.
In addition, there are risks associated with certain investment
strategies employed by the Funds as discussed in the previous section.
NON-DIVERSIFIED PORTFOLIO (GLOBAL UTILITIES FUND ONLY)
The Global Utilities Fund is a non-diversified portfolio, which means
that it may invest a greater proportion of its assets in the securities of a
smaller number of issuers and therefore may be subject to greater market and
credit risk than a more broadly diversified portfolio. (A diversified portfolio
may not invest more than 5% of its assets in obligations of one issuer, with
respect to 75% of its total assets.)
MANAGEMENT
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during at least the last five years are set forth below. Unless otherwise
indicated, the address of each trustee and executive officer is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046.
37
<PAGE> 80
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (80) Trustee and Director and Chairman, A I M Management Group
Chairman Inc., A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company; and Executive Vice Chairman and
Director, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) Trustee Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (international
communications company).
- --------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
- --------------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 8th Floor Mortgage Corp. Formerly, Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
- --------------------------------------------------------------------------------------------------------------------
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company) and Twenty First
Jetero Plaza, Suite E Century, Inc. (a governmental affairs company);
Humble, TX 77338 and Director, Telscape International and
Administaff. Formerly, Member of the U.S. House of
Representatives.
- --------------------------------------------------------------------------------------------------------------------
**CARL FRISCHLING (62) Trustee Partner, Kramer, Levin, Naftalis & Frankel (law
919 Third Avenue firm). Formerly Partner, Reid and Priest (law
New York, NY 10022 firm).
====================================================================================================================
</TABLE>
- ----------------
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
** A trustee who is an interested person" of the Trust as defined in the
1940 Act.
38
<PAGE> 81
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director and CEO, Managed Products, AMVESCAP PLC.
- --------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Trustee Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
- --------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
- --------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
====================================================================================================================
</TABLE>
- --------------------
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
39
<PAGE> 82
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital
President Management, Inc.; Director and Executive Vice
President, A I M Management Group Inc.; Director
and Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
- --------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; General Counsel and Vice President,
A I M Fund Services, Inc.; and Vice President,
A I M Capital Management, Inc. and
A I M Distributors, Inc.
- --------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
- --------------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
- --------------------------------------------------------------------------------------------------------------------
STUART W. COCO (44) Vice President Senior Vice President, A I M Capital Management,
Inc. and Vice President, A I M Advisors, Inc.
- --------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., and Fund Management Company.
- --------------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (39) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
- --------------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital
Management, Inc.
====================================================================================================================
</TABLE>
The standing committees of the Board are the Audit Committee, the
Investments Committee and the Nominating and Compensation Committee.
40
<PAGE> 83
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for:
o considering management's recommendations of independent
accountants for each Fund and evaluating such accountants'
performance, costs and financial stability;
o with AIM, reviewing and coordinating audit plans prepared by
the Funds' independent accountants and management's internal
audit staff; and
o reviewing financial statements contained in periodic reports
to shareholders with the Funds' independent accountants and
management.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investments Committee is responsible for:
o overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and
o considering and acting, on an interim basis between meetings
of the full Board, on investment-related matters requiring
Board consideration, including dividends and distributions,
brokerage policy and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
o considering and nominating individuals to stand for election
as independent trustees as long as the company maintains a
distribution plan pursuant to Rule 12b-1 under the 1940 Act;
o reviewing from time to time the compensation payable to the
independent trustees; and
o making recommendations to the Board regarding matters related
to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such
person was a shareholder of record at the time they submit such names and is
entitled to vote at the meeting, and (ii) that the Nominating and Compensation
Committee or the Board, as applicable, shall make the final determination of
persons to be nominated.
All of the Trust's trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
investment companies managed or advised by AIM.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any Committee thereof. Each trustee of
the Trust who is not also an officer of the Trust is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of certain other investment companies
advised or managed by AIM. Each such trustee receives a fee, allocated among the
AIM Funds for which he or she serves as a director or trustee, which consists of
an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1999 for each trustee of the Trust:
41
<PAGE> 84
<TABLE>
<CAPTION>
====================================================================================================================
AGGREGATE RETIREMENT BENEFITS TOTAL
COMPENSATION ACCRUED BY COMPENSATION
TRUSTEE FROM TRUST(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett $ 14,751 $ 37,485 $ 103,500
- --------------------------------------------------------------------------------------------------------------------
Owen Daly II $ 14,751 $ 122,898 $ 103,500
- --------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. $ 14,751 $ -0- $ 103,500
- --------------------------------------------------------------------------------------------------------------------
Jack Fields $ 14,473 $ 15,826 $ 101,500
- --------------------------------------------------------------------------------------------------------------------
Carl Frischling(4) $ 14,751 $ 97,791 $ 103,500
- --------------------------------------------------------------------------------------------------------------------
Robert H. Graham $ -0- $ -0- $ -0-
- --------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis $ 14,443 $ -0- $ 101,500
- --------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock $ 14,751 $ 45,766 $ 103,500
- --------------------------------------------------------------------------------------------------------------------
Ian W. Robinson(5) $ 3,464 $ 94,442 $ 25,000
- --------------------------------------------------------------------------------------------------------------------
Louis S. Sklar $ 14,443 $ 90,232 $ 101,500
====================================================================================================================
</TABLE>
- ------------------
(1) The total amount of compensation deferred by all trustees of the Trust
during the fiscal year ended December 31, 1999, including interest
earned thereon, was $111,120.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the Trust in respect of such retirement benefits
was $28,223. Data reflects compensation estimated for the calendar year
ended December 31, 1999.
(3) Each trustee serves as a director or trustee of a total of 12
registered investment companies advised by AIM. Data reflects
compensation estimated for the calendar year ended December 31, 1999.
(4) The Trust paid the law firm of Kramer, Levin, Naftalis & Frankel LLP
$54,485 in legal fees for services provided to the Funds during the
fiscal year ended December 31, 1999. Mr. Frischling, a trustee of the
Trust, is a partner in such firm.
(5) Mr. Robinson was a trustee until March 12, 1999, when he retired.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible trustee is entitled to receive an annual benefit from
the Applicable AIM Funds commencing on the first day of the calendar quarter
coincident with or following his or her date of retirement equal to a maximum of
75% of the annual retainer paid or accrued by the Applicable AIM Funds for such
trustee during the twelve-month period immediately preceding the trustee's
retirement (including amounts deferred under a separate agreement between the
Applicable AIM Funds and the trustee) and based on the number of such trustee's
years of service (not in excess of 10 years of service) completed with respect
to any of the Applicable AIM Funds. Such benefit is payable to each eligible
trustee in quarterly installments. If an eligible trustee dies after attaining
the normal retirement date but before receipt of all benefits under the Plan,
the trustee's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased trustee, for no more
than ten years beginning the first day of the calendar quarter following the
date of the trustee's death. Payments under the Plan are not secured or funded
by any AIM Fund.
42
<PAGE> 85
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock,
Robinson, Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
============================================================
Number of
Years of
Service With Annual Retirement
the Applicable AIM Compensation Paid By All
Funds Applicable AIM Funds
============================================================
<S> <C>
10 $67,500
------------------------------------------------------------
9 $60,750
------------------------------------------------------------
8 $54,000
------------------------------------------------------------
7 $47,250
------------------------------------------------------------
6 $40,500
------------------------------------------------------------
5 $33,750
============================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(for purposes of this paragraph only, the "deferring trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Agreements").
Pursuant to the Agreements, the deferring trustees elected to defer receipt of
100% of their compensation payable by the Trust, and such amounts are placed
into a deferral account. Currently, the deferring trustees may select various
AIM Funds in which all or part of their deferral account shall be deemed to be
invested. Distributions from the deferring trustees' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring trustee's retirement benefits commence under the Plan. The Trust's
Board of Trustees, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring trustee's termination
of service as a trustee of the Trust. If a deferring trustee dies prior to the
distribution of amounts in his deferral account, the balance of the deferral
account will be distributed to his designated beneficiary in a single lump sum
payment as soon as practicable after such deferring trustee's death. The
Agreements are not funded and, with respect to the payments of amounts held in
the deferral accounts, the deferring trustees have the status of unsecured
creditors of the Trust and of each other AIM Fund from which they are deferring
compensation.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
Each Fund has entered into a master investment advisory agreement (the
"Advisory Agreement") dated April 17, 2000, and a master administrative services
agreement (the "Administrative Services Agreement"), dated May 1, 1998, with
AIM. A prior investment advisory agreement with substantially similar terms
to the Advisory Agreement was in effect prior to April 17, 2000. A prior master
administrative services agreement ("Prior Administrative Services Agreement")
with substantially similar terms to the Administrative Services Agreement, was
in effect prior to May 1, 1998. In addition, AIM has entered into a Sub-Advisory
Agreement, dated April 17, 2000, (the "INVESCO Agreement") with INVESCO Asset
Management Limited ("INVESCO"), an indirect wholly owned subsidiary of AMVESCAP
PLC, with respect to the Global Growth and Income Fund. A prior sub-advisory
agreement with substantially similar terms to the Sub-Advisory Agreement was
in effect prior to April 17, 2000. The address of INVESCO is 11 Devonshire
Square, London, England EC2 M4YR. AIM has also entered into a sub-advisory
agreement, dated April 17, 2000 (the "Dent Agreement," collectively with the
INVESCO Agreement, the "Sub-Advisory Agreements") with H.S. Dent Advisors, Inc.
("Dent"), with respect to the Dent Demographic Trends
43
<PAGE> 86
Fund. A prior sub-advisory agreement with substantially identical terms was in
effect prior to April 17, 2000. The address of Dent is 6515 Gwin Road, Oakland,
California 94611. See "Fund Management" in each Prospectus.
AIM was organized in 1976, and along with its subsidiaries, manages or
advises over 120 investment portfolios encompassing a broad range of investment
objectives. AIM is a wholly owned subsidiary of A I M Management Group Inc.
("AIM Management"), a holding company that has been engaged in the financial
services business since 1976. The address of AIM is 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173.
AIM and the Trust have adopted a Code of Ethics (the "Code of Ethics")
which requires investment personnel and certain other employees (a) to pre-clear
all personal securities transactions subject to the Code of Ethics, (b) to file
reports or duplicate confirmations regarding such transactions, (c) to refrain
from personally engaging in (i) short-term trading of a security, (ii)
transactions involving a security within seven days of an AIM Fund transaction
involving the same security, and (iii) transactions involving securities being
considered for investment by an AIM Fund and (d) abide by certain other
provisions under the Code of Ethics. The Code of Ethics also prohibits
investment personnel and all other employees from purchasing securities in an
initial public offering. Personal trading reports are reviewed periodically by
AIM, and the Board of Trustees reviews quarterly and annual reports (including
information on any substantial violations of the Code of Ethics). Sanctions for
violations of the Code of Ethics may include censure, monetary penalties,
suspension or termination of employment.
The Advisory Agreement for the Funds provides that each Fund will pay
all expenses of the Fund, including, without limitation: brokerage commissions,
taxes, legal, auditing, or governmental fees, the cost of preparing share
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to trustees and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Trust on behalf of the
Funds in connection with membership in investment company organizations, the
cost of printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise explicitly provided.
The Advisory Agreement for the Funds and the Sub-Advisory Agreements
for the Global Growth and Income Fund and the Dent Demographic Trends Fund
provide that they will each remain in effect until June 30, 2001, and continue
in effect from year to year thereafter only if such continuance is specifically
approved at least annually (i) by the Trust's Board of Trustees or by the vote
of a majority of the outstanding voting securities of the Funds (as defined in
the 1940 Act); and (ii) by the affirmative vote of a majority of the trustees
who are not parties to the agreement or "interested persons" of any such party
(the "Non-Interested Trustees") by votes cast in person at a meeting called for
such purpose. The Advisory Agreement was initially approved by the Trust's Board
of Trustees (including the affirmative vote of all of the Non-Interested
Trustees) on February 3, 2000, and was approved by the Funds' shareholders on
April 10, 2000. The Advisory Agreement became effective on April 17, 2000. Each
of the Sub-Advisory Agreements for the Global Growth and Income Fund and Dent
Demographic Trends Fund was initially approved by the Trust's Board of Trustees
(including the affirmative vote of all of the Non-Interested Trustees) on
February 3, 2000, and was approved by the applicable Fund's shareholders and
became effective April 17, 2000.
The Advisory and Sub-Advisory Agreements provide that each of AIM
(in the case of the Advisory Agreement), INVESCO (in the case of the INVESCO
Agreement), and Dent (in the case of the Dent Agreement), may terminate its
agreement with respect to any Fund(s) on sixty (60) days' written notice
without penalty. In addition, the Trust (by vote of the Board of Trustees or
by vote of a majority of the outstanding voting securities of a Fund) may
terminate the Advisory or Sub-Advisory Agreements with respect to a Fund on 60
days' written notice without penalty. Each agreement terminates automatically
in the event of its assignment.
As compensation for its services, AIM pays INVESCO 40% of the
compensation AIM receives on the portion of the Global Growth and Income Fund's
assets that INVESCO subadvises. As compensation for its services, AIM pays Dent
the following fees pursuant to the Sub-Advisory Agreement with respect to the
Dent Demographic Trends Fund:
44
<PAGE> 87
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $1 billion ..................................................... 0.13%
Over $1 billion, to and including $2 billion ......................... 0.10%
Over $2 billion ...................................................... 0.07%
</TABLE>
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Fund's detriment during the
period stated in the agreement between AIM and the Fund.
Pursuant to the Advisory Agreement, AIM receives a fee from each of the
AIM V.I. Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I. Blue
Chip Fund, the AIM V.I. Capital Appreciation Fund, the AIM V.I. Capital
Development Fund, the AIM V.I. Dent Demographic Trends Fund, the AIM V.I.
Diversified Income Fund, the AIM V.I. Global Growth and Income Fund, the AIM
V.I. Global Utilities Fund, the AIM V.I. Government Securities Fund, the AIM
V.I. Growth Fund, the AIM V.I. Growth and Income Fund, the AIM V.I. High Yield
Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund,
the AIM V.I. Telecommunications and Technology Fund and the AIM V.I. Value Fund
calculated at the following annual rate, based on the average daily net assets
of the Fund during the year:
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $250 million ................................................... 0.65%
Over $250 million .................................................... 0.60%
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $150 million ................................................... 0.80%
Over $150 million .................................................... 0.625%
</TABLE>
AIM V.I. BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $150 million ................................................... 0.75%
Over $150 million .................................................... 0.50%
</TABLE>
AIM V.I. BLUE CHIP FUND
AIM V.I. CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $350 million ................................................... 0.75%
Over $350 million .................................................... 0.625%
</TABLE>
45
<PAGE> 88
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $2 billion ..................................................... 0.85%
Over $2 billion ...................................................... 0.80%
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $250 million ................................................... 0.60%
Over $250 million .................................................... 0.55%
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
All .................................................................. 1.00%
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $250 million ................................................... 0.50%
Over $250 million .................................................... 0.45%
</TABLE>
AIM V.I. HIGH YIELD FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $200 million ................................................... 0.625%
Next $300 million .................................................... 0.55%
Next $500 million .................................................... 0.50%
Amount over $1 billion ............................................... 0.45%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $250 million ................................................... 0.75%
Over $250 million .................................................... 0.70%
</TABLE>
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ----
<S> <C>
First $250 million ................................................... 0.40%
Over $250 million .................................................... 0.35%
</TABLE>
46
<PAGE> 89
Each of the Funds (except the AIM V.I. Blue Chip Fund and the AIM V.I.
Dent Demographic Trends Fund) paid to AIM a management fee (net of fee waivers)
for the fiscal years ended December 31, 1999, December 31, 1998, and December
31, 1997, under a prior, substantially similar advisory agreement, as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 7,663 $ 1,609* N/A
AIM V.I. Balanced Fund $ 210,282 $ -0-* N/A
AIM V.I. Capital Appreciation Fund $ 4,830,846 $3,521,837 $ 3,083,708
AIM V.I. Capital Development Fund $ -0- $ -0-* N/A
AIM V.I. Diversified Income Fund $ 556,418 $ 580,119 $ 447,539
AIM V.I. Global Growth and Income Fund $ 436,438 N/A N/A
AIM V.I. Global Utilities Fund $ 202,137 $ 161,488 $ 106,309
AIM V.I. Government Securities Fund $ 315,598 $ 221,956 $ 138,550
AIM V.I. Growth Fund $ 3,026,404 $1,941,818 $ 1,453,488
AIM V.I. Growth and Income Fund $10,438,977 $5,556,833 $ 2,609,695
AIM V.I. High Yield Fund $ 101,825 $ -0-* N/A
AIM V.I. International Equity Fund $ 2,066,153 $1,744,127 $ 1,519,323
AIM V.I. Money Market Fund $ 317,031 $ 252,407 $ 254,546
AIM V.I. Telecommunications and Technology Fund $ 756,068 N/A N/A
AIM V.I. Value Fund $10,380,472 $5,570,566 $ 3,303,799
</TABLE>
* Fees paid were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
For the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997, AIM waived management fees for each Fund (except the AIM V.I.
Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $59,101 $ 11,445* N/A
AIM V.I. Balanced Fund $ -0- $ 21,238* N/A
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0-
AIM V.I. Capital Development Fund $35,726 $ 9,522* N/A
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0-
AIM V.I. Global Growth and Income Fund $ -0- N/A $ N/A
AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0-
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0-
AIM V.I. High Yield Fund $ 1,750 $ 20,728* N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ -0-
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications and Technology Fund $ -0- N/A $ N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fees waived were for the period May 1, 1998 (date operations
commenced) through December 31, 1998.
47
<PAGE> 90
In addition to the management fees paid by each Fund (except the AIM
V.I. Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) for the
fiscal years ended December 31, 1999, December 31, 1998 and December 31, 1997,
AIM absorbed other expenses as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 43,901 $ 43,400 N/A
AIM V.I. Balanced Fund $ 26,814 $ 25,501 N/A
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0-
AIM V.I. Capital Development Fund $ 68,305 $ 48,808 N/A
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0-
AIM V.I. Global Growth and Income Fund $ 11,500 N/A N/A
AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0-
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0-
AIM V.I. High Yield Fund $ 43,433 $ 24,798 N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ -0-
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications and Technology Fund $ -0- N/A N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fee amounts are for the period May 1, 1998 (date operations
commenced) through December 31, 1998.
The Administrative Services Agreement for the Funds provides that AIM
may perform certain accounting and other administrative services to each Fund
which are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM would be entitled to receive from each Fund reimbursement of
its expenses. In addition, AIM provides, or assures that Participating Insurance
Companies will provide, certain services implementing the Trust's funding
arrangements with Participating Insurance Companies. These services include:
establishment of compliance procedures; negotiation of participation agreements;
preparation of prospectuses, financial reports and proxy statements for existing
Contractowners; maintenance of master accounts; facilitation of purchases and
redemptions requested by Contractowners; distribution to existing Contractowners
of copies of prospectuses, proxy materials, periodic Fund reports and other
materials; maintenance of records; and Contractowner services and communication.
Effective May 1, 1998, the Funds reimburse AIM for its costs in providing, or
assuring that Participating Insurance Companies provide, these services,
currently in an amount up to 0.25% of the average net asset value of each Fund.
AIM has agreed to bear certain of these costs on the net assets of each Fund as
of April 30, 1998.
The Administrative Services Agreement for the Funds provides that the
agreement will remain in effect for the initial term and continue in effect from
year to year thereafter only if such continuance is specifically approved at
least annually (i) by the Trust's Board of Trustees or by the vote of a majority
of the outstanding voting securities of the Funds (as defined in the 1940 Act);
and (ii) by the affirmative vote of a majority of the Non-Interested Trustees,
by votes cast in person at a meeting called for such purpose. The agreement
terminates automatically in the event of its assignment or in the event of
termination of the Advisory Agreement.
48
<PAGE> 91
For the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997, AIM received reimbursement of administrative services costs
from each of the Funds (except the AIM V.I. Blue Chip Fund, the AIM V.I. Dent
Demographic Trends Fund) pursuant to the Administrative Services Agreement and
the Prior Administrative Services Agreement as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ -0- $ 26,658* N/A
AIM V.I. Balanced Fund $ 17,161 $ 26,649* N/A
AIM V.I. Capital Appreciation Fund $ 78,369 $ 62,063 $43,588
AIM V.I. Capital Development Fund $ -0- $ 26,658* N/A
AIM V.I. Diversified Income Fund $ 50,901 $ 47,528 $48,683
AIM V.I. Global Growth and Income Fund $ 20,870 N/A N/A
AIM V.I. Global Utilities Fund $ 51,234 $ 46,855 $47,128
AIM V.I. Government Securities Fund $ 44,501 $ 50,152 $37,872
AIM V.I. Growth Fund $ 73,728 $ 57,128 $44,692
AIM V.I. Growth and Income Fund $ 102,711 $ 296,138 $43,065
AIM V.I. High Yield Fund $ -0- $ 28,103* N/A
AIM V.I. International Equity Fund $ 64,730 $ 76,026 $59,724
AIM V.I. Money Market Fund $ 44,311 $ 36,480 $38,289
AIM V.I. Telecommunications Fund $ 34,698 N/A N/A
AIM V.I. Value Fund $ 107,813 $ 420,725 $53,632
</TABLE>
* Fees paid were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
THE DISTRIBUTION AGREEMENT
The Funds have entered into a master distribution agreement (the
"Distribution Agreement") with AIM Distributors, dated April 17, 2000.
Information concerning AIM Distributors and the continuous offering of the
Funds' shares is set forth in the Prospectus under the heading "Fund
Management." The Distribution Agreement provides that AIM Distributors will bear
the expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to the sale of Fund
shares. The Distribution Agreement provides that the Funds shall bear the
expenses of qualification of shares of the Fund for sale in connection with the
public offering in any jurisdictions where qualification is required by law. AIM
Distributors has not undertaken to sell any specified number of shares of the
Funds.
The Distribution Agreement for the Funds provides that it will continue
in effect until June 30, 2001 and from year to year thereafter only if such
continuance is specifically approved at least annually (i) by the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities of
the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a
majority of Non-Interested Trustees by votes cast in person at a meeting called
for such purpose. The Trust or AIM Distributors may terminate its Distribution
Agreement on sixty (60) days' written notice without penalty. The Distribution
Agreement will terminate automatically in the event of its assignment.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each of the Funds
will be determined as of the close of regular trading of the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern Time) on each "business day of
the Fund." In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern
Time) on a particular day, the net asset value of a Fund share is determined as
of the close of the NYSE on such day. For purposes of determining net asset
value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. A "business day of a Fund" is
any day on which the NYSE
49
<PAGE> 92
is open for business. It is expected that the NYSE will be closed during the
next twelve months on Saturdays and Sundays and on the observed holidays of New
Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net
asset value per share of a Fund is determined by subtracting the liabilities
(e.g., the expenses) of the Fund from the assets of the Fund and dividing the
result by the total number of shares outstanding of such Fund. The determination
of a Fund's net asset value per share is made in accordance with generally
accepted accounting principles.
VALUATION OF INVESTMENTS OF ALL FUNDS EXCEPT THE MONEY MARKET FUND.
Among other items, a Fund's liabilities include accrued expenses and dividends
payable, and its total assets include portfolio securities valued at their
market value as well as income accrued but not received. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers and
in accordance with methods which are specifically authorized by the Board of
Trustees of the Trust. Short-term obligations with maturities of 60 days or less
are valued at amortized cost as reflecting fair value.
VALUATION OF THE MONEY MARKET FUND'S INVESTMENTS. The Money Market Fund
uses the amortized cost method of valuing the securities held by the Fund and
rounds the Fund's per share net asset value to the nearest whole cent;
therefore, it is anticipated that the net asset value of the shares of the Fund
will remain constant at $1.00 per share. However, the Trust can give no
assurance that the Fund can maintain a $1.00 net asset value per share.
FUTURES CONTRACTS. Initial margin deposits made upon entering into
futures contracts are recognized as assets due from the broker (the Fund's agent
in acquiring the futures position). During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are incurred.
When the contract is closed, the Fund that has entered into the futures contract
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
For the Money Market Fund: The net asset value per share of the Fund is
determined daily as of the close of trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund. In
the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a
particular day, the net asset value of a Fund share is determined as of the
close of the NYSE on such day. Net asset value per share is determined by
dividing the value of the Fund's securities, cash and other assets (including
interest accrued but not collected), less all its liabilities (including accrued
expenses and dividends payable), by the number of shares outstanding of the Fund
and rounding the resulting per share net asset value to the nearest one cent.
Determination of the Fund's net asset value per share is made in accordance with
generally accepted accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if the security were sold. During
such periods, the daily yield on shares of the Fund computed as described under
"Yield Information" may differ somewhat from an identical computation made by
another investment company with identical investments utilizing available
indications as to the market value of its portfolio securities.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. The Fund will
invest only in "Eligible Securities," as defined in Rule 2a-7 of the 1940 Act,
which the Fund's Board of Trustees has determined present minimal credit risk.
Rule 2a-7 also requires, among other things, that the Fund maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase only
instruments having remaining maturities of 397 calendar days or less.
50
<PAGE> 93
The Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share at
$1.00 for the Fund as computed for the purpose of sales and redemptions. Such
procedures include review of the Fund's holdings by the Board of Trustees at
such intervals as they may deem appropriate, to determine whether the net asset
value calculated by using available market quotations or other reputable sources
for the Fund deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the Fund's shares. In the event the Board of Trustees determines that such a
deviation exists for the Fund, it will take such corrective action as the Board
of Trustees deems necessary and appropriate with respect to the Fund, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; the withholding of
dividends; redemption of shares in kind; or the establishment of a net asset
value per share by using available market quotations.
The Fund intends to comply with any amendments made to Rule 2a-7 which
may require corresponding changes in the Fund's procedures which are designed to
stabilize the Fund's price per share at $1.00.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading on the NYSE (generally 4:00
p.m. Eastern time) on each business day of the Trust. In the event the NYSE
closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net
asset value of a Fund share is determined as of the close of the NYSE on such
day. For purposes of determining net asset value per share, futures and options
contracts closing prices which are available 15 minutes after the close of
trading of the NYSE will generally be used. Net asset value per share is
determined by dividing the value of the Fund's securities, cash and other assets
(including interest accrued but not collected), less all its liabilities
(including accrued expenses and dividends payable), by the total number of
shares outstanding. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
Each equity security held by the Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the closing bid price on that
day. Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a last
sales price, at the closing bid price on that day. Debt securities are valued on
the basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees of the Trust. Short-term obligations having
60 days or less to maturity are valued on the basis of amortized cost. For
purposes of determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE.
Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the NYSE. The values of such
foreign securities used in computing the net asset value of each Fund's shares
are determined at such times as trading is completed. Foreign currency exchange
rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the values of such foreign securities and such
foreign securities exchange rates may occur after the time at which such
values are determined and prior to the close of the NYSE that will not be
reflected in the computation of a Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Trustees.
51
<PAGE> 94
PURCHASE AND REDEMPTION OF SHARES
The Trust offers the shares of the Funds, on a continuous basis, to
both registered and unregistered separate accounts of affiliated and
unaffiliated Participating Insurance Companies to fund variable annuity
contracts (the "Contracts") and variable life insurance policies ("Policies").
Each separate account contains divisions, each of which corresponds to a Fund in
the Trust. Net purchase payments under the Contracts are placed in one or more
of the divisions of the relevant separate account and the assets of each
division are invested in the shares of the Fund which corresponds to that
division. Each separate account purchases and redeems shares of these Funds for
its divisions at net asset value without sales or redemption charges. Currently
several insurance company separate accounts invest in the Funds.
The Trust, in the future, may offer the shares of its Funds to certain
pension and retirement plans ("Plans") qualified under the Internal Revenue
Code. The relationships of Plans and Plan participants to the Fund would be
subject, in part, to the provisions of the individual plans and applicable law.
Accordingly, such relationships could be different from those described in this
Prospectus for separate accounts and owners of Contracts and Policies, in such
areas, for example, as tax matters and voting privileges.
The Board of Trustees monitors for possible conflicts among separate
accounts (and will do so for plans) buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a separate account to comply with such laws
could cause a conflict. To eliminate a conflict, the Board of Trustees may
require a separate account or Plan to withdraw its participation in a Fund. A
Fund's net asset value could decrease if it had to sell investment securities to
pay redemptions proceeds to a separate account (or plan) withdrawing because of
a conflict.
Each Fund ordinarily effects orders to purchase or redeem its shares
that are based on transactions under Policies or Contracts (e.g., purchase or
premium payments, surrender or withdrawal requests, etc.) at the Fund's net
asset value per share next computed on the day on which the separate account
processes such transactions. Each Fund effects orders to purchase or redeem its
shares that are not based on such transactions at the Fund's net asset value per
share next computed on the day on which the Fund receives the orders.
Please refer to the appropriate separate account prospectus related to
your Contract for more information regarding the Contract.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Funds declare and distribute dividends
representing substantially all net investment income as follows:
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
DECLARED PAID
-------- ---------
<S> <C> <C>
AIM V.I. Aggressive Growth Fund ................................ annually annually
AIM V.I. Balanced Fund ......................................... annually annually
AIM V.I. Blue Chip Fund ........................................ annually annually
AIM V.I. Capital Appreciation Fund ............................. annually annually
AIM V.I. Capital Development Fund .............................. annually annually
AIM V.I. Dent Demographic Trends Fund........................... annually annually
AIM V.I. Diversified Income Fund ............................... annually annually
AIM V.I. Global Utilities Fund ................................. annually annually
</TABLE>
52
<PAGE> 95
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
DECLARED PAID
-------- ---------
<S> <C> <C>
AIM V.I. Global Growth and Income Fund ......................... annually annually
AIM V.I. Government Securities Fund ............................ annually annually
AIM V.I. Growth Fund ........................................... annually annually
AIM V.I. Growth and Income Fund ................................ annually annually
AIM V.I. High Yield Fund ....................................... annually annually
AIM V.I. International Equity Fund ............................. annually annually
AIM V.I. Money Market Fund ..................................... daily daily
AIM V.I. Telecommunications Fund................................ annually annually
AIM V.I. Value Fund ............................................ annually annually
</TABLE>
Substantially all net realized capital gains, if any, are distributed
on an annual basis, except for the Money Market Fund, which may distribute net
realized short-term gains more frequently.
All such distributions will be automatically reinvested, at the
election of Participating Insurance Companies, in shares of the Fund issuing the
distribution at the net asset value determined on the reinvestment date.
TAX MATTERS. Each series of shares of the Trust is treated as a
separate association taxable as a corporation. Each Fund intends to qualify
under the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company ("RIC") for each taxable year. As a RIC, a Fund will not be
subject to federal income tax to the extent it distributes to its shareholders
its net investment income and net capital gains.
In order to qualify as a regulated investment company, each Fund must
satisfy certain requirements concerning the nature of its income,
diversification of its assets and distribution of its income to shareholders. In
order to ensure that individuals holding the Contracts whose assets are invested
in a Fund will not be subject to federal income tax on distributions made by the
Fund prior to the receipt of payments under the Contracts, each Fund intends to
comply with additional requirements of Section 817(h) of the Code relating to
both diversification of its assets and eligibility of an investor to be its
shareholder. Certain of these requirements in the aggregate may limit the
ability of a Fund to engage in transactions involving options, futures
contracts, forward contracts and foreign currency and related deposits.
The holding of the foreign currencies and investments by a Fund in
certain "passive foreign investment companies" may be limited in order to avoid
imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to foreign
withholding taxes on income from its investments. In any year in which more than
50% in value of a Fund's total assets at the close of the taxable year consists
of securities of foreign corporations, the Fund may elect to treat any foreign
taxes paid by it as if they had been paid by its shareholders. The insurance
company segregated asset accounts holding Fund shares should consider the impact
of this election.
Holders of Contracts under which assets are invested in the Funds
should refer to the prospectus for the Contracts for information regarding the
tax aspects of ownership of such Contracts.
Because each Fund intends to qualify under the Code as a RIC for each
taxable year, each Fund must, among other things, meet the following
requirements: A. Each Fund must generally derive at least 90%
53
<PAGE> 96
of its gross income from dividends, interest, payments with respect to
securities loans, gains from the sale or other disposition of stock, securities,
foreign currencies, or other income derived with respect to its business of
investing in such stock, securities or currencies. B. Each Fund must diversify
its holdings so that, at the end of each fiscal quarter or within 30 days
thereafter: (i) at least 50% of the market value of the Fund's assets is
represented by cash, cash items (including receivables), U.S. Government
securities, securities of other RICs, and other securities, with such other
securities limited, with respect to any one issuer, to an amount not greater
than 5% of the Fund's assets and not more than 10% of the outstanding voting
securities of such issuer, and (ii) not more than 25% of the value of the Fund's
assets is invested in the securities of any one issuer (other than U.S.
Government securities or securities of other RICs).
The Code imposes a nondeductible 4% excise tax on a RIC that fails to
distribute during each calendar year at least 98% of its ordinary income for the
calendar year, at least 98% of its capital gain net income for the 12-month
period ending on October 31 of the calendar year and certain other amounts. Each
Fund intends to make sufficient distributions to avoid imposition of the excise
tax. Some Funds meet an exception which results in their not being subject to
excise tax.
As a RIC, each Fund will not be subject to federal income tax on its
income and gains distributed to shareholders if it distributes at least (i) 90%
of its investment company taxable income for the taxable year; and (ii) 90% of
the excess of its tax-exempt interest income under Code Section 103(a) over its
deductions disallowed under Code Sections 265 and 171(a)(2).
Each Fund intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on each Fund by the 1940 Act and Subchapter M of the Code, place certain
limitations on (i) the assets of the insurance company separate accounts that
may be invested in securities of a single issuer and (ii) eligible investors.
Because Section 817(h) and those regulations treat the assets of each Fund as
assets of the corresponding division of the insurance company separate accounts,
each Fund intends to comply with these diversification requirements.
Specifically, the regulations provide that, except as permitted by the "safe
harbor" described below, as of the end of each calendar quarter or within 30
days thereafter no more than 55% of a Fund's total assets may be represented by
any one investment, no more than 70% by any two investments, no more than 80% by
any three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and while each U.S. Government agency and instrumentality is considered a
separate issuer, a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered the same
issuer. The regulations also provide that a Fund's shareholders are limited,
generally, to life insurance company separate accounts, general accounts of the
same life insurance company, an investment adviser or affiliate in connection
with the creation or management of a Fund or the trustee of a qualified pension
plan. Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Fund to satisfy the Section 817(h)
requirements would result in taxation of and treatment of the Contract holders
investing in a corresponding division other than as described in the applicable
prospectuses of the various insurance company separate accounts.
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Trust furnishes semi-annual reports containing information about
the Funds and their operations, including a list of the investments held in each
Fund's portfolio and their respective financial statements. Financial
statements, audited by independent auditors, will be issued annually. The firm
of Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia, PA 19103, serves
as the auditors of each Fund.
54
<PAGE> 97
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Trust
on certain federal securities law matters.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02110, is custodian of all securities and cash of the Funds.
The custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds, and performs
certain other ministerial duties. State Street also acts as transfer and
dividend disbursing agent for the Funds. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets. The Funds pay State Street such compensation as
may be agreed upon from time to time.
PRINCIPAL HOLDERS OF SECURITIES
To the best of the knowledge of each Fund, the names of the record
holders of 5% or more of the outstanding shares of the Fund as of February 1,
2000, and the percentage of the outstanding shares of such Fund owned by such
shareholders as of such date are set out below. The address of A I M Advisors,
Inc. is 11 Greenway Plaza, Suite 100, Houston, TX 77046. The address of
Connecticut General Life Insurance Company is 900 Cottage Grove Road, Hartford,
CT 06152-2321. The address of Glenbrook Life and Annuity Company is 3100 Sanders
Road, N4C, Northbrook, IL 60062. The address of IDS Life Insurance Company is
IDS Tower 10, T27/52, Minneapolis, MN 55440. The address of Merrill Lynch Life
Insurance Company is 800 Scudders Mill Road, Plainsboro, NJ 08536. The address
of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey
is Gateway Center Three, 13th Floor, Newark, NJ 07102. The address of First
Citicorp Life Insurance Company is One Court Square, Long Island City, NY 11120.
The address of Union Central Life Insurance Company is 1876 Waycross Road,
Cincinnati, OH 45240. The address for Hartford Life Insurance Company is 200
Hopmeadow Street, Simsburg, CT 06089. The address of Security Life of Denver
Insurance Company is 1290 Broadway, Denver, CO 80203. The address of Aetna Life
Insurance and Annuity Company is 151 Farmington Avenue, Hartford, CT 06156. The
address of General American Life Insurance Company is 9735 Landmark Parkway
Drive, St. Louis, MO 63127. The address of The Lincoln National Life Insurance
Company is 1300 S. Clinton, Fort Wayne, IN 46802.
55
<PAGE> 98
AIM V.I. AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 98.47%*
</TABLE>
AIM V.I. BALANCED FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 76.89%*
Union Central Life Insurance Company -0- -0- 22.45%
</TABLE>
AIM V.I. BLUE CHIP FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
A I M Advisors, Inc. -0- -0- 62.06%*
Glenbrook Life & Annuity Company -0- -0- 37.95%*
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 34.09%*
Glenbrook Life & Annuity Company -0- -0- 19.33%
Merrill Lynch Life Insurance Company -0- -0- 15.68%
Aetna Life Insurance and Annuity Company -0- -0- 11.19%
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 50.40%*
IDS Life Insurance Company -0- -0- 49.20%*
</TABLE>
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 73.99%*
A I M Advisors, Inc. -0- -0- 25.69%*
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
56
<PAGE> 99
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 47.13%*
Glenbrook Life & Annuity Company -0- -0- 29.99%*
General American Life Insurance Company -0- -0- 14.30%
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 99.64%*
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 49.30%*
Glenbrook Life & Annuity Company -0- -0- 43.74%*
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 30.10%*
Glenbrook Life & Annuity Company -0- -0- 27.54%*
First Citicorp Life Insurance Company -0- -0- 19.48%
Security Life of Denver Insurance Company -0- -0- 11.34%
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
57
<PAGE> 100
AIM V.I. GROWTH FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 38.80%*
Glenbrook Life & Annuity Company -0- -0- 24.84%
Aetna Life Insurance and Annuity Company -0- -0- 10.82%
The Lincoln National Life Insurance Company -0- -0- 5.78%
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
IDS Life Insurance Company -0- -0- 61.43%*
Glenbrook Life & Annuity Company -0- -0- 9.47%
Pruco Life Insurance Company -0- -0- 8.12%
Connecticut General Life Insurance Company -0- -0- 7.75%
</TABLE>
AIM V.I. HIGH YIELD FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 57.13%*
Hartford Life Insurance Company -0- -0- 35.27%*
A I M Advisors, Inc. -0- -0- 7.53%
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
58
<PAGE> 101
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 41.62%*
Glenbrook Life & Annuity Company -0- -0- 19.71%
General American Life Insurance Company -0- -0- 11.87%
First Citicorp Life Insurance Company -0- -0- 6.12%
</TABLE>
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 48.91%*
Glenbrook Life & Annuity Company -0- -0- 29.94%*
General American Life Insurance Company -0- -0- 19.27%
</TABLE>
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 97.13%*
</TABLE>
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Merrill Lynch Life Insurance Company -0- -0- 25.05%*
Connecticut General Life Insurance Company -0- -0- 21.82%
Pruco Life Insurance Company of New Jersey -0- -0- 15.27%
Glenbrook Life & Annuity Company -0- -0- 12.23%
</TABLE>
As of February 1, 2000, the directors and officers of the Company as a
group owned beneficially less than 1% of the outstanding shares of the Company.
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
59
<PAGE> 102
owns over 25% of the shares of the Fund that are outstanding, it may be presumed
to be in "control" of the Fund, as defined in the 1940 Act.
As of February 1, 2000, the trustees and officers of the Trust as a
group owned beneficially less than 1% of the outstanding shares of the Trust.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Funds
and the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C.
60
<PAGE> 103
APPENDIX A
- -------------------------------------------------------------------------------
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated by
an asterisk (*).
Moody's Investors Service, Inc.'s corporate bond ratings are as follows:
*Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
*Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
*A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
*Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
A-1
<PAGE> 104
Standard and Poor's Ratings Services classifications are as follows:
*AAA -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
*AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
*A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
*BBB -- Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.
BB, B, CCC, CC, C -- Debt rated "BB", "B", "CCC", "CC" and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB --" rating.
B -- Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB --" rating.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it's not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B --" rating.
CC -- The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C -- The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC--" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 -- The rating "C1" is reserved for income bonds on which no interest is
being paid.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The rating from "AA" to "CCC" maybe modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
A-2
<PAGE> 105
Duff & Phelps fixed-income ratings are as follows:
*AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
*AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
*A+, A, A- -- Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
*BBB+, BBB, BBB- -- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in quality rating within this category or
into a higher or lower quality rating grade.
CCC -- Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of interest, preferred dividends
and/or principal. Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable company
developments.
Fitch IBCA Inc.'s bond ratings are as follows:
*AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
*AA -- Bonds considered to be Investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+".
*A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
*BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
A-3
<PAGE> 106
CC -- Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C -- Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D -- Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these bonds, and
"D" represents the lowest potential for recovery.
Plus (+) Minus (-) -- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA", "DDD", "DD", or "D" categories.
A-4
<PAGE> 107
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
The following list includes certain common Agency Securities, as defined in
the Prospectus, and does not purport to be exhaustive.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import Bank
of the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Authority of
the U.S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued
and guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consists of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued
and guaranteed by FNMA, a federally chartered and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage
pass-through certificates issued and guaranteed by FNMA. FNMA Certificates
represent a fractional undivided ownership interest in a pool of mortgage loans
either provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from
primary lenders that satisfy certain criteria developed by FNMA, including depth
of mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates
B-1
<PAGE> 108
backed by that loan pool alone, or may package a pool made up of loans purchased
from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may
be included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loan must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust
indenture for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing and administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, all under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest
rate borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee lenders servicing the
underlying mortgage loans receive as compensation a portion of the fee paid to
FNMA, the excess yields on pooled loans with coupon rates above the lowest rate
borne by any mortgage loan in the pool and certain other amounts collected, such
as late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually
through securities dealers. The lender of a single lender pool typically markets
all Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amount of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
GNMA Certificates differ from bonds in that the principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity. GNMA Certificates are called "modified pass-through" securities
because they entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid to
the issuer and GNMA, regardless of whether or not the mortgagor actually makes
the payment. Payment of principal of and interest on GNMA Certificates of the
"modified pass-through" type is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose little risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it
is not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
B-2
<PAGE> 109
As a consequence of the fees paid to GNMA and the issuer of GNMA
Certificates, the coupon rate of interest of GNMA Certificates is lower than the
interest paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates.
The yield which will be earned on GNMA Certificates may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION ("GSA") PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and
long-term bonds issued by public housing and urban renewal agencies in
connection with programs administered by the Department of Housing and Urban
Development of the U.S. Government, the payment of which is secured by the U.S.
Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
TITLE XI BONDS -- are bonds issued in accordance with the provisions of
Title XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
B-3
<PAGE> 110
APPENDIX C
- -------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Funds reserve the right to invest in Money Market
Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes, and bonds issued by the
U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Fund's investment advisor to be of comparable quality to the other
obligations in which the Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European Coal and
Steel Community, the Asian Development Bank and the InterAmerican Development
Bank. The percentage of the Fund's assets invested in securities issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for
the deposit of funds. Like a certificate of deposit, it earns a specified rate
of interest over a definite period of time; however, it cannot be traded in the
secondary market.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S.
dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S.
dollar-denominated obligation issued by a domestic branch of a foreign bank.
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on these
issues vary from a few days to nine months.
C-1
<PAGE> 111
VARIABLE RATE MASTER DEMAND NOTES -- Variable rate master demand notes are
unsecured demand notes that permit investment of fluctuating amounts of money at
variable rates of interest pursuant to arrangements with issuers who meet the
foregoing quality criteria as discussed in the Statement of Additional
Information under "Investment Programs." The interest rate on a variable rate
master demand note is periodically redetermined according to a prescribed
formula. Although there is no secondary market in master demand notes, the payee
may demand payment of the principal amount of the note on relatively short
notice. All variable rate master demand notes acquired by the Money Market Fund
will be payable within a prescribed notice period not to exceed seven days.
4. REPURCHASE AGREEMENTS.
A repurchase agreement is a contractual undertaking whereby the seller of
securities (limited to U.S. Government securities, including securities issued
or guaranteed by the U.S. Treasury or the various agencies and instrumentalities
of the U.S. Government) agrees to repurchase the securities at a specified price
on a future date determined by negotiations.
5. TAXABLE MUNICIPAL SECURITIES.
Taxable municipal securities are debt securities issued by or on behalf of
states and their political subdivisions, the District of Columbia, and
possessions of the United States, the interest on which is not exempt from
federal income tax.
C-2
<PAGE> 112
FINANCIAL STATEMENTS
FS
<PAGE> 113
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Aggressive Growth Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets and the financial highlights for the year
then ended and for the period May 1, 1998 (commencement of operations) through
December 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Aggressive Growth Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period May 1, 1998
(commencement of operations) through December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. AGGRESSIVE GROWTH FUND
FS-1
<PAGE> 114
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS AND OTHER EQUITY
INTERESTS - 88.57%
AIR FREIGHT - 0.55%
Eagle USA Airfreight, Inc.(a) 1,000 $ 43,125
- ---------------------------------------------------------------------
Expeditors International of Washington, Inc. 1,200 52,575
- ---------------------------------------------------------------------
95,700
- ---------------------------------------------------------------------
AIRLINES - 0.41%
Ryanair Holdings PLC - ADR (Ireland)(a) 1,300 71,662
- ---------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.86%
Gentex Corp.(a) 3,500 97,125
- ---------------------------------------------------------------------
Meritor Automotive, Inc. 1,700 32,937
- ---------------------------------------------------------------------
Tower Automotive, Inc.(a) 1,200 18,525
- ---------------------------------------------------------------------
148,587
- ---------------------------------------------------------------------
BANKS (REGIONAL) - 1.01%
Bank United Corp. - Class A 1,300 35,425
- ---------------------------------------------------------------------
First Republic Bank(a) 1,400 32,900
- ---------------------------------------------------------------------
Southwest Bancorporation of Texas, Inc.(a) 3,300 65,381
- ---------------------------------------------------------------------
Trustmark Corp. 1,900 41,058
- ---------------------------------------------------------------------
174,764
- ---------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 0.15%
Canandaigua Brands, Inc. - (Class A(a) 500 25,500
- ---------------------------------------------------------------------
BIOTECHNOLOGY - 0.77%
PE Corp. - Celera Genomics Group(a) 900 134,100
- ---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.17%
Hispanic Broadcasting Corp.(a) 1,000 92,219
- ---------------------------------------------------------------------
Radio One, Inc.(a) 1,200 110,400
- ---------------------------------------------------------------------
202,619
- ---------------------------------------------------------------------
BUILDING MATERIALS - 0.58%
Elcor Corp. 2,150 64,769
- ---------------------------------------------------------------------
Simpson Manufacturing Co., Inc.(a) 800 35,000
- ---------------------------------------------------------------------
99,769
- ---------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.71%
Cambrex Corp. 1,400 48,212
- ---------------------------------------------------------------------
OM Group, Inc. 2,200 75,762
- ---------------------------------------------------------------------
123,974
- ---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 6.71%
Ancor Communications, Inc.(a) 800 54,300
- ---------------------------------------------------------------------
ANTEC Corp.(a) 800 29,200
- ---------------------------------------------------------------------
Comverse Technology, Inc.(a) 850 123,037
- ---------------------------------------------------------------------
Dycom Industries, Inc.(a) 1,200 52,875
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT - CONTINUED
Finisar Corp.(a) 1,700 $ 152,787
- -----------------------------------------------------------------------
Harmonic, Inc.(a) 3,100 294,306
- -----------------------------------------------------------------------
MasTec, Inc.(a) 2,142 95,319
- -----------------------------------------------------------------------
Polycom, Inc.(a) 2,800 178,325
- -----------------------------------------------------------------------
Proxim, Inc.(a) 1,100 121,000
- -----------------------------------------------------------------------
Sycamore Networks, Inc.(a) 200 61,600
- -----------------------------------------------------------------------
1,162,749
- -----------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.02%
National Instruments Corp.(a) 4,350 166,387
- -----------------------------------------------------------------------
pcOrder.com, Inc.(a) 800 40,800
- -----------------------------------------------------------------------
Visual Networks, Inc.(a) 1,800 142,650
- -----------------------------------------------------------------------
349,837
- -----------------------------------------------------------------------
COMPUTERS (NETWORKING) - 4.51%
Cabletron Systems, Inc.(a) 5,000 130,000
- -----------------------------------------------------------------------
Emulex Corp.(a) 2,900 326,250
- -----------------------------------------------------------------------
Foundry Networks, Inc.(a) 200 60,337
- -----------------------------------------------------------------------
Gadzoox Networks, Inc.(a) 1,700 74,056
- -----------------------------------------------------------------------
VeriSign, Inc.(a) 1,000 190,937
- -----------------------------------------------------------------------
781,580
- -----------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 4.29%
Actel Corp.(a) 3,600 86,400
- -----------------------------------------------------------------------
Cybex Computer Products Corp.(a) 900 36,450
- -----------------------------------------------------------------------
QLogic Corp.(a) 1,500 239,812
- -----------------------------------------------------------------------
SanDisk Corp.(a) 2,400 231,000
- -----------------------------------------------------------------------
Xircom, Inc.(a) 2,000 150,000
- -----------------------------------------------------------------------
743,662
- -----------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 11.79%
Allscripts, Inc.(a) 500 22,000
- -----------------------------------------------------------------------
Aspen Technology, Inc.(a) 2,800 74,025
- -----------------------------------------------------------------------
Business Objects S.A. - ADR (France)(a) 1,100 146,987
- -----------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 1,400 278,250
- -----------------------------------------------------------------------
Citrix Systems, Inc.(a) 1,100 135,300
- -----------------------------------------------------------------------
Concord Communications, Inc.(a) 700 31,062
- -----------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 1,800 104,625
- -----------------------------------------------------------------------
Entrust Technologies, Inc. 800 47,950
- -----------------------------------------------------------------------
FreeMarkets, Inc.(a) 200 68,262
- -----------------------------------------------------------------------
Gemstar International Group Ltd.(a) 1,400 99,750
- -----------------------------------------------------------------------
ISS Group, Inc.(a) 800 56,900
- -----------------------------------------------------------------------
Jack Henry & Associates 700 37,581
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-2
<PAGE> 115
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - CONTINUED
Macromedia, Inc.(a) 1,100 $ 80,437
- ------------------------------------------------------------------
Mercury Interactive Corp.(a) 1,300 140,319
- ------------------------------------------------------------------
Micromuse, Inc.(a) 600 102,000
- ------------------------------------------------------------------
Mission Critical Software, Inc.(a) 1,000 70,000
- ------------------------------------------------------------------
Peregrine Systems, Inc.(a) 700 58,933
- ------------------------------------------------------------------
QRS Corp.(a) 850 89,250
- ------------------------------------------------------------------
Rational Software Corp.(a) 1,400 68,775
- ------------------------------------------------------------------
ScanSource, Inc.(a) 700 28,394
- ------------------------------------------------------------------
Symantec Corp.(a) 1,100 64,487
- ------------------------------------------------------------------
TSI International Software Ltd.(a) 1,700 96,262
- ------------------------------------------------------------------
Verity, Inc.(a) 3,300 140,456
- ------------------------------------------------------------------
2,042,005
- ------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.27%
Fossil, Inc.(a) 2,050 47,406
- ------------------------------------------------------------------
CONSUMER FINANCE - 0.08%
AmeriCredit Corp.(a) 800 14,800
- ------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 5.59%
Black Box Corp.(a) 1,300 87,100
- ------------------------------------------------------------------
CommScope, Inc.(a) 2,500 100,781
- ------------------------------------------------------------------
Cree Research, Inc.(a) 2,900 247,588
- ------------------------------------------------------------------
Molex, Inc. - Class A 2,200 99,550
- ------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 2,000 81,375
- ------------------------------------------------------------------
Sammina Corp.(a) 900 89,888
- ------------------------------------------------------------------
Sawtek, Inc.(a) 1,800 119,813
- ------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 4,500 142,313
- ------------------------------------------------------------------
968,408
- ------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 1.72%
C-COR.net Corp.(a) 2,400 183,900
- ------------------------------------------------------------------
Power-One, Inc.(a) 2,500 114,531
- ------------------------------------------------------------------
298,431
- ------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 1.77%
Alpha Industries, Inc.(a) 4,350 249,309
- ------------------------------------------------------------------
Tektronix, Inc. 1,500 58,313
- ------------------------------------------------------------------
307,622
- ------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 10.03%
ANADIGICS, Inc.(a) 1,800 84,938
- ------------------------------------------------------------------
Applied Micro Circuits Corp.(a) 2,400 305,400
- ------------------------------------------------------------------
ATMI, Inc.(a) 2,200 72,738
- ------------------------------------------------------------------
Burr-Brown Corp.(a) 2,100 75,863
- ------------------------------------------------------------------
Cymer, Inc.(a) 800 36,800
- ------------------------------------------------------------------
Dallas Semiconductor Corp. 1,500 96,656
- ------------------------------------------------------------------
GlobeSpan, Inc.(a) 800 52,100
- ------------------------------------------------------------------
Micrel, Inc.(a) 1,300 74,019
- ------------------------------------------------------------------
Microchip Technology, Inc.(a) 3,600 246,375
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS) - CONTINUED
PMC-Sierra, Inc.(a) 900 $ 144,281
- ----------------------------------------------------------------------
SDL, Inc.(a) 1,400 305,200
- ----------------------------------------------------------------------
Semtech Corp.(a) 2,600 135,525
- ----------------------------------------------------------------------
TranSwitch Corp.(a) 900 65,306
- ----------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 800 41,950
- ----------------------------------------------------------------------
1,737,151
- ----------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 3.13%
Advanced Energy Industries, Inc.(a) 2,100 103,425
- ----------------------------------------------------------------------
Asyst Technologies, Inc.(a) 2,600 170,463
- ----------------------------------------------------------------------
Brooks Automation, Inc.(a) 600 19,538
- ----------------------------------------------------------------------
Credence Systems Corp. 2,200 190,300
- ----------------------------------------------------------------------
Etec Systems, Inc.(a) 1,300 58,338
- ----------------------------------------------------------------------
542,064
- ----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.41%
SEI Investments Co. 600 71,409
- ----------------------------------------------------------------------
FOODS - 0.30%
Hain Food Group, Inc. (The)(a) 2,300 51,463
- ----------------------------------------------------------------------
FOOTWEAR - 0.44%
Steven Madden, Ltd.(a) 2,200 41,938
- ----------------------------------------------------------------------
Vans, Inc.(a) 2,800 34,300
- ----------------------------------------------------------------------
76,238
- ----------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.25%
Station Casinos, Inc.(a) 1,900 42,631
- ----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 1.12%
Alpharma, Inc. - Class A 2,200 67,650
- ----------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 800 75,000
- ----------------------------------------------------------------------
Medicis Pharmaceutical Corp. - Class A(a) 1,200 51,075
- ----------------------------------------------------------------------
193,725
- ----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT - 0.64%
Health Management Associates, Inc. - Class A(a) 5,400 72,225
- ----------------------------------------------------------------------
Province Healthcare Co.(a) 2,000 38,000
- ----------------------------------------------------------------------
110,225
- ----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE - 1.26%
Express Scripts, Inc. - Class A(a) 3,400 217,600
- ----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.29%
ResMed, Inc.(a) 1,200 50,100
- ----------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.95%
CareInsite, Inc.(a) 500 40,250
- ----------------------------------------------------------------------
Hooper Holmes, Inc. 2,700 69,525
- ----------------------------------------------------------------------
Techne Corp.(a) 1,000 55,063
- ----------------------------------------------------------------------
164,838
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-3
<PAGE> 116
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.38%
Affiliated Managers Group, Inc.(a) 400 $ 16,175
- -----------------------------------------------------------------
Eaton Vance Corp. 1,300 49,400
- -----------------------------------------------------------------
65,575
- -----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.38%
Kopin Corp.(a) 3,600 151,200
- -----------------------------------------------------------------
Pentair, Inc. 600 23,100
- -----------------------------------------------------------------
Spartech Corp. 2,000 64,500
- -----------------------------------------------------------------
238,800
- -----------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.20%
Mettler-Toledo International, Inc.(a) 900 34,369
- -----------------------------------------------------------------
NATURAL GAS - 0.29%
Kinder Morgan, Inc. 2,500 50,469
- -----------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.26%
Miami Computer Supply Corp.(a)(b) 1,200 44,550
- -----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 2.16%
Cal Dive International, Inc.(a) 700 23,188
- -----------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 4,400 88,275
- -----------------------------------------------------------------
Global Industries Ltd.(a) 1,400 12,075
- -----------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 2,300 51,606
- -----------------------------------------------------------------
Maverick Tube Corp.(a) 4,400 108,625
- -----------------------------------------------------------------
National-Oilwell, Inc.(a) 2,100 32,944
- -----------------------------------------------------------------
Patterson Energy, Inc.(a) 4,500 58,500
- -----------------------------------------------------------------
375,213
- -----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.70%
Cabot Oil & Gas Corp. - Class A 800 12,850
- -----------------------------------------------------------------
Evergreen Resources, Inc.(a) 1,500 29,625
- -----------------------------------------------------------------
Newfield Exploration Co.(a) 2,300 61,525
- -----------------------------------------------------------------
Stone Energy Corp.(a) 500 17,813
- -----------------------------------------------------------------
121,813
- -----------------------------------------------------------------
PUBLISHING - 0.18%
IDG Books Worldwide, Inc. - Class A(a) 1,300 15,031
- -----------------------------------------------------------------
Meredith Corp. 400 16,675
- -----------------------------------------------------------------
31,706
- -----------------------------------------------------------------
RESTAURANTS - 1.30%
CEC Entertainment, Inc.(a) 3,350 95,056
- -----------------------------------------------------------------
Jack in the Box, Inc.(a) 3,100 64,131
- -----------------------------------------------------------------
Sonic Corp.(a) 2,300 65,550
- -----------------------------------------------------------------
224,737
- -----------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.77%
CDW Computer Centers, Inc.(a) 1,700 133,663
- -----------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.35%
99 Cents Only Stores(a) 1,575 60,244
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS) - 0.42%
Wild Oats Markets, Inc.(a) 3,300 $ 73,219
- --------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.26%
Chemdex Corp.(a) 400 44,400
- --------------------------------------------------------------------
RETAIL (SPECIALTY) - 2.54%
Cost Plus, Inc.(a) 925 32,953
- --------------------------------------------------------------------
Linens 'n Things, Inc.(a) 2,000 59,250
- --------------------------------------------------------------------
Michaels Stores, Inc.(a) 3,700 105,450
- --------------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 6,400 137,600
- --------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 2,400 27,000
- --------------------------------------------------------------------
Zale Corp.(a) 1,600 77,400
- --------------------------------------------------------------------
439,653
- --------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 4.20%
American Eagle Outfitters, Inc.(a) 3,600 162,000
- --------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 1,900 65,431
- --------------------------------------------------------------------
Children's Place Retail Stores, Inc. (The)(a) 2,200 36,163
- --------------------------------------------------------------------
Men's Warehouse, Inc. (The)(a) 7,737 227,274
- --------------------------------------------------------------------
Pacific Sunwear of California(a) 2,700 86,076
- --------------------------------------------------------------------
Talbots, Inc. (The) 1,600 71,400
- --------------------------------------------------------------------
Too Inc.(a) 4,600 79,350
- --------------------------------------------------------------------
727,694
- --------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.17%
Queens Copunty Bancorp, Inc. 1,100 29,838
- --------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.42%
Championship Auto Racing Teams, Inc.(a) 200 4,600
- --------------------------------------------------------------------
Copart, Inc.(a) 1,500 65,250
- --------------------------------------------------------------------
G & K Services, Inc. - Class A 800 25,900
- --------------------------------------------------------------------
Iron Mountain, Inc.(a) 2,200 86,488
- --------------------------------------------------------------------
Provant, Inc.(a) 900 22,725
- --------------------------------------------------------------------
Regis Corp. 2,150 40,581
- --------------------------------------------------------------------
245,544
- --------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.34%
Insight Enterprises, Inc.(a) 3,450 140,156
- --------------------------------------------------------------------
Sykes Enterprises, Inc.(a) 2,100 92,138
- --------------------------------------------------------------------
232,294
- --------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 3.96%
Affiliated Computer Services, Inc. - Class A(a) 2,200 101,200
- --------------------------------------------------------------------
CheckFree Holdings Corp.(a) 1,100 114,950
- --------------------------------------------------------------------
Concord EFS, Inc.(a) 9,450 243,338
- --------------------------------------------------------------------
FactSet Research Systems, Inc. 400 31,850
- --------------------------------------------------------------------
National Computer Systems, Inc. 2,500 94,063
- --------------------------------------------------------------------
NOVA Corp.(a) 3,214 101,442
- --------------------------------------------------------------------
686,843
- --------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-4
<PAGE> 117
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (EMPLOYMENT) - 0.33%
Robert Half International, Inc.(a) 2,000 $ 57,125
- --------------------------------------------------------------------
SPECIALTY PRINTING - 0.15%
Valassis Communications, Inc.(a) 600 25,350
- --------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.39%
Powerwave Technologies, Inc.(a) 3,200 186,800
- --------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 800 53,400
- --------------------------------------------------------------------
240,200
- --------------------------------------------------------------------
TELEPHONE - 0.30%
AirGate PCS Inc.(a) 1,000 52,750
- --------------------------------------------------------------------
TEXTILES (APPAREL) - 0.34%
Quicksilver, Inc.(a) 3,850 59,675
- --------------------------------------------------------------------
Total Common Stocks & Other Equity Interests
(Cost $10,154,502) 15,346,343
- --------------------------------------------------------------------
MONEY MARKET FUNDS - 11.32%
STIC Liquid Assets Portfolio(c) 980,282 980,282
- --------------------------------------------------------------------
STIC Prime Portfolio(c) 980,282 980,282
- --------------------------------------------------------------------
Total Money Market Funds (Cost $1,960,564) 1,960,564
- --------------------------------------------------------------------
TOTAL INVESTMENTS - 99.89%
(Cost $12,115,066) 17,306,907
====================================================================
OTHER ASSETS LESS LIABILITIES - 0.11% 18,937
====================================================================
NET ASSETS - 100.00% $17,325,844
====================================================================
</TABLE>
INVESTMENT ABBREVIATIONS:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-5
<PAGE> 118
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $12,115,066) $17,306,907
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 15,394
- ---------------------------------------------------------------------
Investments sold 13,272
- ---------------------------------------------------------------------
Dividends and interest 7,125
- ---------------------------------------------------------------------
Investment for deferred compensation plan 8,650
- ---------------------------------------------------------------------
Total assets 17,351,348
- ---------------------------------------------------------------------
LIABILITIES:
Payables For:
Deferred compensation plan 8,650
- ---------------------------------------------------------------------
Accrued administrative services fees 6,655
- ---------------------------------------------------------------------
Accrued operating expenses 10,199
- ---------------------------------------------------------------------
Total liabilities 25,504
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $17,325,844
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,215,530
=====================================================================
Net asset value, offering and redemption price per share $14.25
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 42,924
- ----------------------------------------------------------------------
Dividends (net of $10 foreign withholding tax) 21,977
- ----------------------------------------------------------------------
Total investment income 64,901
- ----------------------------------------------------------------------
EXPENSES:
Advisory fees 66,764
- ----------------------------------------------------------------------
Administrative services fees 46,310
- ----------------------------------------------------------------------
Custodian fees 39,591
- ----------------------------------------------------------------------
Directors' fees 7,391
- ----------------------------------------------------------------------
Printing fees 12,615
- ----------------------------------------------------------------------
Professional fees 28,738
- ----------------------------------------------------------------------
Other 888
- ----------------------------------------------------------------------
Total expenses 202,297
- ----------------------------------------------------------------------
Less: Fees waived by advisor (103,002)
- ----------------------------------------------------------------------
Expenses paid indirectly (98)
- ----------------------------------------------------------------------
Net expenses 99,197
- ----------------------------------------------------------------------
Net investment income (loss) (34,296)
- ----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (32,898)
- ----------------------------------------------------------------------
Futures contracts 19,210
- ----------------------------------------------------------------------
(13,688)
- ----------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 4,518,631
- ----------------------------------------------------------------------
Futures contracts (15,300)
- ----------------------------------------------------------------------
4,503,331
- ----------------------------------------------------------------------
Net gain from investment securities and futures contracts 4,489,643
- ----------------------------------------------------------------------
Net increase in net assets resulting from operations $4,455,347
======================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-6
<PAGE> 119
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (34,296) $ 15,665
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities
and futures contracts (13,688) (395,537)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and futures contracts 4,503,331 688,510
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,455,347 308,638
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (22,273)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 8,471,394 4,112,738
- --------------------------------------------------------------------------------
Net increase in net assets 12,926,741 4,399,103
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,399,103 --
- --------------------------------------------------------------------------------
End of period $17,325,844 $4,399,103
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $12,551,916 $4,108,916
- --------------------------------------------------------------------------------
Undistributed net investment income (loss) (8,688) (2,786)
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and futures contracts (409,225) (395,537)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 5,191,841 688,510
- --------------------------------------------------------------------------------
$17,325,844 $4,399,103
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Aggressive Growth Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 Fund's investment objective is to
achieve long-term growth of capital.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-7
<PAGE> 120
B. Securities Transactions and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$28,394 and paid-in capital decreased by $28,394 as a result of net
operating loss reclassifications. Net assets of the Fund were unaffected by
the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
The Fund has a capital loss carryforward of $398,627 as of December 31, 1999
which may be carried forward to offset future taxable gains, if any, which
expires in varying increments, if not previously utilized, in the year 2007.
E. Futures Contracts - The Fund may purchase or sell 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 that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - 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 the 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 year
ended December 31, 1999, AIM waived fees of $103,002 and reimbursed expenses
of $36,238.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $46,310 of which AIM retained
$0 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,440
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $98 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $98
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $13,798,559 and $6,568,379, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $5,447,367
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (266,124)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $5,181,243
=========================================================================
</TABLE>
Cost of investments for tax purposes is $12,125,664.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-8
<PAGE> 121
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold 1,128,485 $12,082,374 464,162 $4,261,686
- -----------------------------------------------------------------------
Issued as reinvestment of
dividends -- -- 2,421 22,273
- -----------------------------------------------------------------------
Reacquired (359,576) (3,610,980) (19,962) (171,221)
- -----------------------------------------------------------------------
768,909 $ 8,471,394 446,621 $4,112,738
=======================================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998
(date operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998
------- ------
<S> <C> <C>
Net asset value, beginning of period $ 9.85 $10.00
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) 0.04
- -----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 4.44 (0.14)
- -----------------------------------------------------------------------------
Total from investment operations 4.40 (0.10)
- -----------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.05)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 14.25 $ 9.85
=============================================================================
Total return(b) 44.67% (0.94)%
=============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $17,326 $4,399
=============================================================================
Ratio of expenses to average net assets(c) 1.19%(d) 1.16%(e)
=============================================================================
Ratio of net investment income (loss) to average net
assets(f) (0.41)%(d) 0.96%(e)
=============================================================================
Portfolio turnover rate 89% 30%
=============================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.42% and 4.62% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $8,345,480.
(e) Annualized.
(f) 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 were (1.64)% and (2.50)% (annualized) for 1999 and 1998,
respectively.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-9
<PAGE> 122
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Balanced Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets and the financial highlights for the year
then ended and for the period May 1, 1998 (commencement of operations) through
December 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Balanced Fund, as of December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets and the financial highlights
for the year then ended and for the period May 1, 1998 (commencement of
operations) through December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. BALANCED FUND
FS-10
<PAGE> 123
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS & NOTES - 26.99%
AIRLINES - 1.20%
AMR Corp., Deb., 10.00%, 04/15/21 $ 50,000 $ 56,721
- -------------------------------------------------------------------------------
Delta Air Lines, Inc.,
- -------------------------------------------------------------------------------
Deb., 9.00%, 05/15/16 100,000 103,442
- -------------------------------------------------------------------------------
Deb., 10.38%, 12/15/22 100,000 117,515
- -------------------------------------------------------------------------------
Notes, 7.90%, 12/15/09 (Acquired 12/07/99;
Cost $99,306)(a) 100,000 98,068
- -------------------------------------------------------------------------------
Series C, Medium Term Notes, 6.65%, 03/15/04 100,000 95,928
- -------------------------------------------------------------------------------
United Air Lines, Inc., Deb., 9.75%, 08/15/21 (Acquired
09/23/99; Cost $112,146)(a) 100,000 109,534
- -------------------------------------------------------------------------------
581,208
- -------------------------------------------------------------------------------
AUTOMOBILES - 0.31%
DaimlerChrysler N.A. Holdings, Gtd. Notes,
7.20%, 09/01/09 150,000 147,564
- -------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.50%
Bank One Corp. - Series A, Medium Term Sub. Notes,
6.00%, 02/17/09 250,000 222,002
- -------------------------------------------------------------------------------
Midland Bank PLC (United Kingdom), Yankee Sub. Notes,
7.65%, 05/01/25 20,000 19,952
- -------------------------------------------------------------------------------
241,954
- -------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 0.72%
First Union Corp., Putable Sub. Deb., 7.50%, 04/15/35 200,000 199,650
- -------------------------------------------------------------------------------
Republic New York Corp.,
Sub. Notes, 9.70%, 02/01/09 65,000 71,731
- -------------------------------------------------------------------------------
Sub. Deb., 9.50%, 04/15/14 70,000 77,146
- -------------------------------------------------------------------------------
348,527
- -------------------------------------------------------------------------------
BANKS (REGIONAL) - 0.82%
Mercantile Bancorp., Inc., Unsec. Sub. Notes,
7.30%, 06/15/07 200,000 195,830
- -------------------------------------------------------------------------------
Riggs Capital Trust II-Series C, Gtd. Bonds,
8.88%, 03/15/27 110,000 100,340
- -------------------------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%, 06/01/26 100,000 98,977
- -------------------------------------------------------------------------------
395,147
- -------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.38%
British Sky Broadcasting Group PLC (United Kingdom), Sr.
Unsec. Gtd. Yankee Notes, 8.20%, 07/15/09 190,000 182,975
- -------------------------------------------------------------------------------
Clear Channel Communications, Inc., Conv. Unsec. Notes,
1.50%, 12/01/02 150,000 154,125
- -------------------------------------------------------------------------------
Continental Cablevision, Inc., Sr. Notes,
8.30%, 05/15/06 150,000 155,614
- -------------------------------------------------------------------------------
Cox Communications, Inc., Unsec. Notes,
7.75%, 08/15/06 200,000 201,498
- -------------------------------------------------------------------------------
CSC Holdings Inc., Sr. Unsec. Deb.,
7.88%, 02/15/18 100,000 95,696
- -------------------------------------------------------------------------------
7.63%, 07/15/18 110,000 102,663
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - CONTINUED
Lenfest Communications, Inc., Sr. Unsec. Sub. Notes,
8.25%, 02/15/08 (Acquired 11/17/99;
Cost $50,875)(a) $ 50,000 $ 50,250
- -------------------------------------------------------------------------------
TCI Communications, Inc., Sr. Notes, 8.00%, 08/01/05 200,000 206,090
- -------------------------------------------------------------------------------
1,148,911
- -------------------------------------------------------------------------------
CHEMICALS - 0.19%
Airgas, Inc., Medium Term Notes, 7.14%, 03/08/04 100,000 94,284
- -------------------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.51%
Equistar Chemical, L.P., Sr. Unsec. Notes,
8.50%, 02/15/04 250,000 248,780
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.78%
Comverse Technology, Inc., Conv. Unsec. Sub. Deb.,
4.50%, 07/01/05 111,000 378,649
- -------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.28%
Candescent Technology Corp., Sr. Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired 11/06/98-10/12/99;
Cost $144,790)(a) 173,000 134,940
- -------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.84%
VERITAS Software Corp., Conv. Unsec. Disc. Notes,
1.86%, 08/13/06(b) 150,000 404,437
- -------------------------------------------------------------------------------
CONSUMER FINANCE - 0.77%
Capital One Financial Corp., Unsec. Notes,
7.25%, 05/01/06 40,000 37,784
- -------------------------------------------------------------------------------
Countrywide Capital III-Series B, Gtd. Bonds,
8.05%, 06/15/27 52,000 47,890
- -------------------------------------------------------------------------------
General Motors Acceptance Corp., Notes,
9.00%, 10/15/02 100,000 104,611
- -------------------------------------------------------------------------------
Household Finance Corp., Sr. Unsec. Unsub. Notes,
6.40%, 06/17/08 100,000 92,302
- -------------------------------------------------------------------------------
MBNA Capital I-Series A, Gtd. Bonds, 8.28%, 12/01/26 100,000 87,744
- -------------------------------------------------------------------------------
370,331
- -------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.05%
CMS Energy Corp., Sr. Unsec. Notes, 8.13%, 05/15/02 200,000 199,306
- -------------------------------------------------------------------------------
Commonwealth Edison Co. - Series 94, First Mortgage
Notes, 7.50%, 07/01/13 200,000 195,400
- -------------------------------------------------------------------------------
Empire District Electric Co. (The), Sr. Notes,
7.70%, 11/15/04 150,000 147,073
- -------------------------------------------------------------------------------
Niagara Mohawk Power Co. -
Series G, Sr. Unsec. Notes, 7.75%, 10/01/08 300,000 300,423
- -------------------------------------------------------------------------------
Series H, Sr. Unsec. Disc. Notes, 8.50%, 07/01/10
(Acquired 08/11/99: Cost $150,167)(b) 200,000 149,824
- -------------------------------------------------------------------------------
Southern Energy, Inc., Sr. Notes, 7.90%, 07/15/09
(Acquired 07/21/99; Cost $274,898)(a) 275,000 265,144
- -------------------------------------------------------------------------------
Texas-New Mexico Power Co., Sr. Sec. Notes,
6.25%, 01/15/09 250,000 215,028
- -------------------------------------------------------------------------------
1,472,198
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-11
<PAGE> 124
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT - 0.68%
Time Warner Inc., Deb.,
9.13%, 01/15/13 $ 145,000 $ 159,278
- --------------------------------------------------------------------------
9.15%, 02/01/23 150,000 167,484
- --------------------------------------------------------------------------
326,762
- --------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.28%
Dow Capital B.V. (Netherlands), Gtd. Yankee Deb.,
9.20%, 06/01/10 150,000 165,105
- --------------------------------------------------------------------------
Heller Financial, Inc., Notes, 7.38%, 11/01/09
(Acquired 11/23/99; Cost $134,572)(a) 135,000 131,670
- --------------------------------------------------------------------------
Private Export Funding, Sec. Deb., 8.35%, 01/31/01 230,000 234,395
- --------------------------------------------------------------------------
Source One Mortgage Services Corp., Deb.,
9.00%, 06/01/12 80,000 87,139
- --------------------------------------------------------------------------
618,309
- --------------------------------------------------------------------------
FOODS - 0.40%
ConAgra, Inc., Sr. Unsec. Putable Notes,
7.13%, 10/01/26 200,000 193,802
- --------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.11%
Alpharma, Inc., Conv. Sr. Unsec. Sub. Notes, 3.00%,
06/01/06 (Acquired 05/27/99; Cost $50,000)(a) 50,000 53,875
- --------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.22%
Procter & Gamble Co. (The), Putable Deb.,
8.00%, 09/01/24 100,000 106,172
- --------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.82%
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 105,000 98,092
- --------------------------------------------------------------------------
9.00%, 10/15/06 30,000 30,877
- --------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 300,000 268,149
- --------------------------------------------------------------------------
397,118
- --------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.71%
Florida Windstorm, Sr. Sec. Notes, 7.13%, 02/25/19
(Acquired 03/26/99; Cost $149,177)(a) 150,000 138,182
- --------------------------------------------------------------------------
Terra Nova Insurance PLC (United Kingdom),(a)
Sr. Unsec. Gtd. Notes, 7.00%, 05/15/08 (Acquired
02/25/99; Cost $146,485) 150,000 137,967
- --------------------------------------------------------------------------
Sr. Unsec. Gtd. Yankee Notes, 7.20%, 08/15/07 70,000 65,533
- --------------------------------------------------------------------------
341,682
- --------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.41%
HSBC America Capital Trust II, Gtd. Bonds, 8.38%,
05/15/27 (Acquired 08/12/99; Cost $19,168)(a) 20,000 18,520
- --------------------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Sr. Sub. Notes, 7.38%, 01/15/07 45,000 43,695
- --------------------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 60,000 62,730
- --------------------------------------------------------------------------
Notes, 8.50%, 08/01/15 70,000 71,723
- --------------------------------------------------------------------------
196,668
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NATURAL GAS - 1.83%
CMS Panhandle Holding Co., Sr. Notes,
6.13%, 03/15/04 $ 200,000 $ 189,415
- -------------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%, 09/15/12 200,000 203,152
- -------------------------------------------------------------------------------
Ferrellgas Partners L.P., - Series B, Sr. Sec. Gtd.
Notes, 9.38%, 06/15/06 50,000 49,250
- -------------------------------------------------------------------------------
Kinder Morgan, Inc., Unsec. Deb., 7.35%, 08/01/26 200,000 194,644
- -------------------------------------------------------------------------------
National Fuel Gas Co. - Series D, Medium Term Notes,
6.30%, 05/27/08 100,000 91,051
- -------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb., 8.50%,
12/15/12 150,000 156,044
- -------------------------------------------------------------------------------
883,556
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.38%
NRG Energy, Inc., Sr. Unsec. Notes, 7.50%, 06/01/09 200,000 184,140
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
ONEOK, Inc., Unsec. Notes, 7.75%, 08/15/06 100,000 98,999
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.82%
AES Corp., Sr. Unsec. Sub. Notes, 10.25%, 07/15/06 100,000 102,000
- -------------------------------------------------------------------------------
CE Generation LLC, Sr. Sec. Notes, 7.42%, 12/15/18
(Acquired 04/13/99; Cost $205,604)(a) 200,000 184,306
- -------------------------------------------------------------------------------
Hydro-Quebec - Series B (Canada), Gtd. Medium Term
Notes, 8.62%, 12/15/11 100,000 107,942
- -------------------------------------------------------------------------------
394,248
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.45%
News America Holdings, Inc., Sr. Gtd. Deb.,
9.25%, 02/01/13 200,000 217,980
- -------------------------------------------------------------------------------
RAILROADS - 0.85%
CSX Corp., Deb., 9.00%, 08/15/06 250,000 264,675
- -------------------------------------------------------------------------------
Norfolk Southern Corp., Notes, 7.05%, 05/01/37 150,000 147,035
- -------------------------------------------------------------------------------
411,710
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.37%
Spieker Properties, Inc., Unsec. Deb.,
7.35%, 12/01/17 200,000 176,542
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.22%
AnnTaylor Stores Corp., Conv. Unsec. Gtd. Sub. Bonds,
0.55%, 06/18/19 (Acquired 11/04/99-11/17/99; Cost
$123,616)(a) 200,000 107,250
- -------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.47%
Dime Capital Trust I - Series A, Gtd. Bonds,
9.33%, 05/06/27 75,000 70,719
- -------------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Notes,
7.13%, 02/15/04 75,000 73,106
- -------------------------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 55,000 52,554
- -------------------------------------------------------------------------------
Notes, 7.50%, 08/15/06 30,000 29,858
- -------------------------------------------------------------------------------
226,237
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-12
<PAGE> 125
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING) - 0.23%
Lamar Advertising Co., Conv. Unsec. Notes, 5.25%,
09/15/06 $ 75,000 $ 109,688
- ------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.37%
Laidlaw Inc. (Canada),
Unsec. Yankee Notes, 7.65%, 05/15/06 100,000 92,905
- ------------------------------------------------------------------------------
Unsec. Yankee Deb., 6.70%, 05/01/08 100,000 85,117
- ------------------------------------------------------------------------------
178,022
- ------------------------------------------------------------------------------
SOVEREIGN DEBT - 0.62%
Province of Manitoba - Series AZ (Canada), Putable
Yankee Deb., 7.75%, 07/17/16 100,000 102,395
- ------------------------------------------------------------------------------
Province of Quebec - Series A (Canada), Medium Term
Putable Yankee Notes,
5.74%, 03/02/26 100,000 99,162
- ------------------------------------------------------------------------------
6.29%, 03/06/26 100,000 98,324
- ------------------------------------------------------------------------------
299,881
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.49%
AT&T Corp., Deb., 8.63%, 12/01/31 200,000 204,998
- ------------------------------------------------------------------------------
MCI Communications Corp.,
Sr. Unsec. Notes, 6.50%, 04/15/10 100,000 93,336
- ------------------------------------------------------------------------------
Sr. Unsec. Putable Deb., 7.13%, 06/15/27 200,000 200,960
- ------------------------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%, 10/15/19 200,000 221,594
- ------------------------------------------------------------------------------
720,888
- ------------------------------------------------------------------------------
TELEPHONE - 1.20%
Cable & Wireless Communications PLC (United Kingdom),
Yankee Notes, 6.75%, 12/01/08 100,000 98,517
- ------------------------------------------------------------------------------
Electric Lightwave, Inc. Notes, 6.05%, 05/15/04
(Acquired 04/21/99; Cost $199,854)(a) 200,000 188,722
- ------------------------------------------------------------------------------
GTE Corp., Unsec. Deb., 6.84%, 04/15/18 100,000 91,652
- ------------------------------------------------------------------------------
NTL Inc., Conv. Sub. Notes, 5.75%, 12/15/09 (Acquired
12/17/99; Cost $130,000)(a) 130,000 140,400
- ------------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.38%, 07/15/43 70,000 62,968
- ------------------------------------------------------------------------------
582,259
- ------------------------------------------------------------------------------
WASTE MANAGEMENT - 0.51%
Browning-Ferris Industries, Inc., Deb., 7.40%, 09/15/35 200,000 145,000
- ------------------------------------------------------------------------------
Waste Management, Inc.,
Sr. Unsec. Notes, 7.13%, 12/15/17 10,000 7,836
- ------------------------------------------------------------------------------
Unsec. Putable Notes, 7.10%, 08/01/26 100,000 92,742
- ------------------------------------------------------------------------------
245,578
- ------------------------------------------------------------------------------
Total U.S. Dollar Denominated Bonds & Notes (Cost
$13,150,798) 13,038,296
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 42.08%
AUTOMOBILES - 0.30%
Ford Motor Co. 2,700 $ 144,281
- ------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 0.45%
Chase Manhattan Corp. (The) 2,800 217,525
- ------------------------------------------------------------------------------
BIOTECHNOLOGY - 0.57%
Biogen, Inc.(c) 2,100 177,450
- ------------------------------------------------------------------------------
Genzyme Corp.(c) 2,200 99,000
- ------------------------------------------------------------------------------
276,450
- ------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.67%
CBS Corp.(c) 5,300 338,869
- ------------------------------------------------------------------------------
Hispanic Broadcasting Corp.(c) 2,700 248,991
- ------------------------------------------------------------------------------
Infinity Broadcasting Corp. - Class A(c) 6,750 244,266
- ------------------------------------------------------------------------------
Univision Communications, Inc. - Class A(c) 4,500 459,844
- ------------------------------------------------------------------------------
1,291,970
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.16%
ANTEC Corp.(c) 3,300 120,450
- ------------------------------------------------------------------------------
JDS Uniphase Corp.(c) 800 129,050
- ------------------------------------------------------------------------------
Lucent Technologies Inc. 7,600 568,575
- ------------------------------------------------------------------------------
Motorola, Inc. 1,400 206,150
- ------------------------------------------------------------------------------
Sycamore Networks, Inc.(c) 700 215,600
- ------------------------------------------------------------------------------
Tellabs, Inc.(c) 2,700 173,306
- ------------------------------------------------------------------------------
Williams Communications Group, Inc.(c) 3,900 112,856
- ------------------------------------------------------------------------------
1,525,987
- ------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.52%
Dell Computer Corp.(c) 1,900 96,900
- ------------------------------------------------------------------------------
International Business Machines Corp.(d) 1,800 194,400
- ------------------------------------------------------------------------------
Sun Microsystems, Inc.(c) 5,700 441,394
- ------------------------------------------------------------------------------
732,694
- ------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.42%
Cisco Systems, Inc.(c) 5,000 535,625
- ------------------------------------------------------------------------------
Foundry Networks, Inc.(c) 500 150,844
- ------------------------------------------------------------------------------
686,469
- ------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.11%
EMC Corp.(c) 4,500 491,625
- ------------------------------------------------------------------------------
Immersion Corp.(c) 1,200 46,050
- ------------------------------------------------------------------------------
537,675
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-13
<PAGE> 126
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 5.31%
America Online, Inc.(c)(d) 6,400 $ 482,800
- --------------------------------------------------------------
Concord Communications, Inc.(c) 1,000 44,375
- --------------------------------------------------------------
eSPEED, Inc. - Class A(c) 2,300 81,794
- --------------------------------------------------------------
FreeMarkets, Inc.(c) 1,300 443,706
- --------------------------------------------------------------
InfoSpace.com, Inc.(c) 2,700 577,800
- --------------------------------------------------------------
ISS Group, Inc.(c) 3,100 220,487
- --------------------------------------------------------------
Microsoft Corp.(c) 2,800 326,900
- --------------------------------------------------------------
Telemate.Net Software, Inc.(c) 3,600 58,500
- --------------------------------------------------------------
USWeb Corp.(c) 7,400 328,837
- --------------------------------------------------------------
2,565,199
- --------------------------------------------------------------
CONSUMER FINANCE - 0.17%
SLM Holding Corp. 2,000 84,500
- --------------------------------------------------------------
ELECTRIC COMPANIES - 0.08%
Plug Power, Inc.(c) 1,400 39,550
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.66%
Conexant Systems, Inc.(c) 600 39,825
- --------------------------------------------------------------
General Electric Co. 1,800 278,550
- --------------------------------------------------------------
318,375
- --------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.24%
General Motors Corp. - Class H(c)(d) 1,200 115,200
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.93%
Analog Devices, Inc.(c) 2,800 260,400
- --------------------------------------------------------------
Intel Corp. 3,400 279,862
- --------------------------------------------------------------
Microchip Technology, Inc.(c) 1,900 130,031
- --------------------------------------------------------------
SDL, Inc.(c) 1,200 261,600
- --------------------------------------------------------------
931,893
- --------------------------------------------------------------
ENTERTAINMENT - 0.30%
Time Warner Inc. 2,000 144,875
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.47%
Applied Materials, Inc.(c) 1,800 228,037
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.69%
American Express Co. 1,100 182,875
- --------------------------------------------------------------
Citigroup Inc. 3,450 191,691
- --------------------------------------------------------------
Fannie Mae 2,400 149,850
- --------------------------------------------------------------
Freddie Mac 3,400 160,012
- --------------------------------------------------------------
MGIC Investment Corp. 2,200 132,412
- --------------------------------------------------------------
816,840
- --------------------------------------------------------------
FOODS - 0.17%
Keebler Foods Co.(c) 3,000 84,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED) - 1.12%
American Home Products Corp. 2,600 $ 102,537
- --------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,900 121,956
- --------------------------------------------------------------------
Johnson & Johnson 1,300 121,062
- --------------------------------------------------------------------
Warner-Lambert Co. 2,400 196,650
- --------------------------------------------------------------------
542,205
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.28%
Forest Laboratories, Inc.(c) 2,200 135,162
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 0.98%
Lilly (Eli) & Co. 1,900 126,350
- --------------------------------------------------------------------
Merck & Co., Inc. 1,600 107,300
- --------------------------------------------------------------------
Pfizer Inc. 4,500 145,969
- --------------------------------------------------------------------
Schering-Plough Corp. 2,200 92,812
- --------------------------------------------------------------------
472,431
- --------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.65%
Baxter International, Inc. 2,100 131,906
- --------------------------------------------------------------------
Guidant Corp. 4,000 188,000
- --------------------------------------------------------------------
Medtronic, Inc. 7,100 258,706
- --------------------------------------------------------------------
VISX, Inc.(c) 4,200 217,350
- --------------------------------------------------------------------
795,962
- --------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.18%
MAXIMUS, Inc.(c) 2,600 88,237
- --------------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES - 0.26%
Ethan Allen Interiors, Inc. 3,900 125,044
- --------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.36%
Procter & Gamble, Co. (The) 1,600 175,300
- --------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.40%
AXA Financial, Inc. 4,400 149,050
- --------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 1,600 44,700
- --------------------------------------------------------------------
193,750
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 0.83%
American International Group, Inc. 2,500 270,313
- --------------------------------------------------------------------
CIGNA Corp. 1,600 128,900
- --------------------------------------------------------------------
399,213
- --------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.21%
Travelers Property Casualty Corp. - Class A 2,900 99,325
- --------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.19%
Goldman Sachs Group, Inc. (The) 650 61,222
- --------------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,400 200,400
- --------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 2,200 314,050
- --------------------------------------------------------------------
575,672
- --------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-14
<PAGE> 127
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.11%
Federated Investors, Inc. - Class B 2,600 $ 52,163
- -------------------------------------------------------------------
LODGING - HOTELS - 0.72%
Carnival Corp. 3,300 157,781
- -------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 3,900 192,319
- -------------------------------------------------------------------
350,100
- -------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.29%
Tyco International Ltd. 3,600 139,950
- -------------------------------------------------------------------
NATURAL GAS - 0.61%
Enron Corp. 4,200 186,375
- -------------------------------------------------------------------
Williams Companies, Inc. (The) 3,500 106,969
- -------------------------------------------------------------------
293,344
- -------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
Apache Corp. 2,600 96,038
- -------------------------------------------------------------------
OIL (DOMESTIC INTEGRATED) - 0.21%
Conoco Inc. - Class B 4,100 101,988
- -------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.25%
Exxon Mobil Corp. 1,500 120,844
- -------------------------------------------------------------------
PERSONAL CARE - 0.12%
Steiner Leisure Ltd.(c) 3,500 58,406
- -------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.48%
AES Corp.(c) 3,100 231,725
- -------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.51%
Home Depot, Inc. (The) 3,600 246,825
- -------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.21%
Safeway Inc.(c) 2,900 103,131
- -------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.46%
Dayton Hudson Corp. 3,000 220,313
- -------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.78%
Amazon.com, Inc.(c) 1,300 98,963
- -------------------------------------------------------------------
Bed Bath & Beyond, Inc.(c) 4,200 145,950
- -------------------------------------------------------------------
Linens 'n Things, Inc.(c) 4,400 130,350
- -------------------------------------------------------------------
375,263
- -------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.91%
Omnicom Group, Inc. 1,900 190,000
- -------------------------------------------------------------------
Young & Rubicam Inc. 3,500 247,625
- -------------------------------------------------------------------
437,625
- -------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.88%
National Information Consortium, Inc.(c) 4,000 128,000
- -------------------------------------------------------------------
Official Payments Corp.(c) 2,600 135,200
- -------------------------------------------------------------------
Quanta Services, Inc.(c) 5,700 161,025
- -------------------------------------------------------------------
424,225
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING) - 0.22%
DST Systems, Inc.(c) 1,400 $ 106,838
- -------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.45%
Broadwing Inc.(c) 5,915 218,105
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.70%
Infonet Services Corp. - Class B(c) 5,500 144,375
- -------------------------------------------------------------------------
Western Wireless Corp. - Class A(c) 2,900 193,575
- -------------------------------------------------------------------------
337,950
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.48%
AT&T Corp. 3,150 159,863
- -------------------------------------------------------------------------
Global TeleSystems Group, Inc.(c) 6,550 226,794
- -------------------------------------------------------------------------
MCI WorldCom, Inc.(c) 6,150 326,334
- -------------------------------------------------------------------------
712,991
- -------------------------------------------------------------------------
TELEPHONE - 2.81%
Bell Atlantic Corp. 2,200 135,438
- -------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(c) 4,100 241,388
- -------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(c) 3,500 290,719
- -------------------------------------------------------------------------
Qwest Communications International, Inc.(c) 9,400 404,200
- -------------------------------------------------------------------------
SBC Communications, Inc. 2,900 141,375
- -------------------------------------------------------------------------
Time Warner Telecom, Inc.(c) 2,900 144,819
- -------------------------------------------------------------------------
1,357,939
- -------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $15,068,638) 20,329,959
- -------------------------------------------------------------------------
DOMESTIC PREFERRED STOCKS - 2.05%
Computers (Software & Services) - 0.39%
PSINet, Inc. - SeriesC, $3.375 Conv. Pfd. 1,400 81,725
- -------------------------------------------------------------------------
Verio Inc. - $3.375 Conv. Pfd. (Acquired 07/15/99-
10/01/99; Cost $89,082)(a) 1,900 107,350
- -------------------------------------------------------------------------
189,075
- -------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.27%
Calpine Capital Trust - $2.875 Conv. Pfd. 2,000 129,250
- -------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
Kerr-McGee Corp. - 5.50% Pfd. DECS 3,000 97,500
- -------------------------------------------------------------------------
PERSONAL CARE - 0.07%
Estee Lauder Cos. Inc. - $3.805 Conv. Pfd. 400 34,625
- -------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.12%
Broadwing Inc. - Series B, $3.375 Conv. Pfd. 990 58,657
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.66%
WinStar Communications, Inc. - Series F,
$72.50 Conv. Pfd. 237 315,803
- -------------------------------------------------------------------------
TELEPHONE - 0.16%
NEXTLINK Communications, Inc. - $3.25 Conv. Pfd. 400 76,750
- -------------------------------------------------------------------------
WATER UTILITIES - 0.18%
AES Trust III - $3.375 Conv. Pfd. 1,400 86,275
- -------------------------------------------------------------------------
Total Domestic Preferred Stocks
(Cost $876,497) 987,935
- -------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-15
<PAGE> 128
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED BONDS & NOTES - 2.18%(e)
AUSTRALIA - 0.12%
New South Wales Treasury Corp. - Series 4
(Sovereign Debt), Gtd. Notes, 7.00%, 04/01/04 AUD $ 55,000 $ 36,310
- ------------------------------------------------------------------------------
State Bank New South Wales - Series E (Banks-Major
Regional), Sr. Unsec. Gtd. Medium Term Notes,
8.63%, 08/20/01 AUD 30,000 20,352
- ------------------------------------------------------------------------------
56,662
- ------------------------------------------------------------------------------
CANADA - 0.12%
Clearnet Communications, Inc.
(Telecommunications - Cellular/Wireless), Sr.
Unsec. Disc. Notes, 10.75%, 02/15/09(b) CAD 50,000 20,266
- ------------------------------------------------------------------------------
Export Development Corp. (Sovereign Debt), Sr.
Unsub. Notes, 6.50%, 12/21/04 NZD 75,000 37,136
- ------------------------------------------------------------------------------
57,402
- ------------------------------------------------------------------------------
DENMARK - 0.20%
Kingdom of Denmark (Sovereign Debt), Bonds, 5.00%,
08/15/05 DKK 730,000 97,427
- ------------------------------------------------------------------------------
GERMANY - 0.22%
Bundesrepublik Deutschland (Sovereign Debt),
Series 92 Bonds, 7.25%, 10/21/02 EUR 20,000 21,537
- ------------------------------------------------------------------------------
Landesbank Baden-Wuerttemberg (Banks - Major
Regional), Sr. Unsec. Unsub. Medium Term Notes,
6.25%, 12/15/04 AUD 100,000 62,684
- ------------------------------------------------------------------------------
Treuhandanstalt (Sovereign Debt), Gtd. Notes,
6.00%, 11/12/03 EUR 20,000 20,973
- ------------------------------------------------------------------------------
105,194
- ------------------------------------------------------------------------------
GREECE - 0.16%
Hellenic Republic (Sovereign Debt), Bonds,
6.60%, 01/15/04 GRD 26,000,000 79,762
- ------------------------------------------------------------------------------
NETHERLANDS - 0.29%
Dresdner Finance B.V.-Series 11 (Banks - Major
Regional), Floating Rate Gtd. Notes,
3.56%, 07/30/03 EUR 60,000 60,261
- ------------------------------------------------------------------------------
Hypovereins Finance N.V.-Series E (Banks - Major
Regional), Gtd. Medium Term Notes,
6.00%, 03/12/07 DEM 25,000 12,899
- ------------------------------------------------------------------------------
Mannesmann Finance B.V. (Machinery - Diversified),
Gtd. Unsec. Unsub. Notes, 4.75%, 05/27/09 EUR 10,000 8,874
- ------------------------------------------------------------------------------
SPT Telecom A.S. (Telecommunications - Long
Distance), Gtd. Unsec. Unsub. Notes,
5.13%, 05/07/03 DEM 60,000 30,602
- ------------------------------------------------------------------------------
Tecnost International Finance N.V. - Series E
(Telephone), Medium Term Gtd. Notes, 6.13%,
07/30/09 EUR 30,000 29,076
- ------------------------------------------------------------------------------
141,712
- ------------------------------------------------------------------------------
NEW ZEALAND - 0.24%
International Bank for Reconstruction & Development
(Banks - Money Center), Unsec. Notes,
5.50%, 04/15/04 NZD 200,000 96,782
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NEW ZEALAND - (CONTINUED)
New Zealand Government - NZD
Series 302 (Sovereign Debt), Bonds,
10.00%, 03/15/02 $ 20,000 $ 11,155
- -------------------------------------------------------------------------------
Series 404 (Sovereign Debt), Bonds,
8.00%, 04/15/04 NZD 15,000 8,098
- -------------------------------------------------------------------------------
116,035
- -------------------------------------------------------------------------------
SWEDEN - 0.37%
Stadshypotek A.B. - Series 1562 (Banks-Regional),
Bonds, 3.50%, 09/15/04 SEK 1,000,000 105,693
- -------------------------------------------------------------------------------
Swedish Government - Series 1035 (Sovereign Debt),
Bonds, 6.00%, 02/09/05 SEK 600,000 72,191
- -------------------------------------------------------------------------------
177,884
- -------------------------------------------------------------------------------
UNITED KINGDOM - 0.46%
Lloyds Bank PLC-Series E (Banks-Major Regional), Medium
Term Sub. Notes, 5.25%, 07/14/08 DEM 50,000 24,449
- -------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. - Series E (Investment
Banking/Brokerage), Sr. Unsec. Unsub. Medium Term
Notes, 7.38%, 12/17/07 GBP 55,000 90,047
- -------------------------------------------------------------------------------
National Power PLC (Electric Companies), Sr. Unsec.
Unsub. Bonds, 8.00%, 02/21/07 AUD 100,000 64,916
- -------------------------------------------------------------------------------
National Westminster Bank PLC - Series E (Banks-Money
Center), Unsec. Unsub. Medium Term Bonds, 5.13%,
06/30/11 EUR 30,000 27,066
- -------------------------------------------------------------------------------
Union Bank Switzerland London, (Banks-Major Regional),
Unsec. Sub. Notes, 7.38%, 11/26/04 GBP 10,000 16,372
- -------------------------------------------------------------------------------
222,850
- -------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Bonds & Notes (Cost
$1,108,644) 1,054,928
- -------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
FOREIGN STOCKS - 5.10%
BERMUDA - 0.85%
Global Crossing Ltd. (Telecommunications-Long
Distance)(c) 8,254 412,700
- -------------------------------------------------------------------------------
CANADA - 0.35%
AT&T Canada, Inc. (Telephone)(c) 4,200 169,050
- -------------------------------------------------------------------------------
FINLAND - 1.93%
Nokia Oyj-ADR (Communications Equipment) 3,200 608,000
- -------------------------------------------------------------------------------
Sonera Oyj (Telecommunications-Cellular/Wireless) 4,700 321,898
- -------------------------------------------------------------------------------
929,898
- -------------------------------------------------------------------------------
FRANCE - 0.33%
AXA (Insurance-Multi-Line) 340 47,359
- -------------------------------------------------------------------------------
AXA-ADR (Insurance-Multi-Line) 1,600 113,600
- -------------------------------------------------------------------------------
160,959
- -------------------------------------------------------------------------------
GERMANY - 0.33%
Mannesmann A.G. (Machinery-Diversified) 666 160,500
- -------------------------------------------------------------------------------
ISRAEL - 0.17%
Partner Communications Co. Ltd. - ADR
(Telecommunications-Cellular/Wireless)(c) 3,100 80,212
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-16
<PAGE> 129
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS--0.36%
Libertel N.V. (Telecommunications-Cellular/Wireless)(c) 6,600 172,707
- -------------------------------------------------------------------------------
SOUTH KOREA--0.32%
Korea Telecom Corp. - ADR (Telephone) 2,084 155,779
- -------------------------------------------------------------------------------
SPAIN--0.46%
Telefonica S.A. (Telephone)(c) 7,000 174,720
- -------------------------------------------------------------------------------
Terra Networks, S.A. (Computers-Software & Services)(c) 900 49,140
- -------------------------------------------------------------------------------
223,860
- -------------------------------------------------------------------------------
Total Foreign Stocks (Cost $1,401,762) 2,465,665
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 1.62%
Federal National Mortgage Association
("FNMA")--1.24%
Medium Term Notes, 6.18%, 03/15/01 $300,000 299,019
- -------------------------------------------------------------------------------
Pass through certificates, 6.50%, 11/01/28 318,984 300,541
- -------------------------------------------------------------------------------
599,560
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") - 0.38%
Pass through certificates 6.50%, 03/15/29 196,178 184,162
- -------------------------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $819,115) 783,722
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.61%
U.S. Treasury Notes - 8.61%
5.75%, 04/30/03(f) 600,000 589,320
- -------------------------------------------------------------------------------
7.25%, 08/15/04(f) 300,000 309,420
- -------------------------------------------------------------------------------
5.88%, 11/15/04(f) 250,000 245,077
- -------------------------------------------------------------------------------
6.50%, 08/15/05 to 10/15/06(f) 2,000,000 1,996,340
- -------------------------------------------------------------------------------
6.88%, 05/15/06 1,000,000 1,017,050
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $4,223,663) 4,157,207
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED - 0.01%
ELECTRONICS (DEFENSE) - 0.01%
General Motors Corp. - Class H (Cost
$5,886) 12 90 Jan-00 2,475
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 10.36%
STIC Liquid Assets Portfolio(g) 2,501,867 2,501,867
- -------------------------------------------------------------------------
STIC Prime Portfolio(g) 2,501,867 2,501,867
- -------------------------------------------------------------------------
Total Money Market Funds
(Cost $5,003,734) 5,003,734
- -------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.00%
(Cost $41,658,737) 47,823,921
=========================================================================
OTHER ASSETS LESS LIABILITIES - 1.00% 483,149
=========================================================================
NET ASSETS - 100.00% $48,307,070
=========================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
DEM - German Deutsche Mark
Disc. - Discounted
GBP - British Pound Sterling
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
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 12/31/99 was $1,866,178
which represented 3.86% of the Fund's net assets.
(b) Discounted bond at purchase. Interest rate shown represents the coupon
rate at which the bond will accrue at a specified future date.
(c) Non-income producing security.
(d) A portion of this security is subject to call options written. See Note 6.
(e) Foreign denominated securities. Par value and coupon are denominated in
currency indicated.
(f) A portion of this principal was pledged as collateral to cover margin
contracts for open future contracts. See Note 7.
(g) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
FS-17
<PAGE> 130
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $41,658,737) $47,823,921
- ---------------------------------------------------------------------
Foreign currencies (cost $74,467) 71,304
- ---------------------------------------------------------------------
Receivables for:
Investments sold 333,631
- ---------------------------------------------------------------------
Capital stock sold 82,775
- ---------------------------------------------------------------------
Dividends and interest 357,835
- ---------------------------------------------------------------------
Forward currency contracts open 8,321
- ---------------------------------------------------------------------
Variation margin 7,650
- ---------------------------------------------------------------------
Investment for deferred compensation plan 8,705
- ---------------------------------------------------------------------
Total assets 48,694,142
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 287,829
- ---------------------------------------------------------------------
Options written (premiums received $20,258) 16,338
- ---------------------------------------------------------------------
Deferred compensation plan 8,705
- ---------------------------------------------------------------------
Accrued advisory fees 33,728
- ---------------------------------------------------------------------
Accrued administrative services 14,516
- ---------------------------------------------------------------------
Accrued operating expenses 25,956
- ---------------------------------------------------------------------
Total liabilities 387,072
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $48,307,070
=====================================================================
CAPITAL SHARES, $0.001 par value per share:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 3,703,261
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 13.04
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 948,294
- ----------------------------------------------------------------------------
Dividends (net of foreign withholding tax $799) 137,885
- ----------------------------------------------------------------------------
Total investment income 1,086,179
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 210,282
- ----------------------------------------------------------------------------
Administrative services fees 59,327
- ----------------------------------------------------------------------------
Printing fees 18,702
- ----------------------------------------------------------------------------
Professional fees 28,407
- ----------------------------------------------------------------------------
Custodian fees 34,382
- ----------------------------------------------------------------------------
Directors' fees 7,352
- ----------------------------------------------------------------------------
Other 8,631
- ----------------------------------------------------------------------------
Total expenses 367,083
- ----------------------------------------------------------------------------
Less: Fees waived by advisor (26,814)
- ----------------------------------------------------------------------------
Expenses paid indirectly (529)
- ----------------------------------------------------------------------------
Net expenses 339,740
- ----------------------------------------------------------------------------
Net investment income 746,439
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES, FORWARD CONTRACTS AND FUTURES AND OPTION
CONTRACTS:
Net realized gain (loss) from:
Investment securities (565,510)
- ----------------------------------------------------------------------------
Foreign currencies 2,366
- ----------------------------------------------------------------------------
Forward contracts (3,513)
- ----------------------------------------------------------------------------
Futures contracts 574,474
- ----------------------------------------------------------------------------
Option contracts written 893
- ----------------------------------------------------------------------------
8,710
- ----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 5,583,828
- ----------------------------------------------------------------------------
Foreign currencies (3,959)
- ----------------------------------------------------------------------------
Forward contracts 8,768
- ----------------------------------------------------------------------------
Futures contracts (15,441)
- ----------------------------------------------------------------------------
Option contracts written 3,920
- ----------------------------------------------------------------------------
5,577,116
- ----------------------------------------------------------------------------
Net gain from investment securities, foreign currencies,
forward contracts and futures and option contracts 5,585,826
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $6,332,265
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
FS-18
<PAGE> 131
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 746,439 $ 105,191
- ---------------------------------------------------------------------------------
Net realized gain from investment securities, foreign
currencies, forward contracts and futures and option
contracts 8,710 135,495
- ---------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, forward contracts and
futures and option contracts 5,577,116 700,688
- ---------------------------------------------------------------------------------
Net increase in net assets resulting from operations 6,332,265 941,374
- ---------------------------------------------------------------------------------
Dividends to Shareholders from net investment income (600,086) (115,294)
- ---------------------------------------------------------------------------------
Distributions to Shareholders from net realized gains (230,004) (20,295)
- ---------------------------------------------------------------------------------
Net increase from capital stock transactions 32,461,559 9,537,551
- ---------------------------------------------------------------------------------
Net increase in net assets 37,963,734 10,343,336
- ---------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 10,343,336 --
- ---------------------------------------------------------------------------------
End of period $48,307,070 $10,343,336
=================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $41,997,980 $ 9,536,421
- ---------------------------------------------------------------------------------
Undistributed net investment income (loss) 122,628 (2,790)
- ---------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies, forward contracts and
futures and option contracts (91,342) 109,017
- ---------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, forward contracts and futures and
option contracts 6,277,804 700,688
- ---------------------------------------------------------------------------------
$48,307,070 $10,343,336
=================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Balanced Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. 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 Fund's investment objective is to achieve as high a total return
to investors as possible, consistent with preservation of capital.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would not be reflected in the computation of the Fund's
AIM V.I. BALANCED FUND
FS-19
<PAGE> 132
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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$20,935 and, undistributed net realized gains increased by $20,935 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
Contract to
Settlement ------------------ Unrealized
Date Currency Deliver Receive Value Appreciation
---------- -------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
01/24/00 SEK 1,500,000 $184,884 $176,563 $8,321
===============================================================
</TABLE>
G. Futures Contracts - The Fund may purchase or sell 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 that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options - The Fund may write call options, 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.
I. 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, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
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.
AIM V.I. BALANCED FUND
FS-20
<PAGE> 133
J. Bond Premiums--It is the policy of the Fund not to amortize market premiums
on bonds for financial reporting purposes.
NOTE 2 - 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 the 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 year
ended December 31, 1999, AIM waived fees of $26,814.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $59,327 of which AIM retained
$17,161 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,358
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $529 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $529
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of period -- $ --
- --------------------------------------------------------------------------------------
Written 71 52,994
- --------------------------------------------------------------------------------------
Closed (24) (32,736)
- --------------------------------------------------------------------------------------
End of period 47 $ 20,258
======================================================================================
</TABLE>
Open call option contracts written at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OR PREMIUMS 1999 MARKET APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION)
- ---------------------- -------- ------ --------- -------- ------------ -------------
<S> <C> <C> <C> <C> <C> <C>
America Online Inc. Jan-00 $88 30 $11,565 $ 5,625 $ 5,940
- --------------------------------------------------------------------------------------
General Motors Corp. Jan-00 100 12 5,213 3,525 1,688
- --------------------------------------------------------------------------------------
Int'l Business Machine
Corp. Jan-00 95 5 3,480 7,188 (3,708)
- --------------------------------------------------------------------------------------
47 $20,258 $16,338 $ 3,920
======================================================================================
</TABLE>
NOTE 7 - FUTURES CONTRACTS
On December 31, 1999, $3,023,125 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
Contract Contracts Commitment Appreciation
- -------- --------- ---------- ------------
<S> <C> <C> <C>
S&P 500 Index 9 Mar-00/Buy $104,334
- --------------------------------------------------------------------------------------
</TABLE>
NOTE 8 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $43,855,419 and $13,491,663, respectively. The amount of unrealized
appreciation (depreciation) of investment securities, for tax purposes, as of
December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $7,301,376
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,145,225)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $6,156,151
=========================================================================
</TABLE>
Cost of investments for tax purposes is $41,667,770.
AIM V.I. BALANCED FUND
FS-21
<PAGE> 134
NOTE 9--CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -------------------
Shares Amount Shares Amount
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold 2,956,052 $34,512,915 954,695 $9,785,741
- -----------------------------------------------------------------------
Issued as reinvestment of
dividends 66,460 830,090 12,578 135,589
- -----------------------------------------------------------------------
Reacquired (247,878) (2,881,446) (38,646) (383,779)
- -----------------------------------------------------------------------
2,774,634 $32,461,559 928,627 $9,537,551
=======================================================================
</TABLE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998 (date
operation commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 11.14 $ 10.00
- ----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.31 0.12
- ----------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 1.83 1.18
- ----------------------------------------------------------------------
Total from investment operations 2.14 1.30
- ----------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.17) (0.14)
- ----------------------------------------------------------------------
Distributions from net realized gains (0.07) (0.02)
- ----------------------------------------------------------------------
Total Distributions (0.24) (0.16)
- ----------------------------------------------------------------------
Net asset value, end of period $ 13.04 $ 11.14
======================================================================
Total return(b) 19.31% 13.02%
======================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $48,307 $10,343
======================================================================
Ratio of expenses to average net assets(c) 1.21%(d) 1.18%(e)
======================================================================
Ratio of net investment income to average net
assets(f) 2.66%(d) 3.71%(e)
======================================================================
Portfolio turnover rate 57% 9%
======================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.31% and 2.83% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $28,037,647.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 2.56% and 2.07% (annualized) for 1999 and 1998,
respectively.
AIM V.I. BALANCED FUND
FS-22
<PAGE> 135
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Blue Chip Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations, the statement of changes in net
assets and the financial highlights for the period December 29, 1999 (date
operations commenced) through December 31, 1999. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Blue Chip Fund, as of December 31, 1999, the results of its operations,
the changes in its net assets and the financial highlights for the period
December 29, 1999 (date operations commenced) through December 31, 1999 in
conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. BLUE CHIP FUND
FS-23
<PAGE> 136
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 16.50%
FEDERAL HOME LOAN BANK - 16.50%
Disc. Notes, 1.50%, 01/03/00 (Cost $164,986)(a) $ 165,000 $164,986
- --------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.40%
U.S. TREASURY BILLS - 8.40%
4.95%, 03/30/00 (Cost $83,960)(a) 85,000(b) 83,964
- --------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 53.89%
Bank of America Securities, 3.15%, 01/03/00(c)(d) 38,701 38,701
- --------------------------------------------------------------------------
Bank One Capital Markets, Inc., 3.25%, 01/03/00(e) 230,000 230,000
- --------------------------------------------------------------------------
CIBC Oppenheimer Corp., 3.25%, 01/30/00(f) 230,000 230,000
- --------------------------------------------------------------------------
Greenwich Capital Markets, Inc., 3.30%, 01/03/00(g) 40,000 40,000
- --------------------------------------------------------------------------
Total Repurchase Agreements (Cost $538,701) 538,701
- --------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 21.01%
STIC Liquid Assets Portfolio(h) 104,999 104,999
- --------------------------------------------------------------------------
STIC Prime Portfolio(h) 104,999 104,999
- --------------------------------------------------------------------------
Total Money Market Funds (Cost $209,998) 209,998
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.80%
(Cost $997,645) 997,649(i)
- --------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.20% 1,955
- --------------------------------------------------------------------------
NET ASSETS - 100.00% $999,604
==========================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 5.
(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 is at least 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 06/30/99 with a maturing value of
$470,258,225 and collateralized by $470,134,815 U.S. Government
obligations, 4.75% to 5.25% due on 02/01/01 to 11/14/03 with an aggregate
market value at 12/31/99 of $510,000,998.
(e) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$300,081,250 and collateralized by $304,417,000 U.S. Government
obligations, 0% to 8.125% due 01/30/00 to 05/15/21 with an aggregate
market value at 12/31/99 of $303,690,194.
(f) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$285,077,188 and collateralized by $285,000,000 U.S. Government
obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an aggregate
market value at 12/31/99 of $290,700,000.
(g) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$240,066,000 and collateralized by $343,554,149 U.S. Government
obligations, 5.00% to 10.00% due 03/01/01 to 12/01/29 with an aggregate
market value at 12/31/99 of $244,803,339.
(h) The security shares the same investment advisor as the Fund.
(i) Also represents cost for federal income tax purposes.
Investment Abbreviations:
Disc.- Discounted
See Notes to Financial Statements.
AIM V.I. BLUE CHIP FUND
FS-24
<PAGE> 137
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $997,645) $ 997,649
- ---------------------------------------------------------------------
Receivables for:
Dividends and interest 157
- ---------------------------------------------------------------------
Variation margin 1,870
- ---------------------------------------------------------------------
Due from Advisor 613
- ---------------------------------------------------------------------
Total assets 1,000,289
- ---------------------------------------------------------------------
LIABILITIES:
Accrued administrative services fees 274
- ---------------------------------------------------------------------
Accrued advisory fees 41
- ---------------------------------------------------------------------
Accrued operating expenses 370
- ---------------------------------------------------------------------
Total liabilities 685
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $ 999,604
=====================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 100,001
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 10.00
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 131
- -----------------------------------------------------------------------
Dividends 108
- -----------------------------------------------------------------------
Total investment income 239
- -----------------------------------------------------------------------
EXPENSES:
Advisory fees 41
- -----------------------------------------------------------------------
Administrative services fees 274
- -----------------------------------------------------------------------
Custodian fees 170
- -----------------------------------------------------------------------
Directors' fees 43
- -----------------------------------------------------------------------
Other 156
- -----------------------------------------------------------------------
Total expenses 684
- -----------------------------------------------------------------------
Less: Fees waived and reimbursed by Advisor (613)
- -----------------------------------------------------------------------
Net expenses 71
- -----------------------------------------------------------------------
Net investment income 168
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Change in net unrealized appreciation (depreciation) of:
Investment securities 4
- -----------------------------------------------------------------------
Futures contracts (578)
- -----------------------------------------------------------------------
Net gain (loss) on investment securities (574)
- -----------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(406)
=======================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. BLUE CHIP FUND
FS-25
<PAGE> 138
STATEMENT OF CHANGES IN NET ASSETS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<CAPTION>
1999
---------
<S> <C>
OPERATIONS:
Net investment income $ 168
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment
securities (574)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (406)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,000,010
- ------------------------------------------------------------------------------
Net increase in net assets 999,604
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $ 999,604
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 999,988
- ------------------------------------------------------------------------------
Undistributed net investment income 190
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (574)
- ------------------------------------------------------------------------------
$ 999,604
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Blue Chip Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. The Fund
commenced operations December 29, 1999. 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 Fund's investment
objective is to achieve long-term growth of capital.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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.
AIM V.I. BLUE CHIP FUND
FS-26
<PAGE> 139
B. Securities Transactions and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$22 and paid-in capital decreased by $22 as a result of differing book/tax
treatment of organizational costs reclassifications. Net assets of the Fund
were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
E. Futures Contracts - The Fund may purchase or sell 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 that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - 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 the 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 December 29, 1999 (date operations commenced) through December 31,
1999, AIM waived fees of $315 and reimbursed expenses of $298.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
period December 29, 1999 (date operations commenced) through December 31,
1999, AIM was paid $0 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 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the
period December 29, 1999 (date operations commenced) through December 31,
1999, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 5 - FUTURES CONTRACTS
On December 31, 1999, $46,000 of the principal amount of U.S. Treasury
obligations was pledged as collateral to cover margin requirements for open
futures contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
- -------- --------- ---------------- --------------
<S> <C> <C> <C>
S&P 500 Mini 11 Mar-00/Buy $(578)
</TABLE>
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period December 29, 1999 (date
operations commenced) through December 31, 1999 were as follows:
<TABLE>
<CAPTION>
1999
------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 100,001 $1,000,010
======================================================================
</TABLE>
AIM V.I. BLUE CHIP FUND
FS-27
<PAGE> 140
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period December 29, 1999 (date operations commenced) through
December 31, 1999.
<TABLE>
<CAPTION>
1999
------
<S> <C>
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00
- -------------------------------------------------------------------------
Less distributions:
Dividends from net investment income --
- -------------------------------------------------------------------------
Net asset value, end of period $10.00
- -------------------------------------------------------------------------
Total return(a) 0.00%
- -------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,000
- -------------------------------------------------------------------------
Ratio of expenses to average net assets (b):
With expense waiver and reimbursement 1.30%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement 12.49%
- -------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets(b):
With expense waiver and reimbursement 3.07%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement (8.12)%
- -------------------------------------------------------------------------
Portfolio turnover rate --
=========================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $666,531.
AIM V.I. BLUE CHIP FUND
FS-28
<PAGE> 141
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital Appreciation Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended, the eleven month period ended December 31, 1995 and the year
ended January 31, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Capital Appreciation Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, the eleven month period ended December
31, 1995 and the year ended January 31, 1995 in conformity with generally
accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. CAPITAL APPRECIATION FUND
FS-29
<PAGE> 142
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS & OTHER
EQUITY INTERESTS - 94.37%
AIRLINES - 0.19%
Southwest Airlines Co. 130,400 $ 2,110,850
- ----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.52%
Danaher Corp. 72,500 3,498,125
- ----------------------------------------------------------------------------
SPX Corp.(a) 29,000 2,343,562
- ----------------------------------------------------------------------------
5,841,687
- ----------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.50%
Northern Trust Corp. 107,300 5,686,900
- ----------------------------------------------------------------------------
BANKS (REGIONAL) - 0.68%
Bank United Corp. - Class A 58,000 1,580,500
- ----------------------------------------------------------------------------
Compass Bancshares, Inc. 58,000 1,294,125
- ----------------------------------------------------------------------------
Old Kent Financial Corp. 47,420 1,677,482
- ----------------------------------------------------------------------------
TCF Financial Corp. 41,800 1,039,775
- ----------------------------------------------------------------------------
Zions Bancorp.(a) 34,800 2,059,725
- ----------------------------------------------------------------------------
7,651,607
- ----------------------------------------------------------------------------
BIOTECHNOLOGY - 1.30%
Biogen, Inc.(a) 144,900 12,244,050
- ----------------------------------------------------------------------------
Chiron Corp.(a) 58,000 2,457,750
- ----------------------------------------------------------------------------
14,701,800
- ----------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.82%
Adelphia Communications Corp.(a) 82,500 5,414,062
- ----------------------------------------------------------------------------
AMFM Inc.(a) 130,400 10,203,800
- ----------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group - Class A(a) 173,900 9,868,825
- ----------------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 92,500 4,763,750
- ----------------------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 68,500 6,316,984
- ----------------------------------------------------------------------------
Univision Communications, Inc. - Class A(a) 85,000 8,685,937
- ----------------------------------------------------------------------------
USA Networks, Inc.(a) 92,500 5,110,625
- ----------------------------------------------------------------------------
Westwood One, Inc.(a) 55,100 4,187,600
- ----------------------------------------------------------------------------
54,551,583
- ----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 11.05%
ADC Telecommunications, Inc.(a) 117,600 8,533,350
- ----------------------------------------------------------------------------
Comverse Technology, Inc.(a) 87,000 12,593,250
- ----------------------------------------------------------------------------
Corning, Inc. 184,700 23,814,756
- ----------------------------------------------------------------------------
General Instrument Corp.(a) 110,100 9,358,500
- ----------------------------------------------------------------------------
JDS Uniphase Corp.(a) 174,000 28,068,375
- ----------------------------------------------------------------------------
Lucent Technologies Inc. 40,345 3,018,310
- ----------------------------------------------------------------------------
Motorola, Inc. 43,500 6,405,375
- ----------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 87,000 16,530,000
- ----------------------------------------------------------------------------
QUALCOMM, Inc.(a) 58,000 10,222,500
- ----------------------------------------------------------------------------
Scientific-Atlanta, Inc. 115,900 6,446,937
- ----------------------------------------------------------------------------
124,991,353
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE) - 1.28%
Apple Computer, Inc.(a) 58,000 $ 5,963,125
- -----------------------------------------------------------------------------
Comdisco, Inc. 4,200 156,450
- -----------------------------------------------------------------------------
Gateway Inc.(a) 115,900 8,352,044
- -----------------------------------------------------------------------------
14,471,619
- -----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.08%
Exodus Communications, Inc.(a) 34,800 3,090,675
- -----------------------------------------------------------------------------
VeriSign, Inc.(a) 107,000 20,430,312
- -----------------------------------------------------------------------------
23,520,987
- -----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.40%
Adaptec, Inc.(a) 173,900 8,673,262
- -----------------------------------------------------------------------------
EMC Corp.(a)(b) 121,500 13,273,875
- -----------------------------------------------------------------------------
Lexmark International Group, Inc. - Class A(a) 58,000 5,249,000
- -----------------------------------------------------------------------------
27,196,137
- -----------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 18.94%
America Online, Inc.(a) 318,900 24,057,019
- -----------------------------------------------------------------------------
At Home Corp. - Series A(a) 90,000 3,858,750
- -----------------------------------------------------------------------------
BMC Software, Inc.(a) 104,900 8,385,444
- -----------------------------------------------------------------------------
Business Objects S.A. - ADR (France)(a) 40,600 5,425,175
- -----------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 43,500 8,645,625
- -----------------------------------------------------------------------------
Citrix Systems, Inc.(a) 133,300 16,395,900
- -----------------------------------------------------------------------------
Electronic Arts Inc.(a) 81,000 6,804,000
- -----------------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 120,000 6,975,000
- -----------------------------------------------------------------------------
Inktomi Corp.(a) 104,400 9,265,500
- -----------------------------------------------------------------------------
Intuit Inc.(a) 217,400 13,030,412
- -----------------------------------------------------------------------------
J.D. Edwards & Co.(a) 104,500 3,121,937
- -----------------------------------------------------------------------------
Lycos, Inc.(a) 230,000 18,299,375
- -----------------------------------------------------------------------------
Microsoft Corp.(a) 97,500 11,383,125
- -----------------------------------------------------------------------------
RealNetworks, Inc.(a) 58,000 6,978,125
- -----------------------------------------------------------------------------
Siebel Systems, Inc.(a) 69,600 5,846,400
- -----------------------------------------------------------------------------
Synopsys, Inc.(a) 35,000 2,336,250
- -----------------------------------------------------------------------------
Verio, Inc.(a) 130,400 6,022,850
- -----------------------------------------------------------------------------
VERITAS Software Corp.(a) 217,350 31,108,219
- -----------------------------------------------------------------------------
Yahoo! Inc.(a) 60,900 26,350,669
- -----------------------------------------------------------------------------
214,289,775
- -----------------------------------------------------------------------------
CONSUMER FINANCE - 1.70%
Capital One Financial Corp. 136,200 6,563,137
- -----------------------------------------------------------------------------
Providian Financial Corp. 105,800 9,634,412
- -----------------------------------------------------------------------------
SLM Holding Corp. 72,500 3,063,125
- -----------------------------------------------------------------------------
19,260,674
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-30
<PAGE> 143
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 4.98%
American Power Conversion Corp.(a) 304,400 $ 8,028,550
- ------------------------------------------------------------------------
Conexant Systems, Inc.(a) 177,100 11,755,012
- ------------------------------------------------------------------------
Sanmina Corp.(a) 58,000 5,792,750
- ------------------------------------------------------------------------
Solectron Corp.(a) 173,900 16,542,237
- ------------------------------------------------------------------------
Symbol Technologies, Inc. 152,175 9,672,623
- ------------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 144,900 4,582,462
- ------------------------------------------------------------------------
56,373,634
- ------------------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.30%
General Motors Corp. - Class H(a) 34,800 3,340,800
- ------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 1.23%
PE Corp - PE Biosystems Group 98,600 11,862,812
- ------------------------------------------------------------------------
Waters Corp.(a) 37,700 1,998,100
- ------------------------------------------------------------------------
13,860,912
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 7.08%
Altera Corp.(a) 108,700 5,387,444
- ------------------------------------------------------------------------
Analog Devices, Inc.(a) 155,400 14,452,200
- ------------------------------------------------------------------------
ASM Lithography Holding N.V. (Netherlands)(a) 37,700 4,288,375
- ------------------------------------------------------------------------
Atmel Corp.(a) 106,200 3,139,538
- ------------------------------------------------------------------------
Cypress Semiconductor Corp.(a) 173,900 5,630,013
- ------------------------------------------------------------------------
Linear Technology Corp. 79,200 5,667,750
- ------------------------------------------------------------------------
LSI Logic Corp.(a) 86,800 5,859,000
- ------------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 119,600 5,643,625
- ------------------------------------------------------------------------
Microchip Technology, Inc.(a) 60,100 4,113,094
- ------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 87,700 14,059,406
- ------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 120,000 6,292,500
- ------------------------------------------------------------------------
Xilinx, Inc.(a) 123,000 5,592,656
- ------------------------------------------------------------------------
80,125,601
- ------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 2.00%
Applied Materials, Inc.(a) 29,000 3,673,938
- ------------------------------------------------------------------------
KLA-Tencor Corp.(a) 69,600 7,751,700
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 29,000 3,553,406
- ------------------------------------------------------------------------
Teradyne, Inc.(a) 115,900 7,649,400
- ------------------------------------------------------------------------
22,628,444
- ------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.31%
American Express Co. 33,300 5,536,125
- ------------------------------------------------------------------------
Citigroup Inc. 70,000 3,889,375
- ------------------------------------------------------------------------
MGIC Investment Corp. 89,633 5,394,786
- ------------------------------------------------------------------------
14,820,286
- ------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.34%
Park Place Entertainment(a) 307,500 3,843,750
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.09%
Forest Laboratories, Inc.(a) 101,500 $ 6,235,906
- ---------------------------------------------------------------------
Jones Pharma Inc. 213,950 9,293,453
- ---------------------------------------------------------------------
Medicis Pharmaceutical Corp. - Class A(a) 77,500 3,298,594
- ---------------------------------------------------------------------
MedImmune, Inc.(a) 29,000 4,810,375
- ---------------------------------------------------------------------
23,638,328
- ---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.33%
Express Scripts, Inc. - Class A(a) 58,000 3,712,000
- ---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.56%
Bausch & Lomb, Inc. 58,000 3,969,375
- ---------------------------------------------------------------------
Biomet, Inc. 144,900 5,796,000
- ---------------------------------------------------------------------
Medtronic, Inc. 217,400 7,921,513
- ---------------------------------------------------------------------
17,686,888
- ---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.27%
AFLAC, Inc. 65,000 3,067,188
- ---------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.62%
Goldman Sachs Group, Inc. (The) 100,000 9,418,750
- ---------------------------------------------------------------------
Schwab (Charles) Corp. (The) 231,900 8,899,163
- ---------------------------------------------------------------------
18,317,913
- ---------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.62%
Federated Investors, Inc. - Class B 119,700 2,401,481
- ---------------------------------------------------------------------
Knight/Trimark Group, Inc. - Class A(a) 90,000 4,140,000
- ---------------------------------------------------------------------
Southwest Securities Group, Inc. -
$2.83 Conv. Pfd. 11,800 520,675
- ---------------------------------------------------------------------
7,062,156
- ---------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.77%
Harley-Davidson, Inc. 136,200 8,725,313
- ---------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.26%
Millipore Corp. 75,000 2,896,875
- ---------------------------------------------------------------------
NATURAL GAS - 0.57%
El Paso Energy Corp. 87,000 3,376,688
- ---------------------------------------------------------------------
Enron Corp. 68,500 3,039,688
- ---------------------------------------------------------------------
6,416,376
- ---------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.09%
BJ Services Co.(a) 115,900 4,846,069
- ---------------------------------------------------------------------
Cooper Cameron Corp.(a) 160,100 7,834,894
- ---------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 58,000 1,772,625
- ---------------------------------------------------------------------
Global Industries Ltd.(a) 173,900 1,499,888
- ---------------------------------------------------------------------
R&B Falcon Corp.(a) 215,500 2,855,375
- ---------------------------------------------------------------------
Rowan Companies, Inc.(a) 130,400 2,828,050
- ---------------------------------------------------------------------
Smith International, Inc.(a) 101,500 5,043,281
- ---------------------------------------------------------------------
Transocean Sedco Forex Inc. 87,000 2,930,813
- ---------------------------------------------------------------------
Varco International, Inc.(a) 144,900 1,476,169
- ---------------------------------------------------------------------
Weatherford International, Inc.(a) 96,300 3,845,981
- ---------------------------------------------------------------------
34,933,145
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-31
<PAGE> 144
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION) - 0.73%
Apache Corp. 103,800 $ 3,834,113
- -------------------------------------------------------------------
EOG Resources, Inc. 202,900 3,563,431
- -------------------------------------------------------------------
Santa Fe Snyder Corp.(a) 101,500 812,000
- -------------------------------------------------------------------
8,209,544
- -------------------------------------------------------------------
PUBLISHING - 0.32%
McGraw-Hill Companies, Inc. (The) 58,000 3,574,250
- -------------------------------------------------------------------
RAILROADS - 1.02%
Kansas City Southern Industries, Inc. 155,000 11,566,875
- -------------------------------------------------------------------
RESTAURANTS - 0.53%
Brinker International, Inc.(a) 115,900 2,781,600
- -------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 124,000 3,216,250
- -------------------------------------------------------------------
5,997,850
- -------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.61%
Lowe's Companies, Inc. 115,000 6,871,250
- -------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.45%
CDW Computer Centers, Inc.(a) 85,000 6,683,125
- -------------------------------------------------------------------
Circuit City Stores-Circuit City Group 88,400 3,983,525
- -------------------------------------------------------------------
Tandy Corp. 115,900 5,700,831
- -------------------------------------------------------------------
16,367,481
- -------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.74%
Kohl's Corp.(a) 115,900 8,366,531
- -------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.87%
Dollar Tree Stores, Inc.(a) 104,975 5,084,727
- -------------------------------------------------------------------
Family Dollar Stores, Inc. 165,200 2,694,825
- -------------------------------------------------------------------
Ross Stores, Inc. 115,900 2,078,956
- -------------------------------------------------------------------
9,858,508
- -------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.04%
Lands' End, Inc.(a) 14,600 507,350
- -------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.87%
Barnes & Noble, Inc.(a) 50,000 1,031,250
- -------------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 159,400 5,539,150
- -------------------------------------------------------------------
Linens 'n Things, Inc.(a) 74,500 2,207,063
- -------------------------------------------------------------------
Payless ShoeSource, Inc.(a) 500 23,500
- -------------------------------------------------------------------
Staples, Inc.(a) 347,880 7,218,510
- -------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 111,900 5,147,400
- -------------------------------------------------------------------
21,166,873
- -------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 1.18%
American Eagle Outfitters, Inc.(a) 115,700 5,206,500
- -------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 144,900 4,256,438
- -------------------------------------------------------------------
Talbots, Inc. (The) 87,000 3,882,375
- -------------------------------------------------------------------
13,345,313
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING) - 3.49%
CMGI, Inc.(a) 30,000 $ 8,306,250
- ------------------------------------------------------------------------------
Interpublic Group of Companies, Inc. 107,500 6,201,406
- ------------------------------------------------------------------------------
Lamar Advertising Co.(a) 173,900 10,531,819
- ------------------------------------------------------------------------------
Omnicom Group, Inc. 144,900 14,490,000
- ------------------------------------------------------------------------------
39,529,475
- ------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.63%
ChoicePoint, Inc.(a) 71,600 2,962,450
- ------------------------------------------------------------------------------
Cintas Corp. 77,000 4,090,625
- ------------------------------------------------------------------------------
Viad Corp. 3,100 86,413
- ------------------------------------------------------------------------------
7,139,488
- ------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.56%
Affiliated Computer Services, Inc. - Class A(a) 58,000 2,668,000
- ------------------------------------------------------------------------------
Concord EFS, Inc.(a) 391,300 10,075,975
- ------------------------------------------------------------------------------
DST Systems, Inc.(a) 46,500 3,548,531
- ------------------------------------------------------------------------------
Fiserv, Inc.(a) 217,375 8,328,180
- ------------------------------------------------------------------------------
Paychex, Inc. 108,712 4,348,480
- ------------------------------------------------------------------------------
28,969,166
- ------------------------------------------------------------------------------
SPECIALTY PRINTING - 0.24%
Valassis Communications, Inc.(a) 65,250 2,756,813
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.19%
Broadwing Inc.(a) 58,000 2,138,750
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.33%
Crown Castle International Corp.(a) 159,400 5,120,725
- ------------------------------------------------------------------------------
Metromedia Fiber Network, Inc. - Class A(a) 113,600 5,445,700
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 67,000 4,472,250
- ------------------------------------------------------------------------------
15,038,675
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.27%
Global TeleSystems Group, Inc.(a) 87,000 3,012,375
- ------------------------------------------------------------------------------
TELEPHONE - 1.68%
CenturyTel, Inc. 130,450 6,180,069
- ------------------------------------------------------------------------------
NTL Inc.(a) 80,200 10,004,950
- ------------------------------------------------------------------------------
RCN Corp.(a) 58,000 2,813,000
- ------------------------------------------------------------------------------
18,998,019
- ------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.74%
Jones Apparel Group, Inc.(a) 208,600 5,658,275
- ------------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 115,900 2,701,919
- ------------------------------------------------------------------------------
8,360,194
- ------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests (Cost
$576,300,943) 1,067,499,361
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-32
<PAGE> 145
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS - 5.56%
STIC Liquid Assets Portfolio(c) 31,488,016 $ 31,488,016
- ----------------------------------------------------------------
STIC Prime Portfolio(c) 31,488,016 31,488,016
- ----------------------------------------------------------------
Total Money Market Funds
(Cost $62,976,032) 62,976,032
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 99.93%
(Cost $639,276,975) 1,130,475,393
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.07% 742,067
- ----------------------------------------------------------------
NET ASSETS - 100.00% $1,131,217,460
================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See note 7.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-33
<PAGE> 146
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $639,276,975) $1,130,475,393
- ------------------------------------------------------------------------
Receivables for:
Investments sold 525,180
- ------------------------------------------------------------------------
Capital stock sold 1,550,637
- ------------------------------------------------------------------------
Dividends and interest 556,346
- ------------------------------------------------------------------------
Investment for deferred compensation plan 33,908
- ------------------------------------------------------------------------
Other assets 2,261
- ------------------------------------------------------------------------
Total assets 1,133,143,725
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 75,495
- ------------------------------------------------------------------------
Capital stock reacquired 417,439
- ------------------------------------------------------------------------
Deferred compensation plan 33,908
- ------------------------------------------------------------------------
Options written (Premiums received $59,230) 502,969
- ------------------------------------------------------------------------
Accrued advisory fees 549,277
- ------------------------------------------------------------------------
Accrued administrative services fees 259,589
- ------------------------------------------------------------------------
Accrued operating expenses 87,588
- ------------------------------------------------------------------------
Total liabilities 1,926,265
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,131,217,460
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ------------------------------------------------------------------------
Outstanding 31,793,662
- ------------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 35.58
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,451,091
- ------------------------------------------------------------------------------
Dividends (net of $11,388 foreign withholding tax) 2,847,893
- ------------------------------------------------------------------------------
Total investment income 5,298,984
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 4,830,846
- ------------------------------------------------------------------------------
Administrative services fees 578,362
- ------------------------------------------------------------------------------
Custodian fees 122,880
- ------------------------------------------------------------------------------
Directors' fees 11,313
- ------------------------------------------------------------------------------
Other 199,126
- ------------------------------------------------------------------------------
Total expenses 5,742,527
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (1,411)
- ------------------------------------------------------------------------------
Net expenses 5,741,116
- ------------------------------------------------------------------------------
Net investment income (loss) (442,132)
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 41,879,881
- ------------------------------------------------------------------------------
Option contracts 49,576
- ------------------------------------------------------------------------------
41,929,457
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 297,792,190
- ------------------------------------------------------------------------------
Foreign currencies (43)
- ------------------------------------------------------------------------------
Option contracts (443,738)
- ------------------------------------------------------------------------------
297,348,409
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 339,277,866
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $338,835,734
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-34
<PAGE> 147
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (442,132) $ 631,581
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and option contracts 41,929,457 22,808,693
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
option contracts 297,348,409 78,385,559
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 338,835,734 101,825,833
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (738,724) (922,615)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (23,048,204) (16,345,246)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 168,920,651 39,909,953
- ------------------------------------------------------------------------------
Net increase in net assets 483,969,457 124,467,925
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 647,248,003 522,780,078
- ------------------------------------------------------------------------------
End of year $1,131,217,460 $647,248,003
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 599,987,913 $434,303,451
- ------------------------------------------------------------------------------
Undistributed net investment income (loss) (47,777) 700,362
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option
contracts 40,522,686 22,076,541
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 490,754,638 190,167,649
- ------------------------------------------------------------------------------
$1,131,217,460 $647,248,003
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Appreciation Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 Fund's investment objective is to seek
capital appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
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 preparation 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 closing bid price on that day.
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
closing bid price. 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 based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
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
AIM V.I. CAPITAL APPRECIATION FUND
FS-35
<PAGE> 148
generally determined prior to the close of the NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$432,717, undistributed net realized gains decreased by $435,108 and paid-
in capital increased by $2,391 as a result of differing book/tax treatment
of net operating loss reclassifications. Net assets of the Fund were
unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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, 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
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
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 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $578,362 of which AIM retained
$78,369 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.
AIM V.I. CAPITAL APPRECIATION FUND
FS-36
<PAGE> 149
During the year ended December 31, 1999, the Fund paid legal fees of $6,011
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,411 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,411 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $627,067,583 and $470,380,607, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $497,637,083
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,642,675)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $489,994,408
===========================================================================
</TABLE>
Cost of investments for tax purposes is $640,480,985.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- $ --
- ---------------------------------------------------------------------------
Written 2,274 452,115
- ---------------------------------------------------------------------------
Closed (784) (160,367)
- ---------------------------------------------------------------------------
Exercised (1,180) (209,295)
- ---------------------------------------------------------------------------
Expired (165) (23,223)
- ---------------------------------------------------------------------------
End of period 145 59,230
===========================================================================
</TABLE>
Open call option contracts written as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EMC Corp. January $75 145 $59,230 $502,969 ($443,739)
- -------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-37
<PAGE> 150
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold 10,987,866 $ 295,821,855 4,333,736 $ 99,858,597
- -------------------------------------------------------------------------------
Issued as reinvestment of
dividends 746,374 23,786,928 740,474 17,267,861
- -------------------------------------------------------------------------------
Issued in connection with
acquisitions* 1,111,610 29,381,435 -- --
- -------------------------------------------------------------------------------
Reacquired (6,741,717) (180,069,567) (3,416,071) (77,216,505)
- -------------------------------------------------------------------------------
6,104,133 $ 168,920,651 1,658,139 $ 39,909,953
===============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable America Fund ("Variable America Fund")
pursuant to a plan of reorganization approved by Variable America Fund's
shareholders on August 25, 1999. The acquisition was accomplished by a tax-
free exchange of 1,111,610 shares of the Fund for 1,874,912 shares of
Variable America Fund as of the close of business on October 15, 1999.
Variable America Fund's net assets at that date were $29,381,435, including
$3,238,580 of unrealized appreciation, were combined with those of the Fund.
The net assets of the Fund immediately before the acquisition were
$757,029,224.
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ JANUARY 31,
1999 1998 1997 1996 1995 1995
---------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
- ------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.02) 0.02 0.03 0.02 0.04 0.05
- ------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 11.17 4.12 2.58 2.89 4.46 (0.54)
- ------------------------------------------------------------------------------------------------
Total from investment
operations 11.15 4.14 2.61 2.91 4.50 (0.49)
- ------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.02) (0.04) (0.02) (0.03) -- (0.04)
- ------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.75) (0.65) (0.27) -- -- --
- ------------------------------------------------------------------------------------------------
Total distributions (0.77) (0.69) (0.29) (0.03) -- (0.04)
- ------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 35.58 $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05
- ------------------------------------------------------------------------------------------------
Total return(a) 44.61% 19.30% 13.51% 17.58% 37.38% (3.91)%
- ------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $1,131,217 $647,248 $522,642 $370,063 $212,152 $88,177
- ------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.73%(b) 0.67% 0.68% 0.73% 0.75%(c) 0.84%
- ------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets (0.06)%(b) 0.11% 0.18% 0.18% 0.39%(c) 0.46%
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 65% 83% 65% 59% 37% 81%
================================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $784,307,675.
(c) Annualized.
AIM V.I. CAPITAL APPRECIATION FUND
FS-38
<PAGE> 151
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital Development Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets and the financial highlights for the
year then ended and for the period May 1, 1998 (commencement of operations)
through December 31, 1998. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Capital Development Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets and the
financial highlights for the year then ended and for the period May 1, 1998
(commencement of operations) through December 31, 1998 in conformity with
generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-39
<PAGE> 152
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY INTERESTS - 85.34%
AEROSPACE/DEFENSE - 0.27%
HEICO Corp. - Class A 1,400 $ 29,575
- ------------------------------------------------------------------------
AIRLINES - 0.50%
Ryanair Holdings PLC. - ADR (Ireland)(a) 1,000 55,125
- ------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.33%
Dura Automotive Systems, Inc.(a) 1,000 17,437
- ------------------------------------------------------------------------
Stoneridge, Inc.(a) 1,200 18,525
- ------------------------------------------------------------------------
35,962
- ------------------------------------------------------------------------
BANKS (REGIONAL) - 1.64%
Bank United Corp. - Class A 800 21,800
- ------------------------------------------------------------------------
Colonial BancGroup, Inc. (The) 4,200 43,575
- ------------------------------------------------------------------------
Independence Community Bank Corp. 3,800 47,500
- ------------------------------------------------------------------------
North Fork Bancorporation, Inc. 2,500 43,750
- ------------------------------------------------------------------------
UCBH Holdings, Inc.(a) 1,200 24,675
- ------------------------------------------------------------------------
181,300
- ------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 0.46%
Canandaigua Brands, Inc. - Class A(a) 1,000 51,000
- ------------------------------------------------------------------------
BIOTECHNOLOGY - 0.13%
IDEXX Laboratories, Inc.(a) 900 14,512
- ------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.92%
Citadel Communications Corp.(a) 1,000 64,875
- ------------------------------------------------------------------------
Cox Radio, Inc. - Class A(a) 800 79,800
- ------------------------------------------------------------------------
Emmis Communications Corp. - Class A(a) 800 99,712
- ------------------------------------------------------------------------
Entercom Communications Corp.(a) 1,300 85,800
- ------------------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 400 36,887
- ------------------------------------------------------------------------
Insight Communications Company, Inc.(a) 2,600 77,025
- ------------------------------------------------------------------------
Interep National Radio Sales, Inc.(a) 2,000 26,750
- ------------------------------------------------------------------------
Westwood One, Inc.(a) 950 72,200
- ------------------------------------------------------------------------
543,049
- ------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.89%
ADTRAN, Inc.(a) 600 30,862
- ------------------------------------------------------------------------
Davox Corp.(a) 2,200 43,175
- ------------------------------------------------------------------------
Gilat Satellite Networks Ltd. (Israel)(a) 700 83,125
- ------------------------------------------------------------------------
Next Level Communications, Inc.(a) 400 29,950
- ------------------------------------------------------------------------
NorthEast Optic Network, Inc.(a) 700 43,794
- ------------------------------------------------------------------------
Osicom Technologies, Inc.(a) 2,600 117,975
- ------------------------------------------------------------------------
Proxim, Inc.(a) 100 11,000
- ------------------------------------------------------------------------
Scientific-Atlanta, Inc. 1,100 61,187
- ------------------------------------------------------------------------
Z-Tel Technologies, Inc.(a) 200 8,075
- ------------------------------------------------------------------------
429,143
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING) - 0.31%
Auspex Systems, Inc.(a) 900 $ 9,225
- ------------------------------------------------------------------------
Gadzoox Networks, Inc.(a) 300 13,069
- ------------------------------------------------------------------------
SonicWALL, Inc.(a) 300 12,075
- ------------------------------------------------------------------------
34,369
- ------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.10%
QLogic Corp.(a) 400 63,950
- ------------------------------------------------------------------------
SanDisk Corp.(a) 600 57,750
- ------------------------------------------------------------------------
121,700
- ------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 15.68%
AppNet, Inc.(a) 1,100 48,125
- ------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 600 119,251
- ------------------------------------------------------------------------
Delathree.com, Inc.(a) 500 12,875
- ------------------------------------------------------------------------
Dendrite International, Inc.(a) 750 25,406
- ------------------------------------------------------------------------
Digital Insight Corp.(a) 1,000 36,375
- ------------------------------------------------------------------------
Documentum, Inc.(a) 1,000 59,875
- ------------------------------------------------------------------------
eBenX Inc.(a) 300 13,575
- ------------------------------------------------------------------------
Eclipsys Corp.(a) 2,200 56,375
- ------------------------------------------------------------------------
Hyperion Solutions Corp.(a) 1,500 65,250
- ------------------------------------------------------------------------
InfoCure Corp.(a) 2,800 87,325
- ------------------------------------------------------------------------
Interleaf, Inc.(a) 2,100 70,612
- ------------------------------------------------------------------------
Keynote Systems, Inc.(a) 700 51,625
- ------------------------------------------------------------------------
Medica Logic, Inc.(a) 600 12,600
- ------------------------------------------------------------------------
Mercury Interactive Corp.(a) 600 64,762
- ------------------------------------------------------------------------
MTI Technology Corp.(a) 700 25,812
- ------------------------------------------------------------------------
Navidec, Inc.(a) 1,800 21,600
- ------------------------------------------------------------------------
Nucentrix Broadband Networks, Inc.(a) 600 14,700
- ------------------------------------------------------------------------
Optio Software, Inc.(a) 1,100 25,850
- ------------------------------------------------------------------------
PC-Tel, Inc.(a) 400 21,000
- ------------------------------------------------------------------------
Peregrine Systems, Inc.(a) 1,000 84,190
- ------------------------------------------------------------------------
Primus Knowledge Solutions, Inc.(a) 700 31,719
- ------------------------------------------------------------------------
Radiant Systems, Inc.(a) 1,600 64,300
- ------------------------------------------------------------------------
Rational Software Corp.(a) 2,000 98,250
- ------------------------------------------------------------------------
S1 Corp.(a) 500 39,062
- ------------------------------------------------------------------------
Sterling Software, Inc.(a) 3,700 116,550
- ------------------------------------------------------------------------
Symantec Corp.(a) 2,000 117,250
- ------------------------------------------------------------------------
Tanning Technology Corp.(a) 1,400 82,512
- ------------------------------------------------------------------------
Telescan, Inc.(a) 1,300 32,094
- ------------------------------------------------------------------------
Titan Corp. (The)(a) 2,100 98,962
- ------------------------------------------------------------------------
Transaction Systems Architects, Inc. - Class A(a) 500 14,000
- ------------------------------------------------------------------------
Trizetto Group, Inc. (The)(a) 2,300 107,237
- ------------------------------------------------------------------------
Unigraphics Solutions, Inc.(a) 400 10,800
- ------------------------------------------------------------------------
1,729,919
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-40
<PAGE> 153
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE - 1.59%
American Capital Strategies, Ltd. 3,600 $ 81,900
- ------------------------------------------------------------------------
AmeriCredit Corp.(a) 4,700 86,950
- ------------------------------------------------------------------------
Cash America International, Inc. 700 6,825
- ------------------------------------------------------------------------
175,675
- ------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.24%
Performance Food Group Co.(a) 1,100 26,812
- ------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.05%
Plug Power, Inc.(a) 200 5,650
- ------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.95%
American Power Conversion Corp.(a) 2,100 55,387
- ------------------------------------------------------------------------
Cree Research, Inc.(a) 1,700 145,137
- ------------------------------------------------------------------------
DII Group, Inc.(a) 1,700 120,647
- ------------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 1,500 61,031
- ------------------------------------------------------------------------
Sawtek, Inc.(a) 800 53,250
- ------------------------------------------------------------------------
435,452
- ------------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.83%
Power-One, Inc.(a) 2,000 91,625
- ------------------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.23%
Aeroflex, Inc.(a) 2,400 24,900
- ------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 3.29%
Alpha Industries, Inc.(a) 1,100 63,044
- ------------------------------------------------------------------------
Methode Electronics, Inc. - Class A 3,200 102,800
- ------------------------------------------------------------------------
Tektronix, Inc. 900 34,987
- ------------------------------------------------------------------------
Varian Inc.(a) 4,200 94,500
- ------------------------------------------------------------------------
Varian Semiconductor Equipment Associates, Inc.(a) 2,000 68,000
- ------------------------------------------------------------------------
363,331
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 4.01%
American Xtal Technology, Inc.(a) 700 12,206
- ------------------------------------------------------------------------
Amkor Technology, Inc.(a) 1,800 50,850
- ------------------------------------------------------------------------
Celestica Inc. (Canada)(a) 1,300 72,150
- ------------------------------------------------------------------------
Fairchild Semiconductor Corp.(a) 300 8,925
- ------------------------------------------------------------------------
Micrel, Inc.(a) 1,100 62,631
- ------------------------------------------------------------------------
Microchip Technology, Inc.(a) 1,500 102,656
- ------------------------------------------------------------------------
QuickLogic Corp.(a) 2,300 37,950
- ------------------------------------------------------------------------
Zoran Corp.(a) 1,700 94,775
- ------------------------------------------------------------------------
442,143
- ------------------------------------------------------------------------
ENTERTAINMENT - 1.34%
SFX Entertainment, Inc.(a) 1,700 61,519
- ------------------------------------------------------------------------
ValueVision International, Inc.(a) 1,500 85,969
- ------------------------------------------------------------------------
147,488
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR) - 1.27%
Cohu, Inc. 1,800 $ 55,800
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 500 61,266
- ------------------------------------------------------------------------
Veeco Instruments Inc.(a) 500 23,406
- ------------------------------------------------------------------------
140,472
- ------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.31%
MicroFinancial, Inc. 900 10,519
- ------------------------------------------------------------------------
SEI Investments Co. 200 23,803
- ------------------------------------------------------------------------
34,322
- ------------------------------------------------------------------------
FOODS - 0.32%
American Italian Pasta Co. - Class A(a) 1,150 35,362
- ------------------------------------------------------------------------
Health Care (Drugs - Generic & Other) - 1.15%
Alpharma, Inc. - Class A 1,300 39,975
- ------------------------------------------------------------------------
Jones Pharma, Inc. 2,000 86,875
- ------------------------------------------------------------------------
126,850
- ------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.53%
LifePoint Hospitals, Inc.(a) 4,900 57,881
- ------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.27%
Trigon Healthcare, Inc.(a) 1,000 29,500
- ------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.68%
Cyberonics, Inc.(a) 800 12,750
- ------------------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 1,300 27,462
- ------------------------------------------------------------------------
PolyMedica Corp.(a) 1,500 34,687
- ------------------------------------------------------------------------
74,899
- ------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.16%
Advance Paradigm, Inc.(a) 1,200 25,875
- ------------------------------------------------------------------------
MAXIMUS, Inc.(a) 1,500 50,906
- ------------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 1,900 22,681
- ------------------------------------------------------------------------
United Payors & United Providers, Inc.(a) 1,700 28,156
- ------------------------------------------------------------------------
127,618
- ------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.14%
Annuity and Life Reassurance (Holdings), Ltd.
(Bermuda) 1,800 47,025
- ------------------------------------------------------------------------
Clarica Life Insurance Co. (Canada) 2,800 50,440
- ------------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 800 22,350
- ------------------------------------------------------------------------
UICI(a) 600 6,337
- ------------------------------------------------------------------------
126,152
- ------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.52%
CNA Surety Corp. 1,500 19,500
- ------------------------------------------------------------------------
Radian Group Inc. 793 37,866
- ------------------------------------------------------------------------
57,366
- ------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.62%
Affiliated Managers Group, Inc.(a) 1,700 68,744
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-41
<PAGE> 154
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE TIME (PRODUCTS) - 0.17%
JAKKS Pacific, Inc.(a) 1,000 $ 18,688
- ----------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.73%
Applied Power, Inc. - Class A 2,200 80,850
- ----------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.29%
Spartech Corp. 1,000 32,250
- ----------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 1.33%
Alpine Group, Inc. (The)(a) 3,800 48,925
- ----------------------------------------------------------------------
Armor Holdings, Inc.(a) 2,500 32,813
- ----------------------------------------------------------------------
Mettler-Toledo International, Inc.(a) 1,700 64,919
- ----------------------------------------------------------------------
146,657
- ----------------------------------------------------------------------
NATURAL GAS - 0.29%
Kinder Morgan, Inc. 1,600 32,300
- ----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.38%
School Specialty, Inc.(a) 2,800 42,350
- ----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.04%
BJ Services Co.(a) 1,700 71,081
- ----------------------------------------------------------------------
Cooper Cameron Corp.(a) 1,500 73,406
- ----------------------------------------------------------------------
Key Energy Group, Inc.(a) 15,900 82,481
- ----------------------------------------------------------------------
Pride International, Inc.(a) 3,500 51,188
- ----------------------------------------------------------------------
Tidewater, Inc. 1,600 57,600
- ----------------------------------------------------------------------
335,756
- ----------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 2.48%
Basin Exploration, Inc.(a) 1,900 33,488
- ----------------------------------------------------------------------
Chieftain International, Inc.(a) 1,600 27,600
- ----------------------------------------------------------------------
Devon Energy Corp. 700 23,013
- ----------------------------------------------------------------------
Kerr-McGee Corp. - 5.50% Pfd. DECS 1,500 48,750
- ----------------------------------------------------------------------
Newfield Exploration Co.(a) 900 24,075
- ----------------------------------------------------------------------
Nuevo Energy Co.(a) 2,500 46,875
- ----------------------------------------------------------------------
Santa Fe Snyder Corp.(a) 2,500 20,000
- ----------------------------------------------------------------------
Spinnaker Exploration Co.(a) 3,500 49,438
- ----------------------------------------------------------------------
273,239
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.67%
AMRESCO Capital Trust, Inc. 1,350 11,475
- ----------------------------------------------------------------------
Apartment Investment & Management Co. - Class A. 700 27,869
- ----------------------------------------------------------------------
Colonial Properties Trust 700 16,231
- ----------------------------------------------------------------------
Correctional Properties Trust 1,500 18,375
- ----------------------------------------------------------------------
73,950
- ----------------------------------------------------------------------
RESTAURANTS - 0.57%
CEC Entertainment, Inc.(a) 2,225 63,134
- ----------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.22%
CDW Computer Centers, Inc.(a) 1,200 94,350
- ----------------------------------------------------------------------
InterTAN, Inc.(a) 1,550 40,494
- ----------------------------------------------------------------------
134,844
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DISCOUNTERS) - 0.31%
Ames Department Stores, Inc.(a) 1,200 $ 34,575
- ----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.99%
BJ's Wholesale Club, Inc.(a) 1,400 51,100
- ----------------------------------------------------------------------
Grand Union Co. (The)(a) 2,500 25,313
- ----------------------------------------------------------------------
Wild Oats Markets, Inc.(a) 1,475 32,727
- ----------------------------------------------------------------------
109,140
- ----------------------------------------------------------------------
RETAIL (SPECIALTY) - 3.15%
CSK Auto Corp.(a) 1,500 26,250
- ----------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 2,300 33,350
- ----------------------------------------------------------------------
Linens 'n Things, Inc.(a) 700 20,738
- ----------------------------------------------------------------------
Michaels Stores, Inc.(a) 1,800 51,300
- ----------------------------------------------------------------------
Rent-A-Center, Inc.(a) 2,000 39,625
- ----------------------------------------------------------------------
Rent-Way, Inc.(a) 1,876 35,058
- ----------------------------------------------------------------------
SciQuest.com, Inc.(a) 400 31,800
- ----------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 2,000 22,500
- ----------------------------------------------------------------------
Venator Group, Inc.(a) 3,100 21,700
- ----------------------------------------------------------------------
Zale Corp.(a) 1,350 65,306
- ----------------------------------------------------------------------
347,627
- ----------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.91%
Men's Wearhouse, Inc. (The)(a) 1,700 49,938
- ----------------------------------------------------------------------
Too Inc.(a) 2,900 50,025
- ----------------------------------------------------------------------
99,963
- ----------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.42%
Bay View Capital Corp. 1,400 19,863
- ----------------------------------------------------------------------
Local Financial Corp.(a) 2,500 25,938
- ----------------------------------------------------------------------
45,801
- ----------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 2.75%
Circle.com(a) 1,000 12,313
- ----------------------------------------------------------------------
Lamar Advertising Co.(a) 1,050 63,591
- ----------------------------------------------------------------------
Snyder Communications, Inc.(a) 1,100 21,175
- ----------------------------------------------------------------------
TeleTech Holdings, Inc.(a) 3,400 114,591
- ----------------------------------------------------------------------
Young & Rubicam Inc. 1,300 91,975
- ----------------------------------------------------------------------
303,645
- ----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.69%
Copart, Inc.(a) 1,500 65,250
- ----------------------------------------------------------------------
F.Y.I., Inc.(a) 900 30,600
- ----------------------------------------------------------------------
Iron Mountain Inc.(a) 2,050 80,591
- ----------------------------------------------------------------------
Pegasus Systems, Inc.(a) 700 42,219
- ----------------------------------------------------------------------
Quanta Services, Inc.(a) 1,200 33,900
- ----------------------------------------------------------------------
Regis Corp. 2,350 44,356
- ----------------------------------------------------------------------
296,916
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-42
<PAGE> 155
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (COMPUTER SYSTEMS) - 1.79%
Insight Enterprises, Inc.(a) 1,675 $ 68,047
- --------------------------------------------------------------------
Safeguard Scientifics, Inc.(a) 500 81,031
- --------------------------------------------------------------------
SunGard Data Systems, Inc.(a) 200 4,750
- --------------------------------------------------------------------
Sykes Enterprises, Inc.(a) 1,000 43,875
- --------------------------------------------------------------------
197,703
- --------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.14%
4Front Technologies, Inc.(a) 1,300 17,387
- --------------------------------------------------------------------
BISYS Group, Inc. (The)(a) 1,150 75,038
- --------------------------------------------------------------------
Concord EFS, Inc.(a) 1,550 39,913
- --------------------------------------------------------------------
CSG Systems International, Inc.(a) 2,600 103,675
- --------------------------------------------------------------------
236,013
- --------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 1.78%
Heidrick & Struggles International, Inc.(a) 2,500 105,625
- --------------------------------------------------------------------
Korn/Ferry International(a) 2,500 90,938
- --------------------------------------------------------------------
196,563
- --------------------------------------------------------------------
SERVICES (FACILITIES & ENVIRONMENTAL) - 0.17%
Cornell Corrections, Inc.(a) 100 838
- --------------------------------------------------------------------
Wackenhut Corrections Corp.(a) 1,500 17,531
- --------------------------------------------------------------------
18,369
- --------------------------------------------------------------------
TELECOMMUNICATIONS - 0.72%
Broadwing Inc.(a) 2,168 79,945
- --------------------------------------------------------------------
Telecommunications (Cellular/Wireless) - 1.75%
Arch Communications, Inc.(a) 9,700 63,959
- --------------------------------------------------------------------
Powerwave Technologies, Inc.(a) 1,300 75,888
- --------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 800 53,400
- --------------------------------------------------------------------
193,247
- --------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.08%
CapRock Communications Corp.(a) 1,800 58,388
- --------------------------------------------------------------------
ITC DeltaCom, Inc.(a) 2,200 60,775
- --------------------------------------------------------------------
119,163
- --------------------------------------------------------------------
TEXTILES (SPECIALTY) - 0.30%
Polymer Group, Inc. 1,800 32,850
- --------------------------------------------------------------------
WASTE MANAGEMENT - 0.49%
Catalytica, Inc.(a) 2,500 33,906
- --------------------------------------------------------------------
Safety-Kleen Corp.(a) 1,800 20,363
- --------------------------------------------------------------------
54,269
- --------------------------------------------------------------------
Total Common Stocks & Other Equity Interests
(Cost $7,043,407) 9,417,703
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER
OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED - 0.53%
PUTS - 0.53%
Nasdaq 100 Index 300 $ 306 Feb-00 $ 15,600
- --------------------------------------------------------------------
S & P 500 Index 2,500 137.5 Feb-00 42,969
- --------------------------------------------------------------------
Total Options Purchased
(Cost $123,209) 58,569
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 13.05%
STIC Liquid Assets Portfolio(b) 719,837 719,837
- ---------------------------------------------------------------------
STIC Prime Portfolio(b) 719,837 719,837
- ---------------------------------------------------------------------
Total Money Market Funds (Cost $1,439,674) 1,439,674
- ---------------------------------------------------------------------
TOTAL INVESTMENTS - 98.92% (Cost $8,606,290) 10,915,946
- ---------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.08% 118,985
- ---------------------------------------------------------------------
NET ASSETS - 100.00% $11,034,931
- ---------------------------------------------------------------------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
DECS - Dividend Enhanced Convertible Stock
Pfd. - Preferred
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-43
<PAGE> 156
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $8,606,290) $ 10,915,946
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 99,919
- ----------------------------------------------------------------------
Dividends and interest 6,771
- ----------------------------------------------------------------------
Investments sold 16,696
- ----------------------------------------------------------------------
Reimbursement from advisor 12,503
- ----------------------------------------------------------------------
Investment for deferred compensation plan 8,645
- ----------------------------------------------------------------------
Total assets 11,060,480
- ----------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 8,645
- ----------------------------------------------------------------------
Accrued administrative fees 4,247
- ----------------------------------------------------------------------
Accrued operating expenses 12,657
- ----------------------------------------------------------------------
Total liabilities 25,549
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 11,034,931
- ----------------------------------------------------------------------
Capital shares, $0.001 par value per share:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 928,238
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 11.89
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 18,220
- ----------------------------------------------------------------------
Dividends (net of $63 foreign withholding tax) 25,394
- ----------------------------------------------------------------------
Total investment income 43,614
- ----------------------------------------------------------------------
EXPENSES:
Advisory fees 35,726
- ----------------------------------------------------------------------
Administrative services fees 46,126
- ----------------------------------------------------------------------
Custodian fees 38,398
- ----------------------------------------------------------------------
Directors' fees 6,958
- ----------------------------------------------------------------------
Professional fees 22,118
- ----------------------------------------------------------------------
Printing fees 11,728
- ----------------------------------------------------------------------
Other 1,712
- ----------------------------------------------------------------------
Total expenses 162,766
- ----------------------------------------------------------------------
Less: Fees waived and reimbursed by advisor (104,031)
- ----------------------------------------------------------------------
Expenses paid indirectly (59)
- ----------------------------------------------------------------------
Net expenses 58,676
- ----------------------------------------------------------------------
Net investment income (loss) (15,062)
- ----------------------------------------------------------------------
Realized and unrealized gain (loss) from investment
securities, foreign currencies and option contracts:
Net realized gain (loss) from:
Investment securities 9,055
- ----------------------------------------------------------------------
Option contracts written (457)
- ----------------------------------------------------------------------
Foreign currencies (150)
- ----------------------------------------------------------------------
8,448
- ----------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 2,014,708
- ----------------------------------------------------------------------
Net gain from investment securities and
futures contracts 2,023,156
- ----------------------------------------------------------------------
Net increase in net assets resulting from operations $2,008,094
======================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-44
<PAGE> 157
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<S> <C> <C>
OPERATIONS: 1999 1998
----------- ----------
Net investment income (loss) $ (15,062) $ 8,126
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 8,448 (254,021)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and option contracts 2,014,708 294,948
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,008,094 49,053
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (12,074)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 5,854,369 3,135,489
- --------------------------------------------------------------------------------
Net increase in net assets 7,862,463 3,172,468
================================================================================
NET ASSETS:
Beginning of period 3,172,468 --
- --------------------------------------------------------------------------------
End of period $11,034,931 $3,172,468
- --------------------------------------------------------------------------------
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 8,979,016 $3,134,630
- --------------------------------------------------------------------------------
Undistributed net investment income (loss) (8,290) (3,061)
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (245,451) (254,049)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
option contracts 2,309,656 294,948
- --------------------------------------------------------------------------------
$11,034,931 $3,172,468
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Development Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 Fund's investment objective is long-term
capital appreciation.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based upon
quotes furnished by independent sources and are valued at the last bid price
in the case of equity securities and in the case of debt obligations, the
mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-45
<PAGE> 158
B. Securities Transactions and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$9,833, undistributed net realized gains increased by $150 and paid-in
capital decreased by $9,983 as a result of differing book/tax treatment of
foreign currency transactions and net operating loss reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
The Fund has a capital loss carryforward of $287,192 as of December 31, 1999
which may be carried forward to offset future taxable gains, if any, which
expires in varying increments, if not previously utilized, in the year 2007.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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, 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
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
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 - 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 the 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 year
ended December 31, 1999, AIM waived fees of $79,627 and reimbursed expenses of
$24,404.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $46,126 of which AIM retained
$0 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,438
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-46
<PAGE> 159
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $59 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $59
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $10,259,505 and $5,809,014, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,548,222
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (261,458)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,286,764
=========================================================================
</TABLE>
Cost of investments for tax purposes is $8,629,182.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
Call Option
Contracts
------------------
Number of Premiums
Contracts Received
--------- --------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------
Written 37 10,229
- -------------------------------------------------------------------------
Closed (32) (8,769)
- -------------------------------------------------------------------------
Exercised (3) (1,303)
- -------------------------------------------------------------------------
Expired (2) (157)
- -------------------------------------------------------------------------
End of year -- --
=========================================================================
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-47
<PAGE> 160
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
Shares Amount Shares Amount
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold 746,789 $7,361,857 403,978 $3,617,838
- -------------------------------------------------------------------------------
Issued as reinvestment of dividends -- -- 1,426 12,074
- -------------------------------------------------------------------------------
Reacquired (163,001) (1,507,488) (60,954) (494,423)
- -------------------------------------------------------------------------------
583,788 $5,854,369 344,450 $3,135,489
===============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999, and the period May 1, 1998 (date
operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998(a)
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 9.21 $10.00
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) 0.03
- ---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.71 (0.78)
- ---------------------------------------------------------------------------
Total from investment operations 2.68 (0.75)
- ---------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.04)
- ---------------------------------------------------------------------------
Net asset value, end of period $ 11.89 $ 9.21
- ---------------------------------------------------------------------------
Total return(b) 29.10% (7.51)%
- ---------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,035 $3,172
- ---------------------------------------------------------------------------
Ratio of expenses to average net assets(c) 1.23%(d) 1.21%(e)
- ---------------------------------------------------------------------------
Ratio of net investment income (loss) to average net
assets(f) (0.32)%(d) 0.62%(e)
- ---------------------------------------------------------------------------
Portfolio turnover rate 132% 45%
===========================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
3.42% and 5.80% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $4,763,466.
(e) Annualized.
(f) 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 were (2.51)% and (3.97)% (annualized) for 1999 and 1998,
respectively.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-48
<PAGE> 161
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Dent Demographic Trends Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations, the statement of
changes in net assets and the financial highlights for the period December 29,
1999 (date operations commenced) through December 31, 1999. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Dent Demographic Trends Fund, as of December 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
period December 29, 1999 (date operations commenced) through December 31, 1999
in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-49
<PAGE> 162
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 16.50%
FEDERAL HOME LOAN BANK - 16.50%
Disc. Notes, 1.50%, 01/03/00 (Cost
$164,986)(a) $ 165,000 $ 164,986
- -----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.40%
U.S. TREASURY BILLS - 8.40%
4.95%, 03/30/00 (Cost $83,960)(a) 85,000(b) 83,964
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 53.89%(c)
Bank of America Securities, 3.15%,
01/03/00(d) 38,701 38,701
- -----------------------------------------------------------------------------
Bank One Capital Markets, Inc.
3.25%, 01/03/00(e) 230,000 230,000
- -----------------------------------------------------------------------------
CIBC Oppenheimer Corp., 3.25%, 01/03/00(f) 230,000 230,000
- -----------------------------------------------------------------------------
Greenwich Capital Markets, Inc.,
3.30%, 01/03/00(g) 40,000 40,000
- -----------------------------------------------------------------------------
Total Repurchase Agreements (Cost $538,701) 538,701
- -----------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 21.01%
STIC Liquid Assets Portfolio(h) 104,999 104,999
- -----------------------------------------------------------------------------
STIC Prime Portfolio(h) 104,999 104,999
- -----------------------------------------------------------------------------
Total Money Market Funds (Cost $209,998) 209,998
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.80% (Cost $997,645) 997,649(i)
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.20% 1,950
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $999,599
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) A portion of the principal balance was pledged as collateral to cover
margin requirements for open futures contracts. See Note 5.
(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 is at least 102% of the sale
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts, and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(d) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$470,258,225 and collateralized by $470,134,815 U.S. Government
obligations, 4.75% to 5.25% due 02/01/01 to 11/14/03 with an aggregate
market value at 12/31/99 of $510,000,998.
(e) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$300,081,250 and collateralized by $304,417,000 U.S. Government
obligations, 0% to 8.125% due 01/03/00 to 05/15/21 with an aggregate
market value at 12/31/99 of $303,690,194.
(f) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$285,077,188 and collateralized by $285,000,000 U.S. Government
obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an aggregate
market value at 12/31/99 of $290,700,000.
(g) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$240,066,000 and collateralized by $343,554,149 U.S. Government
obligations, 5.00% to 10.00% due 03/01/01 to 12/01/29 with an aggregate
market value at 12/31/99 of $244,803,339.
(h) The security shares the same investment advisor as the Fund.
(i) Also represents cost for federal income tax purposes.
Investment Abbreviations:
Disc.- Discounted
See Notes to Financial Statements.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-50
<PAGE> 163
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $997,645) $ 997,649
- ----------------------------------------------------------------------
Receivables for:
Dividends and interest 157
- ----------------------------------------------------------------------
Variation margin 1,870
- ----------------------------------------------------------------------
Due from Advisor 613
- ----------------------------------------------------------------------
Total assets 1,000,289
- ----------------------------------------------------------------------
LIABILITIES:
Accrued advisory fees 47
- ----------------------------------------------------------------------
Accrued administration fees 274
- ----------------------------------------------------------------------
Accrued operating expenses 369
- ----------------------------------------------------------------------
Total liabilities 690
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 999,599
- ----------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 100,001
- ----------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 10.00
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 131
- -----------------------------------------------------------------------
Dividends 108
- -----------------------------------------------------------------------
Total investment income 239
- -----------------------------------------------------------------------
EXPENSES:
Advisory fees 47
- -----------------------------------------------------------------------
Administrative services fees 274
- -----------------------------------------------------------------------
Custodian fees 170
- -----------------------------------------------------------------------
Directors' fees 43
- -----------------------------------------------------------------------
Other 155
- -----------------------------------------------------------------------
Total expenses 689
- -----------------------------------------------------------------------
Less: Fees waived and reimbursed by Advisor (613)
- -----------------------------------------------------------------------
Net expenses 76
- -----------------------------------------------------------------------
Net investment income 163
- -----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Change in net unrealized appreciation (depreciation) of:
Investment securities 4
- -----------------------------------------------------------------------
Futures contracts (578)
- -----------------------------------------------------------------------
Net gain (loss) on investment securities (574)
- -----------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(411)
=======================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-51
<PAGE> 164
STATEMENT OF CHANGES IN NET ASSETS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<CAPTION>
1999
---------
<S> <C>
OPERATIONS:
Net investment income $ 163
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment
securities (574)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (411)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,000,010
- ------------------------------------------------------------------------------
Net increase in net assets 999,599
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $ 999,599
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 999,988
- ------------------------------------------------------------------------------
Undistributed net investment income 185
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (574)
- ------------------------------------------------------------------------------
$ 999,599
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Dent Demographic Trends Fund (the "Fund") is a series portfolio of
AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. The Fund commenced operations December 29, 1999. 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 Fund's investment objective is to achieve long-term growth of
capital.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-52
<PAGE> 165
B. Securities Transactions and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$22 and paid-in capital decreased by $22 as a result of differing book/tax
treatment of organizational costs reclassifications. Net assets of the Fund
were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
E. Futures Contracts - The Fund may purchase or sell 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 that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). H.S. Dent Advisors, Inc. is the Fund's subadvisor.
Under the terms of the master investment advisory agreement, the Fund pays an
advisory fee to AIM at the annual rate of 0.85% of the first $2 billion of the
Fund's average daily net assets, plus 0.80% of the Fund's average daily net
assets in excess of $2 billion. During the period December 29, 1999 (date
operations commenced) through December 31, 1999, AIM waived fees of $321 and
reimbursed expenses of $292.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
period December 29, 1999 (date operations commenced) through December 31,
1999, AIM was paid $0 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 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the
period December 29, 1999 (date operations commenced) through December 31,
1999, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 5 - FUTURES CONTRACTS
On December 31, 1999, $46,000 principal amount of U.S. Treasury obligations
were pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
- ------------ --------- ---------------- -------------
<S> <C> <C> <C>
S&P 500 Mini 11 Mar-00/Buy ($578)
- -------------------------------------------------------
</TABLE>
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-53
<PAGE> 166
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period December 29, 1999 (date
operations commenced) through December 31, 1999 were as follows:
<TABLE>
<CAPTION>
1999
------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 100,001 $1,000,010
===========================================================================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period December 29, 1999 (date operations commenced) through
December 31, 1999.
<TABLE>
<CAPTION>
1999
------
<S> <C>
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00
- -------------------------------------------------------------------------
Less distributions:
Dividends from net investment income --
- -------------------------------------------------------------------------
Net asset value, end of period $10.00
- -------------------------------------------------------------------------
Total return(a) 0.00%
- -------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,000
- -------------------------------------------------------------------------
Ratio of expenses to average net assets(b):
With expense waiver and reimbursement 1.40%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement 12.58%
- -------------------------------------------------------------------------
Ratio of net investment income (loss) to average net assets(b):
With expense waiver and reimbursement 2.96%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement (8.22)%
- -------------------------------------------------------------------------
Portfolio turnover rate --
=========================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $666,528.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-54
<PAGE> 167
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Diversified Income Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended, the eleven month period ended December 31, 1995 and the year
ended January 31, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Diversified Income Fund, as of December 31, 1999, the results of its
operations for the year ended, the changes in its net assets for each of the
two years in the period then ended and the financial highlights for each of the
four years in the period then ended, the eleven month period December 31, 1995
and the year ended January 31, 1995 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. DIVERSIFIED INCOME FUND
FS-55
<PAGE> 168
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS & NOTES - 62.09%
AIR FREIGHT - 0.64%
Atlas Air, Inc., Sr. Unsec. Notes, 10.75%, 08/01/05 $ 620,000 $ 638,600
- -----------------------------------------------------------------------------
AIRLINES - 3.32%
Air 2 US - Series C, Equipment Trust Ctfs., 10.13%,
10/01/20 (Acquired 10/28/99; Cost $550,000)(a) 550,000 547,514
- -----------------------------------------------------------------------------
Airplanes Pass Through Trust - Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/19 300,000 264,000
- -----------------------------------------------------------------------------
Delta Air Lines, Inc., Deb.,
9.00%, 05/15/16 825,000 853,396
- -----------------------------------------------------------------------------
10.38%, 12/15/22 600,000 705,090
- -----------------------------------------------------------------------------
Dunlop Standard Aerospace Holdings PLC (United
Kingdom), Sr. Unsec. Sub. Notes, 11.88%, 05/15/09 460,000 475,525
- -----------------------------------------------------------------------------
United Air Lines, Inc. - Series 95A2, Pass Through
Ctfs., 9.56%, 10/19/18 425,000 454,040
- -----------------------------------------------------------------------------
3,299,565
- -----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.66%
Advance Stores Co., Inc. - Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.25%, 04/15/08 335,000 289,775
- -----------------------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%, 04/15/05 380,000 370,500
- -----------------------------------------------------------------------------
660,275
- -----------------------------------------------------------------------------
AUTOMOBILES - 0.44%
General Motors Corp., Putable Deb., 8.80%, 03/01/21 400,000 440,096
- -----------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.73%
Midland Bank PLC (United Kingdom), Sub. Notes, 7.65%,
05/01/25 245,000 244,417
- -----------------------------------------------------------------------------
Regions Financial Corp., Putable Sub. Notes, 7.75%,
09/15/24 500,000 482,895
- -----------------------------------------------------------------------------
727,312
- -----------------------------------------------------------------------------
BANKS (MONEY CENTER) - 1.80%
Bayerische Landesbank Girozentrale (Germany), Unsec.
Sub. Notes, 5.88%, 12/01/08 100,000 89,812
- -----------------------------------------------------------------------------
First Union Corp., Putable Sub. Deb., 7.50%, 04/15/35 800,000 798,600
- -----------------------------------------------------------------------------
Republic New York Corp.,
Sub. Deb., 9.50%, 04/15/14 350,000 385,728
- -----------------------------------------------------------------------------
Sub. Notes, 9.70%, 02/01/09 470,000 518,673
- -----------------------------------------------------------------------------
1,792,813
- -----------------------------------------------------------------------------
BANKS (REGIONAL) - 1.27%
Mercantile Bancorp., Inc., Unsec. Sub. Notes, 7.30%,
06/15/07 825,000 807,799
- -----------------------------------------------------------------------------
Riggs Capital Trust II - Series C, Gtd. Bonds, 8.88%,
03/15/27 500,000 456,091
- -----------------------------------------------------------------------------
1,263,890
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - 5.69%
British Sky Broadcasting Group PLC (United Kingdom),
Sr. Unsec. Gtd. Yankee Notes, 8.20%, 07/15/09 $ 795,000 $ 765,606
- ------------------------------------------------------------------------------
Comcast Cable Communications, Unsec. Notes, 8.50%,
05/01/27 500,000 530,860
- ------------------------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb., 7.88%, 02/15/18 400,000 382,784
- ------------------------------------------------------------------------------
Sr. Unsec. Deb., 7.63%, 07/15/18 1,400,000 1,306,620
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 12/15/07 500,000 493,275
- ------------------------------------------------------------------------------
Fox Family Worldwide, Inc., Sr. Unsec. Disc. Notes,
10.25%, 11/01/07(b) 840,000 554,400
- ------------------------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc. Notes, 11.88%,
10/15/07(b) 1,000,000 672,500
- ------------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec. Sub. Notes,
8.25%, 02/15/08 950,000 954,750
- ------------------------------------------------------------------------------
5,660,795
- ------------------------------------------------------------------------------
BUILDING MATERIALS - 0.11%
Blount Inc., Sr. Sub Notes, 13.00%, 08/01/09(c) 100,000 106,000
- ------------------------------------------------------------------------------
CHEMICALS - 0.16%
Lyondell Chemical Co., Sr. Gtd. Sub. Notes, 10.88%,
05/01/09 150,000 155,250
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.17%
Dialog Corp. PLC - Series A (United Kingdom), Sr. Sub.
Yankee Notes, 11.00%, 11/15/07 350,000 169,750
- ------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.66%
Lattice Semiconductor Corp., Conv. Notes, 4.75%,
11/01/06 (Acquired 12/03/99; Cost $690,000)(a) 500,000 659,520
- ------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.39%
Exodus Communications, Inc., Sr. Unsec. Notes, 11.25%,
07/01/08 375,000 390,937
- ------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.31%
Equinix Inc., Sr. Notes, 13.00%, 12/01/07(c)(d) 300,000 311,250
- ------------------------------------------------------------------------------
CONSUMER FINANCE - 1.55%
Capital One Financial Corp., Unsec. Notes, 7.25%,
05/01/06 530,000 500,643
- ------------------------------------------------------------------------------
Countrywide Capital III - Series B, Gtd. Bonds, 8.05%,
06/15/27 400,000 368,388
- ------------------------------------------------------------------------------
MBNA Capital I - Series A, Gtd. Bonds, 8.28%, 12/01/26 770,000 675,629
- ------------------------------------------------------------------------------
1,544,660
- ------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.11%
Cleveland Electric Illuminating Co. (The) - Series D,
Sr. Sec. Notes, 7.88%, 11/01/17 500,000 471,832
- ------------------------------------------------------------------------------
El Paso Electric Co. - Series E, Sec. First Mortgage
Bonds, 9.40%, 05/01/11 150,000 158,914
- ------------------------------------------------------------------------------
Niagara Mohawk Power Co. - Series H, Sr. Unsec. Disc.
Notes, 8.50%, 07/01/10(b) 2,000,000 1,498,240
- ------------------------------------------------------------------------------
Southern Energy, Inc., Sr. Notes, 7.90%, 07/15/09
(Acquired 12/03/99; Cost $980,670)(a) 1,000,000 964,160
- ------------------------------------------------------------------------------
3,093,146
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-56
<PAGE> 169
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT - 1.55%
Time Warner Inc., Deb., 9.13%, 01/15/13 $1,400,000 $ 1,537,858
- ------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.13%
Heller Financial, Inc., Notes, 7.38%, 11/01/09
(Acquired 11/23/99; Cost $323,970)(a) 325,000 316,982
- ------------------------------------------------------------------------------
Source One Mortgage Services Corp., Deb., 9.00%,
06/01/12 180,000 196,063
- ------------------------------------------------------------------------------
Sumitomo Bank International Finance N.V. (Japan), Gtd.
Sub. Notes, 8.50%, 06/15/09 600,000 610,949
- ------------------------------------------------------------------------------
1,123,994
- ------------------------------------------------------------------------------
FOODS - 1.41%
ConAgra, Inc., Sr. Unsec. Putable Notes, 7.13%,
10/01/26 1,300,000 1,259,713
- ------------------------------------------------------------------------------
Vlasic Foods International Inc. - Series B, Sr. Unsec.
Sub. Notes, 10.25%, 07/01/09 150,000 143,625
- ------------------------------------------------------------------------------
1,403,338
- ------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.72%
Hollywood Casino Corp.,
Class A, 1st Mortgage, 13.00%, 08/01/06(c) 150,000 161,250
- ------------------------------------------------------------------------------
Sr. Sec. Gtd. Sub. Notes, 11.25%, 05/01/07(c) 125,000 131,250
- ------------------------------------------------------------------------------
Hollywood Park, Inc. - Series B, Sr. Gtd. Unsec. Sub.
Notes, 9.25%, 02/15/07 75,000 74,812
- ------------------------------------------------------------------------------
Venetian Casino Resort LLC, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 400,000 351,000
- ------------------------------------------------------------------------------
718,312
- ------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.16%
Triad Hospitals Holdings Inc. - Series B, Sr. Unsec.
Gtd. Sub. Notes, 11.00%, 05/15/09 150,000 156,000
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.37%
Procter & Gamble Co. (The), Putable Deb., 8.00%,
09/01/24 350,000 371,602
- ------------------------------------------------------------------------------
HOUSEWARES - 0.40%
Decora Industries, Inc. - Series B, Sr. Sec. Gtd.
Notes, 11.00%, 05/01/05 500,000 402,500
- ------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.36%
Americo Life, Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 75,375
- ------------------------------------------------------------------------------
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 235,000 219,539
- ------------------------------------------------------------------------------
9.00%, 10/15/06 200,000 205,846
- ------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 950,000 849,139
- ------------------------------------------------------------------------------
1,349,899
- ------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.38%
HSBC America Capital Trust II, Gtd. Bonds, 8.38%,
05/15/27 (Acquired 08/12/99; Cost $431,289)(a) 450,000 416,691
- ------------------------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Notes, 8.50%, 08/01/15 360,000 368,860
- ------------------------------------------------------------------------------
Sr. Sub. Notes, 7.38%, 01/15/07 470,000 456,370
- ------------------------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 130,000 135,915
- ------------------------------------------------------------------------------
1,377,836
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
IRON & STEEL - 0.29%
Acme Metal Inc., Sr. Unsec. Gtd. Notes, 10.88%,
12/15/07(e) $ 633,000 $ 129,765
- -------------------------------------------------------------------------------
GS Technologies Operating Co., Inc., Sr. Gtd. Notes,
12.00%, 09/01/04 350,000 162,750
- -------------------------------------------------------------------------------
292,515
- -------------------------------------------------------------------------------
LODGING - HOTELS - 0.87%
Hilton Hotels Corp., Conv. Sub. Notes, 5.00%, 05/15/06 125,000 96,250
- -------------------------------------------------------------------------------
John Q. Hammons Hotels, Inc., Sec. First Mortgage
Notes, 9.75%, 10/01/05 550,000 508,750
- -------------------------------------------------------------------------------
Stena Line A.B. (Sweden), Sr. Unsec. Yankee Notes,
10.63%, 06/01/08 430,000 260,150
- -------------------------------------------------------------------------------
865,150
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.10%
Glenoit Corp., Sr. Unsec. Gtd. Sub. Notes, 11.00%,
04/15/07 340,000 86,700
- -------------------------------------------------------------------------------
Mechala Group (Jamaica) Series B, Sr. Gtd. Sub. Notes,
12.75%, 12/30/99(f) 44,000 15,510
- -------------------------------------------------------------------------------
102,210
- -------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.40%
MMI Products, Inc. - Series B, Sr. Unsec. Sub. Notes,
11.25%, 04/15/07 380,000 393,300
- -------------------------------------------------------------------------------
METALS MINING - 0.90%
Centaur Mining and Exploration Ltd. (Australia), Sr.
Gtd. Yankee Notes, 11.00%, 12/01/07 550,000 547,250
- -------------------------------------------------------------------------------
Rio Algom Ltd. (Canada), Unsec. Yankee Deb., 7.05%,
11/01/05 370,000 346,405
- -------------------------------------------------------------------------------
893,655
- -------------------------------------------------------------------------------
NATURAL GAS - 2.00%
Dynegy Inc., Sr. Unsec. Deb., 7.13%, 05/15/18 500,000 445,460
- -------------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 450,000 431,973
- -------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb.,
8.50%, 12/15/12 500,000 520,145
- -------------------------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%, 07/15/11 600,000 590,136
- -------------------------------------------------------------------------------
1,987,714
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.57%
NRG Energy, Inc., Sr. Unsec. Notes, 7.50%, 06/01/09 500,000 460,350
- -------------------------------------------------------------------------------
Pride International, Inc., Sr. Unsec. Notes, 10.00%,
06/01/09 100,000 103,750
- -------------------------------------------------------------------------------
564,100
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.00%
ONEOK, Inc., Unsec. Notes, 7.75%, 08/15/06 400,000 395,996
- -------------------------------------------------------------------------------
Queen Sand Resources, Inc., Sr. Unsec. Gtd. Sub. Notes,
12.50%, 07/01/08 240,000 116,400
- -------------------------------------------------------------------------------
Talisman Energy Inc. (Canada), Yankee Deb., 7.13%,
06/01/07 500,000 480,475
- -------------------------------------------------------------------------------
992,871
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-57
<PAGE> 170
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (REFINING & MARKETING) - 0.29%
Texas Petrochemical Corp., Sr. Unsec. Sub. Notes,
11.13%, 07/01/06 $ 330,000 $ 288,750
- -------------------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.06%
Polaroid Corp., Sr. Unsec. Notes, 11.50%, 02/15/06 60,000 59,700
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.69%
AES Corp., Sr. Notes, 8.00%, 12/31/08 750,000 688,125
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.59%
News America Holdings, Inc.
Sr. Gtd. Deb., 9.25%, 02/01/13 1,000,000 1,089,900
- -------------------------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 491,105
- -------------------------------------------------------------------------------
1,581,005
- -------------------------------------------------------------------------------
RAILROADS - 1.68%
CSX Corp., Sr. Unsec. Putable Deb.,
6.95%, 05/01/27 300,000 298,047
- -------------------------------------------------------------------------------
7.25%, 05/01/27 750,000 736,103
- -------------------------------------------------------------------------------
Norfolk Southern Corp., Notes, 7.05%, 05/01/37 650,000 637,150
- -------------------------------------------------------------------------------
1,671,300
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.97%
Health Care REIT, Inc., Unsec. Notes,
7.57%, 04/15/00 300,000 298,602
- -------------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Deb.,
7.35%, 12/01/17 750,000 662,033
- -------------------------------------------------------------------------------
960,635
- -------------------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.15%
Rite Aid Corp., Conv. Unsec. Sub. Notes,
5.25%, 09/15/02 220,000 150,150
- -------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.17%
Plainwell Inc. - Series B, Sr. Unsec. Sub. Notes,
11.00%, 03/01/08 330,000 173,250
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.68%
Amazon.com, Inc., Conv. Deb., 4.75%, 02/01/09 (Acquired
01/29/99; Cost $501,875)(a) 500,000 568,125
- -------------------------------------------------------------------------------
CSK Auto Inc. - Series A, Sr. Gtd. Sub. Deb,
11.00%, 11/01/06 260,000 265,200
- -------------------------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub. Notes,
10.25%, 06/01/08 330,000 319,275
- -------------------------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec. Gtd. Sub. Notes,
11.00%, 08/15/08 500,000 516,250
- -------------------------------------------------------------------------------
1,668,850
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.70%
Big 5 Corp. - Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 500,000 495,000
- -------------------------------------------------------------------------------
J Crew Operating Corp., Sr. Sub. Notes,
10.38%, 10/15/07 240,000 202,800
- -------------------------------------------------------------------------------
697,800
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SAVINGS & LOAN COMPANIES - 1.78%
Dime Capital Trust I - Series A, Gtd. Bonds,
9.33%, 05/06/27 $ 420,000 $ 396,026
- -------------------------------------------------------------------------------
Sovereign Bancorp, Inc., Medium Term Sub. Notes, 8.00%,
03/15/03 800,000 764,008
- -------------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Notes,
7.13%, 02/15/04 245,000 238,811
- -------------------------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 190,000 181,549
- -------------------------------------------------------------------------------
Notes, 7.50%, 08/15/06 195,000 194,078
- -------------------------------------------------------------------------------
1,774,472
- -------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.43%
Interpublic Group of Companies, Inc. (The), Conv.
Notes, 1.87%, 06/01/06 (Acquired 05/26/99;
Cost $92,650)(a) 110,000 124,988
- -------------------------------------------------------------------------------
MDC Communications Corp. (Canada), Sr. Unsec. Sub.
Yankee Notes, 10.50%, 12/01/06 300,000 297,750
- -------------------------------------------------------------------------------
422,738
- -------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.18%
CUC International, Inc., Conv. Sub. Notes, 3.00%,
02/15/02 73,000 73,730
- -------------------------------------------------------------------------------
Hydrochem Industrial Service Co. - Series B, Sr. Gtd.
Sub. Notes, 10.38%, 08/01/07 140,000 120,750
- -------------------------------------------------------------------------------
Laidlaw Inc. (Canada),
Unsec. Yankee Deb., 6.70%, 05/01/08 500,000 425,585
- -------------------------------------------------------------------------------
Unsec. Yankee Notes, 7.65%, 05/15/06 600,000 557,430
- -------------------------------------------------------------------------------
1,177,495
- -------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.37%
MSX International, Inc., Sr. Unsec. Gtd. Sub. Notes,
11.38%, 01/15/08 380,000 364,800
- -------------------------------------------------------------------------------
SHIPPING - 0.58%
Hutchison Delta Finance Ltd. - Series REGS (Cayman
Islands), Conv. Unsec. Notes, 7.00%, 11/25/01 500,000 580,000
- -------------------------------------------------------------------------------
SOVEREIGN DEBT - 2.52%
Ministry Finance Russia (Vneshtorgbank) (Russia), Deb.,
3.00%, 05/14/06 9,000 2,999
- -------------------------------------------------------------------------------
Province of Manitoba - Series A2 (Canada), Putable
Yankee Deb., 7.75%, 07/17/16 950,000 972,753
- -------------------------------------------------------------------------------
Province of Quebec - Series A (Canada), Medium Term
Putable Yankee Notes,
5.74%, 03/02/26 750,000 743,715
- -------------------------------------------------------------------------------
6.29%, 03/06/26 800,000 786,592
- -------------------------------------------------------------------------------
2,506,059
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.83%
Clearnet Communications, Inc. (Canada), Sr. Unsec.
Disc. Yankee Notes, 14.75%, 12/15/05(b) 110,000 108,900
- -------------------------------------------------------------------------------
US Unwired Inc., Sr. Disc. Notes,
13.38%, 11/01/09(b)(c) 1,100,000 643,500
- -------------------------------------------------------------------------------
WebLink Wireless, Inc., Sr. Disc. Sub. Notes,
11.25%, 02/01/08(b) 750,000 266,250
- -------------------------------------------------------------------------------
Worldwide Fiber Inc. (Canada), Sr. Notes,
12.50%, 12/15/05 210,000 221,550
- -------------------------------------------------------------------------------
12.00%, 08/01/09(c) 560,000 581,000
- -------------------------------------------------------------------------------
1,821,200
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-58
<PAGE> 171
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE) - 3.93%
Call-Net Enterprises, Inc. (Canada), Sr. Unsec. Disc.
Yankee Notes, 8.94%, 08/15/08(b) $ 290,000 $ 144,275
- ------------------------------------------------------------------------------
Destia Communications, Inc., Sr. Unsec. Notes, 13.50%,
07/15/07 750,000 796,875
- ------------------------------------------------------------------------------
Esprit Telecom Group PLC (United Kingdom), Sr. Unsec.
Yankee Notes, 11.50%, 12/15/07 350,000 357,000
- ------------------------------------------------------------------------------
MCI Communications Corp., Sr. Unsec. Putable Deb.,
7.13%, 06/15/27 1,000,000 1,004,800
- ------------------------------------------------------------------------------
Primus Telecommunications Group, Inc., Sr. Notes,
12.75%, 10/15/09(c) 400,000 418,000
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 11.25%, 01/15/09 150,000 145,500
- ------------------------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%, 10/15/19 320,000 354,550
- ------------------------------------------------------------------------------
Tele1 Europe B.V. (Netherlands), Sr. Unsec. Notes,
13.00%, 05/15/09 400,000 422,000
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. (Netherlands), Sr.
Notes, 13.25%, 05/15/08(i) 250,000 267,500
- ------------------------------------------------------------------------------
3,910,500
- ------------------------------------------------------------------------------
TELEPHONE - 2.90%
AT&T Canada Inc. (Canada), Sr. Unsec. Notes, 7.65%,
09/15/06 330,000 328,985
- ------------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group, Bonds, 7.88%,
07/15/09 (Acquired 06/30/99; Cost $397,616)(a) 400,000 398,846
- ------------------------------------------------------------------------------
Bell Atlantic Financial Services, Inc. - Series REGS,
Conv. Bonds, 4.25%, 09/15/05 500,000 628,828
- ------------------------------------------------------------------------------
Esat Telecom Group PLC (Ireland), Sr. Yankee Notes,
12.50%, 02/01/07(b) 470,000 401,850
- ------------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.38%, 07/15/43 750,000 674,655
- ------------------------------------------------------------------------------
Williams Communications Group, Inc., Sr. Unsec. Notes,
10.70%, 10/01/07 425,000 447,313
- ------------------------------------------------------------------------------
2,880,477
- ------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.44%
Cherokee International LCC - Series B, Sr. Unsec. Sub.
Notes, 10.50%, 05/01/09 500,000 442,500
- ------------------------------------------------------------------------------
TRUCKERS - 0.40%
Travelcenters of America, Inc., Sr. Unsec. Gtd. Sub.
Notes, 10.25%, 04/01/07 400,000 400,000
- ------------------------------------------------------------------------------
WASTE MANAGEMENT - 2.13%
Browning-Ferris Industries, Inc., Deb.,
9.25%, 05/01/21 350,000 316,750
- ------------------------------------------------------------------------------
7.40%, 09/15/35 300,000 217,500
- ------------------------------------------------------------------------------
Waste Management, Inc., Conv. Sub. Notes,
2.00%, 01/24/05 110,000 91,575
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.13%, 10/01/07 485,000 427,741
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.13%, 12/15/17 175,000 137,134
- ------------------------------------------------------------------------------
Unsec. Putable Notes, 7.10%, 08/01/26 1,000,000 927,420
- ------------------------------------------------------------------------------
2,118,120
- ------------------------------------------------------------------------------
Total U.S. Dollar Denominated Bonds & Notes
(Cost $65,680,737) 61,784,639
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS &
NOTES - 20.54%
AUSTRALIA - 0.94%
New South Wales Treasury Corp. - Series 4
(Sovereign Debt), Gtd. Notes, 7.00%, 04/01/04 AUD 975,000 643,678
- ------------------------------------------------------------------------------
State Bank New South Wales-Series E
(Banks-Major Regional), Sr. Unsec.
Gtd. Medium Term Notes, 8.63%, 08/20/01 AUD 425,000 288,326
- ------------------------------------------------------------------------------
932,004
- ------------------------------------------------------------------------------
CANADA - 6.44%
AT&T Canada Inc. (Telephone),
Sr. Unsec. Notes, 7.15%, 09/23/04 CAD 700,000 479,184
- ------------------------------------------------------------------------------
Bell Mobility Cellular Inc.
(Telecommunications - Cellular/Wireless),
Deb., 6.55%, 06/02/08 CAD 750,000 497,916
- ------------------------------------------------------------------------------
Canadian Oil Debco Inc.
(Oil & Gas - Exploration & Production),
Deb., 11.00%, 10/31/00 CAD 450,000 322,308
- ------------------------------------------------------------------------------
Canadian Pacific Ltd. - Series D
(Manufacturing-Diversified), Unsec.
Medium Term Notes, 5.85%, 03/30/09
(Acquired 03/24/99; Cost $330,724)(a) CAD 500,000 319,958
- ------------------------------------------------------------------------------
Clearnet Communications Inc.
(Telecommunications - Cellular/Wireless),
Sr. Disc. Notes,
- ------------------------------------------------------------------------------
11.75%, 08/13/07
(Acquired 07/31/97-11/04/97;
Cost $799,965)(a)(b) CAD 1,500,000 737,892
- ------------------------------------------------------------------------------
10.40%, 05/15/08(b) CAD 1,600,000 703,942
- ------------------------------------------------------------------------------
Export Development Corp. (Sovereign Debt),
Sr. Unsub. Notes, 6.50%, 12/21/04 NZD 270,000 133,691
- ------------------------------------------------------------------------------
Microcell Telecommunications Inc. (Telecommunications-
Cellular/Wireless),
Sr. Disc. Notes, 11.13%, 10/15/07(b) CAD 1,000,000 465,946
- ------------------------------------------------------------------------------
Poco Petroleums Ltd.
(Oil & Gas - Exploration & Production),
Unsec. Deb., 6.60%, 09/11/07 CAD 750,000 491,795
- ------------------------------------------------------------------------------
Province of Ontario (Sovereign Debt),
Sr. Unsec. Unsub. Notes, 6.25%, 12/03/08 NZD 1,000,000 456,282
- ------------------------------------------------------------------------------
Rogers Cablesystems
(Broadcasting - Television, Radio & Cable),
Sr. Sec. Second Priority Deb.,
9.65%, 01/15/14 CAD 600,000 434,421
- ------------------------------------------------------------------------------
Teleglobe Canada Inc. (Telephone),
Unsec. Deb., 8.35%, 06/20/03 CAD 850,000 603,009
- ------------------------------------------------------------------------------
TransCanada Pipelines - Series Q
(Natural Gas), Deb., 10.63%, 10/20/09 CAD 500,000 427,493
- ------------------------------------------------------------------------------
Westcoast Energy Inc. - Series V (Natural Gas), Unsec.
Deb., 6.45%, 12/18/06(c) CAD 500,000 339,583
- ------------------------------------------------------------------------------
6,413,420
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-59
<PAGE> 172
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
CAYMAN ISLANDS - 0.77%
Sutton Bridge Financial Ltd. - Series REGS
(Power Producers-Independent), Gtd. Eurobonds, 8.63%,
06/30/22(c) GBP 450,000 763,630
- -------------------------------------------------------------------------------
DENMARK - 0.56%
Kingdom of Denmark (Sovereign Debt), Bonds, 5.00%,
08/15/05 DKK 4,170,000 556,534
- -------------------------------------------------------------------------------
GERMANY - 2.72%
Bundesrepublik Deutschland (Sovereign Debt),
Series 92 Bonds, 7.25%, 10/21/02 EUR 1,000,000 1,076,863
- -------------------------------------------------------------------------------
International Bank for Reconstruction & Development
(Banks-Money Center),
Unsec. Deb., 7.13%, 04/12/05 DEM 1,000,000 559,995
- -------------------------------------------------------------------------------
Landesbank Baden-Wuerttemberg
(Banks - Major Regional), Sr. Unsec.
Unsub. Medium Term Notes,
6.25%, 12/15/04 AUD 400,000 250,737
- -------------------------------------------------------------------------------
Treuhandanstalt (Sovereign Debt), Gtd. Notes,
6.00%, 11/12/03 EUR 780,000 817,928
- -------------------------------------------------------------------------------
2,705,523
- -------------------------------------------------------------------------------
GREECE - 0.94%
Hellenic Republic (Sovereign Debt), Bonds,
6.60%, 01/15/04 GRD 306,000,000 938,733
- -------------------------------------------------------------------------------
LUXEMBOURG - 0.64%
PTC International Finance II S.A. (Telephone),
Sr. Sub. Gtd. Notes, 11.25%, 12/01/09
(Acquired 11/16/99; Cost $621,844)(a) EUR 615,000 637,536
- -------------------------------------------------------------------------------
NETHERLANDS - 2.63%
Dresdner Finance B.V. - Series 11
(Banks - Major Regional), Floating Rate
Gtd. Notes, 3.53%, 07/30/03 EUR 650,000 652,822
- -------------------------------------------------------------------------------
Hypovereins Finance N.V. - Series E
(Banks - Major Regional), Gtd. Medium
Term Notes, 6.00%, 03/12/07 DEM 210,000 108,349
- -------------------------------------------------------------------------------
KPNQwest N.V. - Series REGS
(Telecommunications-Long Distance), Sr.
Unsec. Notes, 7.13%, 06/01/09 EUR 650,000 651,803
- -------------------------------------------------------------------------------
Mannesmann Finance B.V.
(Machinery - Diversified), Gtd. Unsec.
Unsub. Notes, 4.75%, 05/27/09 EUR 250,000 221,859
- -------------------------------------------------------------------------------
SPT Telecom A.S.
(Telecommunications - Long Distance),
Gtd. Unsec. Unsub. Notes, 5.13%, 05/07/03 DEM 420,000 214,210
- -------------------------------------------------------------------------------
Tecnost International Finance N.V. - Series E
(Telephone), Medium Term Gtd. Notes,
6.13%, 07/30/09 EUR 270,000 261,680
- -------------------------------------------------------------------------------
Tele1 Europe (Telecommunications - Long Distance),
Sr. Notes, 11.88%, 12/01/09 (Acquired 12/08/99;
Cost $511,300)(a) EUR 500,000 508,257
- -------------------------------------------------------------------------------
2,618,980
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT(h) VALUE
<S> <C> <C>
NEW ZEALAND - 0.65%
Inter-American Development Bank, (Banks - Money Center),
Unsec. Bonds, 5.75%, 04/15/04 NZD 1,000,000 486,467
- --------------------------------------------------------------------------------
New Zealand Government -
- --------------------------------------------------------------------------------
Series 302 (Sovereign Debt), Bonds,
10.00%, 03/15/02 NZD 145,000 80,875
- --------------------------------------------------------------------------------
Series 404 (Sovereign Debt), Bonds,
8.00%, 04/15/04 NZD 145,000 78,281
- --------------------------------------------------------------------------------
645,623
- --------------------------------------------------------------------------------
SWEDEN - 1.17%
Stadshypotek A.B. - Series 1562 (Banks-Regional), Bonds,
3.50%, 09/15/04 SEK 7,000,000 739,852
- --------------------------------------------------------------------------------
Swedish Government - Series 1035 (Sovereign Debt),
Bonds, 6.00%, 02/09/05 SEK 3,500,000 421,117
- --------------------------------------------------------------------------------
1,160,969
- --------------------------------------------------------------------------------
UNITED KINGDOM - 2.38%
Colt Telecom Group PLC - Series DBC (Telephone), Sr.
Notes, 7.63%, 07/31/08 DEM 150,000 76,729
- --------------------------------------------------------------------------------
Jazztel PLC (Telecommunications - Cellular/Wireless),
Sr. Notes, 13.25%, 12/15/09 (Acquired 12/09/99; Cost
$318,122)(a) EUR 310,000 313,871
- --------------------------------------------------------------------------------
Lloyds Bank PLC - Series E (Banks - Major Regional),
Medium Term Sub. Notes, 5.25%, 07/14/08 DEM 850,000 415,639
- --------------------------------------------------------------------------------
National Power PLC (Electric Companies), Sr.
Unsec. Unsub. Bonds, 8.00%, 02/21/07 AUD 500,000 324,578
- --------------------------------------------------------------------------------
National Westminster Bank PLC - Series E (Banks - Money
Center), Unsec. Unsub. Medium Term Bonds, 5.13%,
06/30/11 EUR 200,000 180,438
- --------------------------------------------------------------------------------
TeleWest Communications PLC (Broadcasting - Television,
Radio & Cable), Sr. Unsec. Conv. Notes, 5.25%,
02/19/07 GBP 350,000 647,872
- --------------------------------------------------------------------------------
Union Bank Switzerland London (Banks-Major Regional),
Unsec. Sub. Notes, 7.38%, 11/26/04 GBP 250,000 409,305
- --------------------------------------------------------------------------------
2,368,432
- --------------------------------------------------------------------------------
UNITED STATES - 0.70%
General Electric Capital Corp. - Series E (Financial-
Diversified), Sr. Unsec. Unsub. Medium Term Notes,
6.00%, 07/27/01 GBP 200,000 317,839
- --------------------------------------------------------------------------------
Merrill Lynch & Co., Inc. - Series E (Investment
Banking/Brokerage), Sr. Unsec. Unsub. Medium Term
Notes, 7.38%, 12/17/07 GBP 235,000 384,747
- --------------------------------------------------------------------------------
702,586
- --------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Non-Convertible Bonds
& Notes (Cost $21,527,812) 20,443,970
- --------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-60
<PAGE> 173
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS - 2.09%
BANKS (MAJOR REGIONAL) - 0.50%
Societe Generale (France) 2,150 $ 499,853
- ------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.21%
First Republic Capital Corp. - Series A-Pfd. (Acquired
05/26/99; Cost $750,000)(a) 750 690,000
- ------------------------------------------------------------------------------
Westpac Banking Corp., STRYPES Trust - $3.135 Conv.
Pfd. 16,000 513,000
- ------------------------------------------------------------------------------
1,203,000
- ------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.00%
Knology Inc. - Wts., expiring 10/22/07
(Acquired 03/12/98; Cost $0)(a)(i) 1,000 2,750
- ------------------------------------------------------------------------------
Wireless One, Inc. - Wts., expiring 10/19/00(i) 420 0
- ------------------------------------------------------------------------------
2,750
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.00%
Electronic Retailing Systems International, Inc. -
Wts., expiring 02/01/04(i) 590 590
- ------------------------------------------------------------------------------
IRON & STEEL - 0.00%
Gulf States Steel, Inc. - Wts., expiring 04/15/03(i) 230 2
- ------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.11%
Tribune Co. - $3.14 Conv. Pfd. 3.14%, 06/01/00 700 105,963
- ------------------------------------------------------------------------------
SOVEREIGN DEBT - 0.02%
Republic of Argentina - Wts. (Argentina),
expiring 02/25/00(i) 198 2,698
- ------------------------------------------------------------------------------
United Mexican States - Wts. (Mexico),
expiring 02/18/00(i) 180 16,672
- ------------------------------------------------------------------------------
19,370
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.04%
Clearnet Communications Inc. -
Class A-ADR (Canada)(i) 891 30,628
- ------------------------------------------------------------------------------
Loral Space & Communications Ltd.(i) 351 8,534
- ------------------------------------------------------------------------------
39,162
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS
(LONG DISTANCE) - 0.17%
Tele1 Europe B.V. - Wts. (Netherlands),
expiring 05/15/08(c)(i) 400 68,100
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. - Wts.
(Netherlands), expiring 05/15/08(i) 250 100,063
- ------------------------------------------------------------------------------
168,163
- ------------------------------------------------------------------------------
TELEPHONE - 0.04%
Esat Telecom Group PLC - Wts. (Ireland),
expiring 02/01/07(i) 470 34,075
- ------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests
(Cost $1,628,916) 2,072,928
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ASSET-BACKED SECURITIES - 1.44%
CONSUMER FINANCE - 0.30%
Green Tree Home Equity Loan Trust - Series 1999-D-
Class A5 Bond, 7.88%, 09/15/30 $ 300,000 $ 303,076
- -----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.18%
Contimortgage Home Equity Loan Trust, Sub. Series
1999-2-Class B Notes, 8.50%, 04/25/29 200,000 180,094
- -----------------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.50%
Fingerhut Master Trust, Sub. Series 1998-2-Class C
Floating Rate Notes, 7.41%, 02/15/07 500,000 494,577
- -----------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.46%
Aircraft Finance Trust - Series 1999-1A-Class A, Sub.
Bonds, 8.00%, 05/15/24 500,000 456,553
- -----------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $1,473,598) 1,434,300
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.94%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 0.03%
Pass Through Ctfs., 8.50%, 03/01/10 28,676 29,590
- -----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") -
0.91%
7.50%, 04/01/29 to 10/01/29 917,354 908,366
- -----------------------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $946,021) 937,956
- -----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.03%
U.S. TREASURY NOTES - 7.99%
5.50%, 07/31/01 400,000 395,900
- -----------------------------------------------------------------------------
4.25%, 11/15/03 300,000 278,739
- -----------------------------------------------------------------------------
7.25%, 08/15/04 5,000,000 5,157,000
- -----------------------------------------------------------------------------
5.88%, 11/15/04 1,000,000 980,310
- -----------------------------------------------------------------------------
6.88%, 05/15/06 250,000 254,263
- -----------------------------------------------------------------------------
5.63%, 05/15/08 675,000 635,033
- -----------------------------------------------------------------------------
4.75%, 11/15/08 280,000 246,999
- -----------------------------------------------------------------------------
7,948,244
- -----------------------------------------------------------------------------
U.S. TREASURY BONDS - 0.04%
6.38%, 08/15/27 40,000 38,414
- -----------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $8,160,540) 7,986,658
- -----------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 2.90%
STIC Liquid Assets Portfolio(j) 1,443,333 1,443,333
- -----------------------------------------------------------------------------
STIC Prime Portfolio(j) 1,443,333 1,443,333
- -----------------------------------------------------------------------------
Total Money Market Funds (Cost $2,886,666) 2,886,666
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.03% (Cost $102,304,290) 97,547,117
=============================================================================
OTHER ASSETS LESS LIABILITIES - 1.97% 1,961,461
=============================================================================
NET ASSETS - 100.00% $99,508,578
=============================================================================
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-61
<PAGE> 174
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 the Board of Directors. The
aggregate market value of these securities at 12/31/99 was $7,207,090 which
represents 7.24% of the Fund's net assets.
(b) Discounted bond at purchase. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(c) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securites Act of
1933, as amended.
(d) Issued as a unit. This unit includes 1 Sr. Note plus one warrant to
purchase 6.667 shares of common stock.
(e) Defaulted security. Currently, the issuer is partially in default with
respect to interest payments.
(f) This security has matured, but payment has not been received pending
outcome of a vote of noteholders and judgement from court on reorganization
of the company. If approved noteholders will receive $477 per $1000
principal amount of notes.
(g) Non-income producing security.
(h) Foreign denominated security. Par value and coupon rate are denominated in
currency indicated.
(i) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(j) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DEM - German Deutsche Mark
Disc. - Discounted
EUR - Euro
GBP - British Pound Sterling
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
REIT - Real Estate Investment Trust
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
STRYPES - Structured Yield Product Exchangeable for Stock
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
Wts. - Warrants
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-62
<PAGE> 175
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $102,304,290) $97,547,117
- ---------------------------------------------------------------------
Foreign currency, at value (cost $723,469) 712,901
- ---------------------------------------------------------------------
Receivables for:
Investments sold 947
- ---------------------------------------------------------------------
Forward currency contracts 108,166
- ---------------------------------------------------------------------
Forward currency contracts closed 32,061
- ---------------------------------------------------------------------
Capital stock sold 66,630
- ---------------------------------------------------------------------
Dividends and interest 1,878,715
- ---------------------------------------------------------------------
Investment for deferred compensation plan 28,680
- ---------------------------------------------------------------------
Other assets 340
- ---------------------------------------------------------------------
Total assets 100,375,557
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 609,856
- ---------------------------------------------------------------------
Forward currency contracts 60,337
- ---------------------------------------------------------------------
Forward currency contracts closed 2,052
- ---------------------------------------------------------------------
Capital stock reacquired 15,064
- ---------------------------------------------------------------------
Deferred compensation plan 28,680
- ---------------------------------------------------------------------
Accrued advisory fees 51,548
- ---------------------------------------------------------------------
Accrued administrative service fees 20,327
- ---------------------------------------------------------------------
Accrued operating expenses 79,115
- ---------------------------------------------------------------------
Total liabilities 866,979
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $99,508,578
=====================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 9,892,323
=====================================================================
Net asset value, offering and redemption price per share $ 10.06
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 7,310,562
- -------------------------------------------------------------------------------
Dividends (net of $1,894 foreign withholding tax) 134,048
- -------------------------------------------------------------------------------
Total investment income 7,444,610
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 556,418
- -------------------------------------------------------------------------------
Administrative services fees 67,038
- -------------------------------------------------------------------------------
Custodian fees 48,004
- -------------------------------------------------------------------------------
Directors' fees 7,655
- -------------------------------------------------------------------------------
Other 90,853
- -------------------------------------------------------------------------------
Total expenses 769,968
- -------------------------------------------------------------------------------
Less: Expenses paid indirectly (644)
- -------------------------------------------------------------------------------
Net expenses 769,324
- -------------------------------------------------------------------------------
Net investment income 6,675,286
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (5,242,949)
- -------------------------------------------------------------------------------
Foreign currencies (38,715)
- -------------------------------------------------------------------------------
Forward currency contracts 540,020
- -------------------------------------------------------------------------------
(4,741,644)
- -------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (3,362,627)
- -------------------------------------------------------------------------------
Foreign currencies (9,253)
- -------------------------------------------------------------------------------
Forward currency contracts (88,248)
- -------------------------------------------------------------------------------
(3,460,128)
- -------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies and
forward currency contracts (8,201,772)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(1,526,486)
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-63
<PAGE> 176
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,675,286 $ 6,761,255
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment
securities, foreign currencies and forward
currency contracts (4,741,644) (884,777)
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities, foreign
currencies and forward currency contracts (3,460,128) (2,586,149)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (1,526,486) 3,290,329
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (6,334,513) (4,724,444)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (1,507,363)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 10,924,224 10,068,179
- ------------------------------------------------------------------------------
Net increase in net assets 3,063,225 7,126,701
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 96,445,353 89,318,652
- ------------------------------------------------------------------------------
End of year $ 99,508,578 $96,445,353
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $105,971,017 $90,723,425
- ------------------------------------------------------------------------------
Undistributed net investment income 5,259,129 5,805,150
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies and
forward currency contracts (7,009,298) (311,599)
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities, foreign currencies and
forward currency contracts (4,712,270) 228,377
- ------------------------------------------------------------------------------
$ 99,508,578 $96,445,353
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Diversified Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 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.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be
AIM V.I. DIVERSIFIED INCOME FUND
FS-64
<PAGE> 177
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$886,794, undistributed net realized gains decreased by $1,956,055 and
paid-in capital increased by $2,842,849 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
The Fund has a capital loss carryforward of $5,553,324 as of December 31,
1999 which may be carried forward to offset future taxable gains, if any,
which expires in varying increments, if not previously utilized, in the year
2007.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
Outstanding foreign currency contracts as of December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT -------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
02/04/00 CAD 4,300,000 $2,932,751 $2,981,814 (49,063)
--------------------------------------------------------------
02/28/00 EUR 2,000,000 2,077,000 2,022,092 54,908
--------------------------------------------------------------
02/28/00 NZD 1,000,000 511,720 522,994 (11,274)
--------------------------------------------------------------
01/24/00 SEK 9,600,000 1,183,257 1,129,999 53,258
--------------------------------------------------------------
$6,704,728 $6,656,899 $47,829
==============================================================
</TABLE>
NOTE 2 - 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 the annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $67,038 of which AIM retained
$50,901 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,569
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $644 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $644
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
AIM V.I. DIVERSIFIED INCOME FUND
FS-65
<PAGE> 178
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $74,328,381 and $79,528,233, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 1,306,434
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,088,425)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(4,781,991)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $ 102,329,108.
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 2,074,968 $ 22,313,329 2,291,048 $ 26,553,679
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 626,559 6,334,513 569,635 6,231,807
- ------------------------------------------------------------------------------
Issued in connection with
acquisitions* 1,744,335 18,512,585 -- --
- ------------------------------------------------------------------------------
Reacquired (3,372,508) (36,236,203) (1,956,150) (22,717,307)
- ------------------------------------------------------------------------------
1,073,354 $ 10,924,224 904,533 $ 10,068,179
==============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable Strategic Income Fund ("Variable Strategic
Income Fund") and GT Global Variable Global Government Income Fund
("Variable Global Government Income Fund") pursuant to a plan of
reorganization approved by Variable Strategic Income Fund's shareholders and
Variable Global Government Income Fund's shareholders on August 25, 1999.
The acquisitions were accomplished by a tax-free exchange of 1,744,335
shares of the Fund for 1,088,436 shares of Variable Strategic Income Fund
and 587,315 shares of Variable Global Government Income Fund outstanding as
of the close of business on October 15, 1999. Variable Strategic Income
Fund's net assets at that date were $12,226,436, including ($992,073) of
unrealized depreciation, and Variable Global Government Income Fund's net
assets at that date were $6,286,149, including ($488,448) of unrealized
depreciation, were combined with those of the Fund. The net assets of the
Fund immediately before the acquisition were $85,340,921.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JANUARY 31,
1999 1998 1997 1996 1995 1995
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
- ------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.64 0.75 0.73 0.73 0.69 0.76
- ------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) (0.85) (0.35) 0.24 0.28 0.94 (1.42)
- ------------------------------------------------------------------------------------------
Total from investment
operations (0.21) 0.40 0.97 1.01 1.63 (0.66)
- ------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.67) (0.57) (0.01) (0.68) (0.75) (0.68)
- ------------------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- (0.18) -- -- -- --
- ------------------------------------------------------------------------------------------
Total distributions (0.67) (0.75) (0.01) (0.68) (0.75) (0.68)
- ------------------------------------------------------------------------------------------
Net asset value, end of
period $ 10.06 $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12
==========================================================================================
Total return(a) (1.92)% 3.58% 9.39% 10.19% 18.11% (6.35)%
==========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $99,509 $96,445 $89,319 $63,624 $44,630 $25,271
==========================================================================================
Ratio of expenses to
average net assets 0.83%(b) 0.77% 0.80% 0.86% 0.88%(c) 0.91%(d)
==========================================================================================
Ratio of net investment
income to average net
assets 7.20%(b) 6.99% 6.90% 7.09% 7.65%(c) 8.07%(d)
==========================================================================================
Portfolio turnover rate 83% 50% 52% 76% 72% 100%
==========================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $92,736,295.
(c) Annualized.
(d) After fee waivers and/or expense reimbursement. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.03% and 7.95%, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
FS-66
<PAGE> 179
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global Growth and Income Fund (formerly, GT Global Variable Growth and
Income Fund), a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1999, the
related statement of operations, the statement of changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended December 31, 1998 and the financial highlights for each of
the four years in the period then ended were audited by other auditors whose
report dated February 19, 1999, expressed an unqualified opinion thereon.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Global Growth and Income Fund, as of December 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-67
<PAGE> 180
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 32.42%
BANKS (MONEY CENTER) - 1.88%
Bank of America Corp. 11,500 $ 577,156
- ---------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 3.07%
Anheuser-Busch Cos, Inc. 9,382 664,949
- ---------------------------------------------------------------------------
Brown-Forman Corp. - Class B 4,900 280,525
- ---------------------------------------------------------------------------
945,474
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.94%
Tellabs, Inc.(a) 4,500 288,844
- ---------------------------------------------------------------------------
ELECTRIC COMPANIES - 1.60%
Southern Co. (The) 21,000 493,500
- ---------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.55%
Emerson Electric Co. 8,300 476,212
- ---------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.71%
Intel Corp. 6,400 526,800
- ---------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.20%
American General Corp. 4,850 367,994
- ---------------------------------------------------------------------------
FOODS - 1.76%
Bestfoods 10,300 541,394
- ---------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 2.84%
Bristol-Myers Squibb Co. 13,600 872,950
- ---------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.60%
Procter & Gamble, Co. (The) 4,500 493,031
- ---------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.37%
Tyco International Ltd. 10,800 419,850
- ---------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 2.68%
Exxon Mobil Corp. 10,221 823,429
- ---------------------------------------------------------------------------
PUBLISHING - 3.38%
McGraw-Hill Cos., Inc. (The) 16,860 1,038,998
- ---------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.23%
Equity Office Properties Trust 23,000 566,375
- ---------------------------------------------------------------------------
Equity Residential Properties Trust 10,000 426,875
- ---------------------------------------------------------------------------
993,250
- ---------------------------------------------------------------------------
TELEPHONE - 2.60%
Bell Atlantic Corp. 13,000 800,313
- ---------------------------------------------------------------------------
TOBACCO - 1.01%
Philip Morris Cos. Inc. 13,450 311,872
- ---------------------------------------------------------------------------
Total Domestic Common Stocks (Cost $8,134,041) 9,971,067
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 48.56%
AUSTRALIA - 2.25%
Foster's Brewing Group Ltd. (Beverages - Alcoholic) 117,000 $ 335,918
- -------------------------------------------------------------------------------
National Australia Bank Ltd. - ADR (Banks - Major
Regional) 23,300 356,679
- -------------------------------------------------------------------------------
692,597
- -------------------------------------------------------------------------------
BELGIUM - 0.02%
Fortis (B) - CVG (Financial - Diversified)(a) 1,932 6,670
- -------------------------------------------------------------------------------
FRANCE - 3.75%
Compagnie de Saint-Gobain (Manufacturing -
Diversified)(a) 2,100 394,599
- -------------------------------------------------------------------------------
Societe Television Francaise 1 (Broadcasting -
Television, Radio & Cable) 1,450 758,863
- -------------------------------------------------------------------------------
1,153,462
- -------------------------------------------------------------------------------
GERMANY - 2.68%
MobilCom A.G. (Telecommunications -
Cellular/Wireless) 5,800 496,180
- -------------------------------------------------------------------------------
Porsche A.G. - Pfd. (Automobiles) 120 328,505
- -------------------------------------------------------------------------------
824,685
- -------------------------------------------------------------------------------
HONG KONG - 1.28%
Hutchison Whampoa Ltd. (Retail - Food Chains) 27,000 392,487
- -------------------------------------------------------------------------------
ITALY - 2.72%
Seat Pagine Gialle S.p.A. (Publishing) 255,000 836,662
- -------------------------------------------------------------------------------
JAPAN - 10.60%
Aeon Credit Service Ltd. (Consumer Finance) 4,200 346,282
- -------------------------------------------------------------------------------
Fujitsu Ltd. (Electrical Equipment) 19,000 866,977
- -------------------------------------------------------------------------------
JAFCO Co., Ltd. (Financial - Diversified) 2,000 714,810
- -------------------------------------------------------------------------------
Rohm Co. Ltd. (Electronics - Component
Distributors) 1,900 781,395
- -------------------------------------------------------------------------------
Toshiba Corp. (Electrical Equipment) 72,000 549,914
- -------------------------------------------------------------------------------
3,259,378
- -------------------------------------------------------------------------------
NETHERLANDS - 9.29%
ING Groep N.V. - ADR (Insurance Brokers) 8,638 521,101
- -------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Electrical Equipment) 2,900 394,025
- -------------------------------------------------------------------------------
Koninklijke KPN N.V. - ADR (Telecommunications -
Long Distance) 11,005 1,073,263
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. - New York Shares (Oil -
International Integrated) 14,160 867,194
- -------------------------------------------------------------------------------
2,855,583
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-68
<PAGE> 181
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NEW ZEALAND - 0.93%
Telecom Corp. of New Zealand Ltd. (Telephone) 61,000 $ 286,852
- --------------------------------------------------------------------------------
SOUTH KOREA - 1.37%
Samsung Electronics (Electronics - Component
Distributors) 1,800 421,664
- --------------------------------------------------------------------------------
SPAIN - 1.67%
Telefonica S.A. (Telephone)(a) 20,600 514,175
- --------------------------------------------------------------------------------
SWITZERLAND - 2.06%
Julius Baer Holding Ltd. (Banks - Major Regional) 210 634,365
- --------------------------------------------------------------------------------
UNITED KINGDOM - 9.94%
Abbey National PLC (Savings & Loan Companies) 9,000 143,870
- --------------------------------------------------------------------------------
Allied Zurich PLC (Insurance - Multi-Line) 30,000 353,377
- --------------------------------------------------------------------------------
Cadbury Schweppes PLC (Foods) 96,510 582,822
- --------------------------------------------------------------------------------
CGU PLC (Insurance Brokers) 13,916 224,140
- --------------------------------------------------------------------------------
Diageo PLC (Beverages - Alcoholic) 36,151 290,698
- --------------------------------------------------------------------------------
EMAP PLC (Publishing) 13,500 279,020
- --------------------------------------------------------------------------------
EMI Group PLC (Leisure Time - Products) 45,790 449,168
- --------------------------------------------------------------------------------
Lloyds TSB Group PLC (Banks - Major Regional) 32,571 407,328
- --------------------------------------------------------------------------------
Reckitt Benckiser PLC (Household Products/
Non-durables) 34,816 326,342
- --------------------------------------------------------------------------------
3,056,765
- --------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$10,907,965) 14,935,345
- --------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
NON-U.S. DOLLAR DENOMINATED BONDS & NOTES - 8.73%(b)
DENMARK - 1.37%
Kingdom of Denmark (Sovereign Debt),
Bonds, 8.00%, 03/15/06 DKK 2,750,000 421,265
- --------------------------------------------------------------------------------
FRANCE - 1.40%
Government of France (Sovereign Debt),
Deb., 4.00%, 10/25/09 EUR 480,000 430,891
- --------------------------------------------------------------------------------
GERMANY - 3.83%
Bundesrepublik Deutschland (Sovereign Debt),
Series 91 Bonds, 8.25%, 09/20/01 EUR 825,000 885,329
- --------------------------------------------------------------------------------
Series 94 Bonds, 6.25%, 01/04/24 EUR 280,000 292,142
- --------------------------------------------------------------------------------
1,177,471
- --------------------------------------------------------------------------------
UNITED KINGDOM - 2.13%
United Kingdom Treasury (Sovereign Debt), Bonds,
7.00%, 06/07/02 GBP 30,000 49,135
- --------------------------------------------------------------------------------
Gtd., 9.00%, 08/06/12 GBP 282,000 606,843
- --------------------------------------------------------------------------------
655,978
- --------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Bonds & Notes
(Cost $2,956,980) 2,685,605
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES - 6.31%
U.S. TREASURY BONDS - 2.48%
8.75%, 08/15/20 $ 300,000 $ 363,153
- -------------------------------------------------------------------------
6.50%, 11/15/26 410,000 399,566
- -------------------------------------------------------------------------
762,719
- -------------------------------------------------------------------------
U.S. TREASURY NOTES - 3.83%
5.625%, 02/28/01 745,000 740,932
- -------------------------------------------------------------------------
5.50%, 02/15/08 465,000 435,417
- -------------------------------------------------------------------------
1,176,349
- -------------------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $1,999,405) 1,939,068
- -------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 1.85%
STIC Liquid Assets Portfolio(c) 284,938 284,938
- -------------------------------------------------------------------------
STIC Prime Portfolio(c) 284,938 284,938
- -------------------------------------------------------------------------
Total Money Market Funds
(Cost $569,876) 569,876
- -------------------------------------------------------------------------
TOTAL INVESTMENTS - 97.87% (Cost $24,568,267) 30,100,961
=========================================================================
OTHER ASSETS LESS LIABILITIES - 2.13% 655,165
=========================================================================
NET ASSETS - 100.00% $ 30,756,126
=========================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Foreign denominated security. Par value and coupon rate are denominated in
currency indicated.
(c) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR- American Depositary Receipt
Deb.- Debentures
Gtd.- Guaranteed
Pfd.- Preferred
See Notes to Financial Statements.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-69
<PAGE> 182
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,568,267) $30,100,961
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $461,718) 461,470
- ---------------------------------------------------------------------
Receivables for:
Dividends and interest 165,833
- ---------------------------------------------------------------------
Forward currency contracts open 19,199
- ---------------------------------------------------------------------
Forward currency contracts closed 28,911
- ---------------------------------------------------------------------
Other assets 169
- ---------------------------------------------------------------------
Total assets 30,776,543
- ---------------------------------------------------------------------
LIABILITIES:
Accrued advisory fees 13,732
- ---------------------------------------------------------------------
Accrued administrative services fees 4,109
- ---------------------------------------------------------------------
Accrued operating expenses 2,576
- ---------------------------------------------------------------------
Total liabilities 20,417
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $30,756,126
=====================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 2,273,784
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 13.53
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $64,558 foreign withholding tax) $ 855,121
- -------------------------------------------------------------------------------
Interest 736,720
- -------------------------------------------------------------------------------
Security lending income 6,756
- -------------------------------------------------------------------------------
Total investment income 1,598,597
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 436,438
- -------------------------------------------------------------------------------
Administrative services fees 32,370
- -------------------------------------------------------------------------------
Custodian fees 26,648
- -------------------------------------------------------------------------------
Directors' fees and expenses 7,543
- -------------------------------------------------------------------------------
Interest expense 5,420
- -------------------------------------------------------------------------------
Other 89,336
- -------------------------------------------------------------------------------
Total expenses 597,755
- -------------------------------------------------------------------------------
Less: Expense reductions (2,556)
- -------------------------------------------------------------------------------
Advisory fee waivers (11,500)
- -------------------------------------------------------------------------------
Net expenses 583,699
- -------------------------------------------------------------------------------
Net investment income 1,014,898
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 4,300,208
- -------------------------------------------------------------------------------
Foreign currencies (96,735)
- -------------------------------------------------------------------------------
Forward currency contracts 37,710
- -------------------------------------------------------------------------------
4,241,183
- -------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (6,198,458)
- -------------------------------------------------------------------------------
Foreign currencies (11,357)
- -------------------------------------------------------------------------------
Forward currency contracts 16,295
- -------------------------------------------------------------------------------
(6,193,520)
- -------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies and
forward currency contracts (1,952,337)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (937,439)
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-70
<PAGE> 183
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,014,898 $ 1,373,112
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 4,241,183 7,246,776
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities, foreign
currencies and forward currency contracts (6,193,520) 1,012,021
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (937,439) 9,631,909
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,196,434) (1,163,351)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (11,580,778) (689,824)
- ------------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (11,109,484) (2,554,737)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (24,824,135) 5,223,997
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 55,580,261 50,356,264
- ------------------------------------------------------------------------------
End of year $ 30,756,126 $55,580,261
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 24,707,801 $35,751,068
- ------------------------------------------------------------------------------
Undistributed net investment income (64,629) 721,621
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward
currency contracts 566,043 7,367,141
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 5,546,911 11,740,431
- ------------------------------------------------------------------------------
$ 30,756,126 $55,580,261
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Growth and Income Fund (the "Fund"), (formerly named the GT
Global Variable Growth & Income Fund), is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Prior to October 18, 1999, the Fund was a
series portfolio of GT Global Variable Investment Trust (the "Trust")
organized as a Delaware business trust registered under the 1940 Act. Pursuant
to an agreement and plan of reorganization between the Company and the Trust,
the Fund was reorganized as a portfolio of the Company effective October 18,
1999. Matters affecting each portfolio will be 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 Fund. 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 Fund's
investment objective is to achieve long-term growth of capital with current
income.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-71
<PAGE> 184
asset value per share, futures and options contracts generally will be valued
15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$604,714, undistributed net realized gains increased by $538,497 and paid-
in capital increased by $66,217 as a result of differing book and tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
------------------
SETTLEMENT UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
- ---------- -------- ------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
01/04/00 GBP 60,446 $ 97,626 $ 97,602 $ 24
- ---------------------------------------------------------------
02/09/00 GBP 600,000 988,110 968,935 19,175
- ---------------------------------------------------------------
660,446 $1,085,736 $1,066,537 $19,199
===============================================================
</TABLE>
NOTE 2 - 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 the annual rate of 1.00% of
the Fund's average daily net assets. Under the terms of a sub-advisory
agreement between AIM and INVESCO Asset Management Limited ("INVESCO"), AIM
pays INVESCO 40% of the amount paid by the Fund to AIM.
Effective July 1, 1999, the Company entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services and other administrative services to the Fund.
Prior to July 1, 1999, AIM was the pricing and accounting agent for the Fund.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount
was allocated to and paid by each such fund based on its relative average
daily net assets. For the year ended December 31, 1999, AIM was paid $32,370
of which AIM retained $20,870 for such services.
The Company has entered into a master distribution agreement with
A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for
the Fund. Certain officers and directors of the Company are officers of AIM
and AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $153 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3 - EXPENSE REDUCTIONS
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $18 under an expense offset arrangement and AIM directed
certain portfolio trades to brokers who then paid $2,538 of the Fund's
expenses. The effect of the above arrangements resulted in a reduction of the
Fund's total expenses of $2,556 during the year ended December 31, 1999.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-72
<PAGE> 185
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period. Prior
to May 28, 1999, the Fund, along with certain other funds advised and/or
administered by AIM, had a line of credit with BankBoston and State Street
Bank & Trust Company. The arrangements with the banks allowed the Fund and
certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000 subject to limits set by its
prospectus for borrowings.
During the year ended December 31, 1999, the average outstanding daily
balance of bank loans for the Fund was $108,145 with a weighted average
interest rate of 5.15%. Interest expense for the Fund for the year ended
December 31, 1999 was $5,420.
NOTE 6 - PORTFOLIO SECURITIES LOANED
At December 31, 1999, there were no securities on loan to brokers. For the
year ended December 31, 1999, the Fund received fees of $6,756 for securities
lending.
For international securities, cash collateral is received by the fund against
loaned securities in an amount at least equal to 105% of the market value of
the loaned securities at the inception of each loan. The collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the market
value of the loaned securities during the period of the loan. The cash
collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $38,788,743 and $60,327,220, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 6,549,086
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,079,412)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 5,469,674
==========================================================================
</TABLE>
Cost of investments for tax purposes is $24,631,287.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-73
<PAGE> 186
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 5,390,132 $ 89,281,583 3,937,752 $80,249,994
- -----------------------------------------------------------------------------
Issued in connection with
reinvestment 1,014,762 12,777,212 90,392 1,853,175
- -----------------------------------------------------------------------------
Reacquired (6,715,236) (113,168,279) (4,150,799) (84,657,906)
- -----------------------------------------------------------------------------
(310,342) $(11,109,484) (122,655) $(2,554,737)
=============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the five-year period ended
December 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of
period $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99
- ------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.57 0.53 0.41 0.53 0.52
- ------------------------------------------------------------------------------
Net gains (losses) on
securities (both realized
and unrealized) (1.29) 3.08 2.23 1.81 1.46
- ------------------------------------------------------------------------------
Total from investment
operations (0.72) 3.61 2.64 2.34 1.98
- ------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.61) (0.44) (0.51) (0.35) (0.40)
- ------------------------------------------------------------------------------
Distributions from net
realized capital gains (6.65) (0.26) (0.04) (0.05) --
- ------------------------------------------------------------------------------
Total distributions (7.26) (0.70) (0.55) (0.40) (0.40)
- ------------------------------------------------------------------------------
Net asset value, end of
period $ 13.53 $ 21.51 $ 18.60 $ 16.51 $ 14.57
- ------------------------------------------------------------------------------
Total return (0.13)% 19.60% 16.22% 16.33% 15.49%
- ------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $30,756 $55,580 $50,356 $36,433 $30,565
- ------------------------------------------------------------------------------
Ratio of expenses to average
net assets including
interest expense:
With reimbursement (Note 2) 1.34%(a) 2.53% 1.13% 1.20% 1.23%
- ------------------------------------------------------------------------------
Without reimbursement 1.37%(a) 2.53% 1.27% 1.30% 1.44%
- ------------------------------------------------------------------------------
Ratio of expenses to average
net assets excluding
interest expense:
With reimbursement 1.33%(a) 2.49% 1.13% 1.20% 1.23%
- ------------------------------------------------------------------------------
Without reimbursement 1.36%(a) 2.49% 1.27% 1.30% 1.44%
- ------------------------------------------------------------------------------
Ratio of net investment
income to average net assets
With reimbursement (Note 2) 2.32%(a) 1.22% 2.86% 3.58% 3.87%
- ------------------------------------------------------------------------------
Without reimbursement 2.29%(a) 1.22% 2.72% 3.48% 3.66%
- ------------------------------------------------------------------------------
Ratio of interest expense to
average net assets 0.01%(a) 0.04% -- -- --
- ------------------------------------------------------------------------------
Portfolio turnover rate 91% 72% 60% 57% 73%
==============================================================================
</TABLE>
(a) Ratios are based on average net assets of $43,643,834.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-74
<PAGE> 187
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the four years in the period
then ended, the eleven month period ended December 31, 1995, and the period May
2, 1994 (commencement of operations) through January 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Global Utilities Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, the eleven month period ended December
31, 1995, and the period May 2, 1994 (commencement of operations) through
January 31, 1995 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GLOBAL UTILITIES FUND
FS-75
<PAGE> 188
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 52.45%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.22%
UnitedGlobalCom Inc. - Class A(a) 9,000 $ 635,625
- ------------------------------------------------------------------
Univision Communications, Inc. - Class A(a) 6,300 643,781
- ------------------------------------------------------------------
1,279,406
- ------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 6.24%
Aether Systems, Inc.(a) 3,900 279,337
- ------------------------------------------------------------------
ANTEC Corp.(a) 4,400 160,600
- ------------------------------------------------------------------
Copper Mountain Networks, Inc.(a) 3,100 151,125
- ------------------------------------------------------------------
Covad Communications Group, Inc.(a) 1,350 75,516
- ------------------------------------------------------------------
JDS Uniphase Corp.(a) 800 129,050
- ------------------------------------------------------------------
Juniper Networks, Inc.(a) 800 272,000
- ------------------------------------------------------------------
Lucent Technologies Inc. 10,400 778,050
- ------------------------------------------------------------------
Sycamore Networks, Inc.(a) 600 184,800
- ------------------------------------------------------------------
Tellabs, Inc.(a) 4,400 282,425
- ------------------------------------------------------------------
Williams Communications Group, Inc.(a) 5,900 170,731
- ------------------------------------------------------------------
2,483,634
- ------------------------------------------------------------------
COMPUTERS (NETWORKING) - 5.00%
Cisco Systems, Inc.(a) 2,500 267,812
- ------------------------------------------------------------------
Foundry Networks, Inc.(a) 1,200 362,025
- ------------------------------------------------------------------
Redback Networks, Inc.(a) 7,300 1,295,750
- ------------------------------------------------------------------
Rhythms NetConnections, Inc.(a) 2,000 62,000
- ------------------------------------------------------------------
1,987,587
- ------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.35%
GRIC Communication, Inc.(a) 5,500 139,562
- ------------------------------------------------------------------
ELECTRIC COMPANIES - 6.96%
Allegheny Energy, Inc. 8,000 215,500
- ------------------------------------------------------------------
DQE, Inc. 7,700 266,612
- ------------------------------------------------------------------
Edison International 14,500 379,719
- ------------------------------------------------------------------
Energy East Corp. 11,000 228,937
- ------------------------------------------------------------------
FirstEnergy Corp. 4,500 102,094
- ------------------------------------------------------------------
FPL Group, Inc. 5,600 239,750
- ------------------------------------------------------------------
IPALCO Enterprises, Inc. 4,000 68,250
- ------------------------------------------------------------------
NiSource, Inc. 10,200 182,325
- ------------------------------------------------------------------
NSTAR 2,510 101,655
- ------------------------------------------------------------------
Pinnacle West Capital Corp. 8,700 265,894
- ------------------------------------------------------------------
Southern Co. (The) 11,600 272,600
- ------------------------------------------------------------------
Teco Energy, Inc. 11,400 211,612
- ------------------------------------------------------------------
Texas Utilities Co. 6,540 232,579
- ------------------------------------------------------------------
2,767,527
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 0.10%
Conexant Systems, Inc.(a) 600 $ 39,825
- ---------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.71%
SDL, Inc.(a) 1,300 283,400
- ---------------------------------------------------------------------
ENTERTAINMENT - 0.40%
Time Warner Inc. 2,200 159,363
- ---------------------------------------------------------------------
NATURAL GAS - 2.82%
Enron Corp. 7,800 346,125
- ---------------------------------------------------------------------
Public Service Co. of North Carolina, Inc. 3,900 126,019
- ---------------------------------------------------------------------
Williams Companies, Inc. (The) 21,300 650,981
- ---------------------------------------------------------------------
1,123,125
- ---------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.30%
AES Corp.(a) 4,100 306,475
- ---------------------------------------------------------------------
MidAmerican Energy Holdings Co.(a) 6,200 208,863
- ---------------------------------------------------------------------
515,338
- ---------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.38%
Alexandria Real Estate Equities, Inc. 4,700 149,519
- ---------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.77%
Convergys Corp.(a) 16,300 501,225
- ---------------------------------------------------------------------
Quanta Services, Inc.(a) 7,200 203,400
- ---------------------------------------------------------------------
704,625
- ---------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 0.72%
Clarent Corp.(a) 3,700 287,675
- ---------------------------------------------------------------------
TELECOMMUNICATIONS - 2.93%
Broadwing Inc.(a) 31,624 1,166,135
- ---------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 4.17%
Infonet Services Corp. - Class B(a) 6,900 181,125
- ---------------------------------------------------------------------
Phone.com, Inc.(a) 5,200 602,875
- ---------------------------------------------------------------------
TeleCorp PCS, Inc.(a) 5,600 212,800
- ---------------------------------------------------------------------
Tritel, Inc.(a) 8,400 266,175
- ---------------------------------------------------------------------
Triton PCS Holdings, Inc. - Class A(a) 4,100 186,550
- ---------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 3,100 206,925
- ---------------------------------------------------------------------
1,656,450
- ---------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.50%
AT&T Corp. 5,700 289,275
- ---------------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 3,600 124,650
- ---------------------------------------------------------------------
MCI WorldCom, Inc.(a) 18,431 977,968
- ---------------------------------------------------------------------
1,391,893
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-76
<PAGE> 189
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE - 11.88%
Bell Atlantic Corp. 4,800 $ 295,500
- -------------------------------------------------------------------------------
BellSouth Corp. 4,200 196,613
- -------------------------------------------------------------------------------
CenturyTel, Inc. 11,800 559,025
- -------------------------------------------------------------------------------
GTE Corp. 3,200 225,800
- -------------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(a) 8,000 471,000
- -------------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(a) 4,300 357,169
- -------------------------------------------------------------------------------
Qwest Communications International, Inc.(a) 15,000 645,000
- -------------------------------------------------------------------------------
SBC Communications, Inc. 31,397 1,530,604
- -------------------------------------------------------------------------------
Time Warner Telecom, Inc.(a) 8,900 444,444
- -------------------------------------------------------------------------------
4,725,155
- -------------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $10,261,302) 20,860,219
- -------------------------------------------------------------------------------
FOREIGN STOCKS - 27.23%
ARGENTINA - 0.43%
El Sitio, Inc. (Computers-Software & Services)(a) 4,600 169,050
- -------------------------------------------------------------------------------
AUSTRALIA - 0.33%
Telstra Corp. Ltd. (Telephone) 19,380 105,426
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. - Installment Receipts (Telephone)(a) 7,200 25,402
- -------------------------------------------------------------------------------
130,828
- -------------------------------------------------------------------------------
AUSTRIA - 0.45%
Oesterreichische Elektrizitaetswirtschafts A.G. -
Class A (Electric Companies) 1,270 178,308
- -------------------------------------------------------------------------------
BELGIUM - 0.41%
Electrabel S.A. (Electric Companies) 500 163,548
- -------------------------------------------------------------------------------
BERMUDA - 0.88%
Global Crossing Ltd. (Telecommunications -
Long Distance)(a) 6,985 349,250
- -------------------------------------------------------------------------------
CANADA - 1.37%
AT&T Canada, Inc. (Telephone)(a) 7,400 297,850
- -------------------------------------------------------------------------------
BCT.Telus Communications, Inc. (Telephone) 4,955 120,674
- -------------------------------------------------------------------------------
BCT.Telus Communications, Inc. - Class A (Telephone) 1,651 39,865
- -------------------------------------------------------------------------------
Westcoast Energy, Inc. (Natural Gas) 5,500 88,344
- -------------------------------------------------------------------------------
546,733
- -------------------------------------------------------------------------------
DENMARK - 0.62%
Tele Danmark A.S. - ADR (Telephone) 6,500 245,375
- -------------------------------------------------------------------------------
FINLAND - 3.16%
Nokia Oyj - ADR (Communications Equipment) 4,700 893,000
- -------------------------------------------------------------------------------
Sonera Oyj (Telecommunications - Cellular/Wireless) 5,300 362,991
- -------------------------------------------------------------------------------
1,255,991
- -------------------------------------------------------------------------------
FRANCE - 2.17%
France Telecom S.A. - ADR (Telecommunications) 4,000 534,000
- -------------------------------------------------------------------------------
Suez Lyonnaise des Eaux S.A. (Manufacturing -
Diversified) 1,100 176,139
- -------------------------------------------------------------------------------
Vivendi (Manufacturing - Diversified) 1,700 153,388
- -------------------------------------------------------------------------------
863,527
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY - 1.34%
Mannesmann A.G. (Machinery - Diversified) 1,181 $ 284,626
- ------------------------------------------------------------------------------
RWE A.G. (Electric Companies) 2,825 110,601
- ------------------------------------------------------------------------------
Viag A.G. (Manufacturing - Diversified) 7,500 137,380
- ------------------------------------------------------------------------------
532,607
- ------------------------------------------------------------------------------
GREECE - 0.08%
Panafon Hellenic Telecom S.A. - GDR
(Telecommunications - Cellular/Wireless)
(Acquired 11/20/98; Cost $21,696)(b) 2,400 30,960
- ------------------------------------------------------------------------------
HUNGARY - 0.37%
Magyar Tavkozlesi Rt - ADR (Telecommunications -
Long Distance) 4,100 147,600
- ------------------------------------------------------------------------------
IRELAND - 1.67%
eircom PLC (Telecommunication - Long Distance) 152,500 664,584
- ------------------------------------------------------------------------------
ISRAEL - 0.62%
Partner Communications Co. Ltd. - ADR
(Telecommunications - Cellular/Wireless)(a) 9,600 248,400
- ------------------------------------------------------------------------------
ITALY - 2.59%
ACEA S.p.A. (Water Utilities)(a) 38,400 533,338
- ------------------------------------------------------------------------------
AEM S.p.A. (Electric Companies) 55,000 220,312
- ------------------------------------------------------------------------------
Enel S.p.A. (Electric Companies)(a) 29,900 125,186
- ------------------------------------------------------------------------------
Societa Nordelettrica S.p.A. (Electric Companies) 49,000 150,414
- ------------------------------------------------------------------------------
1,029,250
- ------------------------------------------------------------------------------
JAPAN - 0.95%
Nippon Telegraph & Telephone Corp. (Telephone) 12 205,630
- ------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. - ADR (Telephone) 2,000 172,250
- ------------------------------------------------------------------------------
377,880
- ------------------------------------------------------------------------------
MEXICO - 0.20%
Nuevo Grupo Iusacell S.A. de C.V.-ADR
(Telecommunications - Cellular/Wireless)(a) 5,300 79,169
- ------------------------------------------------------------------------------
NETHERLANDS - 3.06%
KPNQWest N.V. (Telecommunications -
Long Distance)(a) 6,700 445,726
- ------------------------------------------------------------------------------
Libertel N.V. (Telecommunications-Cellular/Wireless)(a) 7,800 204,108
- ------------------------------------------------------------------------------
Versatel Telecom International N.V.
(Telecommunications - Long Distance)(a) 16,100 567,135
- ------------------------------------------------------------------------------
1,216,969
- ------------------------------------------------------------------------------
SOUTH KOREA - 0.81%
Korea Telecom Corp. - ADR (Telephone) 4,312 322,322
- ------------------------------------------------------------------------------
SPAIN - 3.02%
Autopistas Concesionaria Espanola S.A.
(Services - Commercial & Consumer) 4,095 39,772
- ------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 7,600 150,762
- ------------------------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 25,464 635,580
- ------------------------------------------------------------------------------
Terra Networks, S.A. (Computers - Software &
Services)(a) 6,900 376,739
- ------------------------------------------------------------------------------
1,202,853
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-77
<PAGE> 190
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - 2.70%
COLT Telecom Group PLC (Communications Equipment)(a) 2,000 $ 102,340
- -------------------------------------------------------------------------------
Kelda Group PLC (Water Utilities) 26,174 147,921
- -------------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 13,113 99,728
- -------------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 14,485 104,081
- -------------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Companies) 4,800 151,800
- -------------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 22,750 172,284
- -------------------------------------------------------------------------------
Thus PLC (Telecommunications - Long Distance)(a) 22,300 140,791
- -------------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 15,000 155,859
- -------------------------------------------------------------------------------
1,074,804
- -------------------------------------------------------------------------------
Total Foreign Stocks (Cost $6,402,949) 10,830,008
- -------------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 4.14%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.36%
MediaOne Group, Inc.-$3.04 Conv. Pfd. 3,000 144,000
- -------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.88%
PSINet, Inc. - Series C, $3.375 Conv. Pfd. 6,000 350,250
- -------------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.77%
Calpine Capital Trust-$2.875 Conv. Pfd. 4,700 303,737
- -------------------------------------------------------------------------------
NATURAL GAS - 0.85%
El Paso Energy Cap Trust, Inc. - $2.375 Conv. Pfd. 6,700 337,513
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.12%
Broadwing Inc. - Series B, $3.375 Conv. Pfd. 820 48,585
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.87%
WinStar Communications, Inc. -Series F,
$72.50 Conv. Pfd. 260 346,450
- -------------------------------------------------------------------------------
TELEPHONE - 0.29%
NEXTLINK Communications - $3.25 Conv. Pfd. (Acquired
03/26/98; Cost $30,000)(b) 600 115,125
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks (Cost
$1,448,282) 1,645,660
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES - 6.02%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.26%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 102,875
- -------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.89%
Candescent Technology Corp., Sr. Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired 04/17/98-11/30/98; Cost $431,218)(b) 452,000 352,560
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRIC COMPANIES - 0.93%
El Paso Electric Co. - Series E, Sec. First Mortgage
Bonds, 9.40%, 05/01/11 $ 100,000 $ 105,943
- -----------------------------------------------------------------------------
Indiana Michigan Power Co. - Series F, Sec. Lease
Obligation Bonds, 9.82%, 12/07/22 93,396 103,341
- -----------------------------------------------------------------------------
Western Resources, Inc., Sr. Unsec. Notes,
6.25%, 08/15/03 75,000 70,913
7.13%, 08/01/09 100,000 90,482
- -----------------------------------------------------------------------------
370,679
- -----------------------------------------------------------------------------
NATURAL GAS - 1.25%
Dynegy Inc., Sr. Unsec. Deb., 7.13%, 05/15/18 100,000 89,092
- -----------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%, 09/15/12 400,000 406,304
- -----------------------------------------------------------------------------
495,396
- -----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.67%
AES Corp.,
Sr. Notes, 8.00%, 12/31/08 100,000 91,750
Sr. Unsec. Sub. Notes, 10.25%, 07/15/06 100,000 102,000
- -----------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 73,698
- -----------------------------------------------------------------------------
267,448
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.08%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 153,171
- -----------------------------------------------------------------------------
Global TeleSystems Group, Inc., Conv. Notes,
8.75%, 06/30/00 80,000 277,700
- -----------------------------------------------------------------------------
430,871
- -----------------------------------------------------------------------------
TELEPHONE - 0.94%
NTL Inc., Conv. Sub. Notes, 5.75%, 12/15/09 (Acquired
12/17/99; Cost $180,000)(b) 180,000 194,400
- -----------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.38%, 07/15/43 200,000 179,908
- -----------------------------------------------------------------------------
374,308
- -----------------------------------------------------------------------------
Total U.S. Dollar Denominated Bonds & Notes
(Cost $2,452,442) 2,394,137
- -----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED BONDS & NOTES - 3.06%(c)
CANADA - 0.93%
Canadian Oil Debco Inc. (Oil & Gas-Exploration &
Production), Deb., 11.00%, 10/31/00 CAD 100,000 71,624
- -----------------------------------------------------------------------------
Clearnet Communications, Inc. (Telecommunications -
Cellular/Wireless), Sr. Unsec. Disc. Notes,
10.75%, 02/15/09(d) CAD 300,000 121,596
- -----------------------------------------------------------------------------
Teleglobe Canada Inc. (Telephone), Unsec. Deb., 8.35%,
06/20/03 CAD 100,000 70,942
- -----------------------------------------------------------------------------
TransCanada Pipelines - Series Q (Natural Gas), Deb.,
10.63%, 10/20/09 CAD 125,000 106,873
- -----------------------------------------------------------------------------
371,035
- -----------------------------------------------------------------------------
FRANCE - 0.39%
France Telecom (Telephone), Conv. Bonds,
2.00%, 01/01/04 FRF 603,520 153,473
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-78
<PAGE> 191
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM - 1.74%
COLT Telecom Group PLC (Communications Equipment),
Conv. Bonds, 2.00%, 12/16/06 (Acquired 12/09/99;
Cost $153,930)(b) EUR 150,000 $ 162,479
- ------------------------------------------------------------------------------
National Grid Co. PLC (Electric Companies),
Conv. Bonds, 4.25%, 02/17/08
(Acquired 02/05/98; Cost $397,800)(b) GBP 240,000 467,456
- ------------------------------------------------------------------------------
Series RG, Conv. Bonds, 4.25%, 04/17/08 GBP 32,000 62,328
- ------------------------------------------------------------------------------
692,263
- ------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Bonds & Notes
(Cost $1,110,879) 1,216,771
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 7.24%
STIC Liquid Assets Portfolio(e) 1,441,160 1,441,160
- ------------------------------------------------------------------------------
STIC Prime Portfolio(e) 1,441,160 1,441,160
- ------------------------------------------------------------------------------
Total Money Market Funds (Cost $2,882,320) 2,882,320
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.14%
(Cost $24,558,174) 39,829,115
- ------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS--(0.14%) (56,849)
- ------------------------------------------------------------------------------
NET ASSETS--100.00% $39,772,266
- ------------------------------------------------------------------------------
</TABLE>
INVESTMENT ABBREVIATIONS:
ADR - American Depository Receipt
CAD - Canadian Dollars
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
EUR - Euro
FRF - French Franc
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/99 was $1,322,980 which
represented 3.33% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d) Step bond issued at discount. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(e) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-79
<PAGE> 192
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $24,558,174) $39,829,115
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $22,668) 19,600
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 16,293
- ---------------------------------------------------------------------
Dividends and interest 105,615
- ---------------------------------------------------------------------
Investment for deferred compensation plan 24,627
- ---------------------------------------------------------------------
Total assets 39,995,250
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 68,535
- ---------------------------------------------------------------------
Capital stock reacquired 70,147
- ---------------------------------------------------------------------
Deferred compensation plan 24,627
- ---------------------------------------------------------------------
Accrued advisory fees 20,900
- ---------------------------------------------------------------------
Accrued administrative service fees 11,658
- ---------------------------------------------------------------------
Accrued operating expenses 27,117
- ---------------------------------------------------------------------
Total liabilities 222,984
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $39,772,266
- ---------------------------------------------------------------------
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,744,266
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 22.80
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $14,857 foreign withholding tax) $ 443,325
- ---------------------------------------------------------------------
Interest 446,558
- ---------------------------------------------------------------------
Total investment income 889,883
- ---------------------------------------------------------------------
EXPENSES:
Advisory fees 202,137
- ---------------------------------------------------------------------
Administrative services fees 58,645
- ---------------------------------------------------------------------
Custodian fees 29,266
- ---------------------------------------------------------------------
Directors' fees 7,321
- ---------------------------------------------------------------------
Other 58,242
- ---------------------------------------------------------------------
Total expenses 355,611
- ---------------------------------------------------------------------
Less: Expenses paid indirectly (210)
- ---------------------------------------------------------------------
Net expenses 355,401
- ---------------------------------------------------------------------
Net investment income 534,482
- ---------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment securities 2,020,449
- ---------------------------------------------------------------------
Foreign currencies (23,553)
- ---------------------------------------------------------------------
1,996,896
- ---------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 7,368,770
- ---------------------------------------------------------------------
Foreign currencies (2,769)
- ---------------------------------------------------------------------
7,366,001
- ---------------------------------------------------------------------
Net gain on investment securities and foreign currencies 9,362,897
- ---------------------------------------------------------------------
Net increase in net assets resulting from operations $9,897,379
=====================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-80
<PAGE> 193
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 534,482 $ 610,580
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and option contracts 1,996,896 (59,962)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 7,366,001 3,278,654
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,897,379 3,829,272
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income (618,958) (450,038)
- --------------------------------------------------------------------------------
Distributions from net realized gains -- (187,121)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 2,360,217 2,862,654
- --------------------------------------------------------------------------------
Net increase in net assets 11,638,638 6,054,767
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 28,133,628 22,078,861
- --------------------------------------------------------------------------------
End of year $39,772,266 $28,133,628
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $22,058,910 $19,698,693
- --------------------------------------------------------------------------------
Undistributed net investment income 478,129 608,138
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies, futures
and option contracts 1,966,978 (75,451)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 15,268,249 7,902,248
- --------------------------------------------------------------------------------
$39,772,266 $28,133,628
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Utilities Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 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
stocks of public utility companies (either domestic or foreign).
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. GLOBAL UTILITIES FUND
FS-81
<PAGE> 194
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$45,533 and undistributed net realized gains increased by $45,533 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
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.
NOTE 2 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the year
ended December 31, 1999, the Fund paid AIM $58,645 of which AIM retained $51,234
for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,470
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $210 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $210
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $14,873,790 and $12,930,318, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $15,958,031
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (688,644)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $15,269,387
==========================================================================
</TABLE>
Cost of investments for tax purposes is $24,559,728.
AIM V.I. GLOBAL UTILITIES FUND
FS-82
<PAGE> 195
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 482,016 $8,991,351 516,028 $8,375,181
- -------------------------------------------------------------------
Issued as reinvestment
of dividends 28,722 618,958 37,858 637,159
- -------------------------------------------------------------------
Reacquired (386,649) (7,250,092) (380,439) (6,149,686)
- -------------------------------------------------------------------
124,089 $2,360,217 173,447 $2,862,654
===================================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------ JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
------- ------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 17.36 $ 15.26 $ 12.55 $11.64 $9.69 $10.00
- ------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.32 0.35 0.32 0.40 0.29 0.27
- ------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 5.49 2.15 2.40 0.99 1.98 (0.33)
- ------------------------------------------------------------------------------------------------
Total from investment
operations 5.81 2.50 2.72 1.39 2.27 (0.06)
- ------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.37) (0.28) -- (0.41) (0.31) (0.25)
- ------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.12) (0.01) (0.07) (0.01) --
- ------------------------------------------------------------------------------------------------
Total distributions (0.37) (0.40) (0.01) (0.48) (0.32) (0.25)
- ------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 22.80 $ 17.36 $ 15.26 $12.55 $11.64 $ 9.69
- ------------------------------------------------------------------------------------------------
Total return(b) 33.56% 16.49% 21.63% 12.07% 23.73% (0.56)%
- ------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $39,772 $28,134 $22,079 $13,576 $8,394 $2,958
- ------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 1.14%(c) 1.11% 1.28% 1.40%(d) 1.47%(d)(e) 1.31%(e)(f)
- ------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets 1.72%(c) 2.46% 2.81% 3.56%(d) 3.76%(d)(e) 4.39%(e)(f)
- ------------------------------------------------------------------------------------------------
Portfolio turnover rate 45% 32% 28% 47% 58% 69%
================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Totals returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $31,098,057.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.55% and 3.42% for 1996 and 2.44%
(annualized) and 2.79% (annualized) for 1995.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 2.80% (annualized) and 2.90% (annualized),
respectively.
AIM V.I. GLOBAL UTILITIES FUND
FS-83
<PAGE> 196
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Government Securities Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended, the eleven month period ended December 31, 1995 and the year
ended January 31, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Government Securities Fund, as of December 31, 1999, the results of its
operations for the year ended, the changes in its net assets for each of the
two years in the period then ended and the financial highlights for each of the
four years in the period then ended, the eleven month period ended December 31,
1995 and the year ended January 31, 1995 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GOVERNMENT SECURITIES FUND
FS-84
<PAGE> 197
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES - 0.87%
CONSUMER FINANCE - 0.87%
Asia Development Bank, Deb., 8.00%, 04/30/01 $ 200,000 $ 203,226
- ----------------------------------------------------------------------------
Financial Assistance Corp., Bonds, 9.38%, 07/21/03 75,000 80,940
- ----------------------------------------------------------------------------
International Bank for Reconstruction & Development,
Unsub. Unsec. Notes, 5.25%, 09/16/03 350,000 332,118
- ----------------------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $614,432) 616,284
- ----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 64.35%
FEDERAL FARM CREDIT BANK - 2.92%
Medium term notes
5.96%, 07/14/03 200,000 194,390
- ----------------------------------------------------------------------------
5.80%, 06/17/05 1,000,000 949,770
- ----------------------------------------------------------------------------
6.22%, 06/17/08 1,000,000 925,250
- ----------------------------------------------------------------------------
2,069,410
- ----------------------------------------------------------------------------
FEDERAL HOME LOAN BANK - 3.07%
Debentures
6.00%, 06/27/00 250,000 250,023
- ----------------------------------------------------------------------------
5.97%, 12/11/00 1,000,000 996,480
- ----------------------------------------------------------------------------
7.31%, 07/06/01 500,000 505,990
- ----------------------------------------------------------------------------
8.17%, 12/16/04 400,000 420,812
- ----------------------------------------------------------------------------
2,173,305
- ----------------------------------------------------------------------------
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 14.29%
Debentures
5.75%, 07/15/03 1,150,000 1,112,349
- ----------------------------------------------------------------------------
6.45%, 04/29/09 1,000,000 936,050
- ----------------------------------------------------------------------------
Pass through certificates
6.00%, 11/01/08 to 09/01/13 1,040,446 995,181
- ----------------------------------------------------------------------------
6.50%, 12/01/08 to 08/01/28 4,038,585 3,844,835
- ----------------------------------------------------------------------------
7.00%, 11/01/10 to 01/01/26 964,654 953,281
- ----------------------------------------------------------------------------
10.50%, 08/01/19 109,957 119,990
- ----------------------------------------------------------------------------
8.50%, 09/01/20 to 12/01/26 2,075,591 2,149,257
- ----------------------------------------------------------------------------
10,110,943
- ----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") -
27.24%
Debentures
8.25%, 12/18/00 500,000 508,640
- ----------------------------------------------------------------------------
6.38%, 01/16/02 1,470,000 1,464,355
- ----------------------------------------------------------------------------
7.50%, 02/11/02 1,350,000 1,373,153
- ----------------------------------------------------------------------------
7.55%, 04/22/02 400,000 407,852
- ----------------------------------------------------------------------------
6.80%, 01/10/03 1,605,000 1,606,011
- ----------------------------------------------------------------------------
8.50%, 02/01/05 500,000 500,985
- ----------------------------------------------------------------------------
5.75%, 06/15/05 500,000 474,545
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") -
27.24% - CONTINUED
Medium term notes
6.40%, 05/02/01 1,225,000 $ 1,223,947
- ---------------------------------------------------------------------------
6.69%, 08/07/01 500,000 501,650
- ---------------------------------------------------------------------------
7.38%, 03/28/05 300,000 305,859
- ---------------------------------------------------------------------------
Pass through certificates
7.00%, 03/01/04 to 01/01/28 3,697,688 3,633,075
- ---------------------------------------------------------------------------
6.00%, 12/01/08 to 12/01/13 2,886,622 2,745,710
- ---------------------------------------------------------------------------
7.50%, 11/01/09 to 07/01/27 1,624,063 1,626,020
- ---------------------------------------------------------------------------
6.50%, 10/01/10 to 09/01/27 1,489,904 1,441,551
- ---------------------------------------------------------------------------
8.50%, 09/01/24 to 02/01/25 981,400 1,008,697
- ---------------------------------------------------------------------------
STRIPS(a)
7.37%, 10/09/19 1,800,000 452,682
- ---------------------------------------------------------------------------
19,274,732
- ---------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") -
12.40%
Pass through certificates
9.50%, 08/15/03 to 09/15/16 47,041 50,461
- ---------------------------------------------------------------------------
7.50%, 03/15/08 to 08/15/28 1,992,785 1,976,283
- ---------------------------------------------------------------------------
9.00%, 09/15/08 to 10/15/16 93,366 98,436
- ---------------------------------------------------------------------------
11.00%, 10/15/15 25,601 28,241
- ---------------------------------------------------------------------------
10.50%, 09/15/17 to 11/15/19 21,617 23,637
- ---------------------------------------------------------------------------
10.00%, 06/15/19 628,842 683,080
- ---------------------------------------------------------------------------
6.50%, 12/15/23 370,911 351,783
- ---------------------------------------------------------------------------
8.00%, 07/15/24 to 07/15/26 2,400,291 2,436,443
- ---------------------------------------------------------------------------
7.00%, 04/15/28 to 06/15/28 3,227,603 3,126,740
- ---------------------------------------------------------------------------
8,775,104
- ---------------------------------------------------------------------------
PRIVATE EXPORT FUNDING COMPANY - 0.43%
Debentures
7.30%, 01/31/02 300,000 303,444
- ---------------------------------------------------------------------------
STUDENT LOAN MARKETING ASSOCIATION - 0.71%
Debentures
6.50%, 08/01/02 150,000 149,426
- ---------------------------------------------------------------------------
Medium term notes
7.50%, 03/08/00 350,000 351,036
- ---------------------------------------------------------------------------
500,462
- ---------------------------------------------------------------------------
TENNESSEE VALLEY AUTHORITY - 3.29%
Debentures
6.38%, 06/15/05 2,400,000 2,325,696
- ---------------------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $46,820,120) 45,533,096
- ---------------------------------------------------------------------------
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
FS-85
<PAGE> 198
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. TREASURY SECURITIES - 18.64%
U.S. TREASURY BONDS - 5.86%
9.25%, 02/15/16 550,000 $ 678,766
- ----------------------------------------------------------------
7.63%, 02/15/25 550,000 609,306
- ----------------------------------------------------------------
6.88%, 08/15/25 500,000 508,975
- ----------------------------------------------------------------
6.13%, 11/15/27 1,500,000 1,395,345
- ----------------------------------------------------------------
6.13%, 08/15/29(b) 1,000,000 953,590
- ----------------------------------------------------------------
4,145,982
- ----------------------------------------------------------------
U.S. TREASURY NOTES - 11.59%
6.13%, 12/31/01 500,000 499,025
- ----------------------------------------------------------------
6.00%, 07/31/02 300,000 298,329
- ----------------------------------------------------------------
5.25%, 08/15/03 3,500,000 3,375,470
- ----------------------------------------------------------------
6.00%, 08/15/04(b) 3,000,000 2,954,340
- ----------------------------------------------------------------
5.50%, 02/15/08 1,000,000 936,380
- ----------------------------------------------------------------
5.63%, 05/15/08 150,000 141,118
- ----------------------------------------------------------------
8,204,662
- ----------------------------------------------------------------
U.S. TREASURY STRIPS - 1.19 %(a)
5.38%, 05/15/06 750,000 494,288
- ----------------------------------------------------------------
6.80%, 11/15/18 1,250,000 347,163
- ----------------------------------------------------------------
841,451
- ----------------------------------------------------------------
Total U.S. Treasury Securities
(Cost $14,038,612) 13,192,095
- ----------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 21.04%
STIT Government & Agency Portfolio
(Cost $14,883,691)(c) 14,883,691 14,883,691
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 104.90%
(Cost $76,356,855) 74,225,166
================================================================
OTHER ASSETS LESS LIABILITIES - (4.90%) (3,463,944)
================================================================
NET ASSETS - 100.00% $70,761,222
================================================================
</TABLE>
Investment Abbreviations:
Deb. - Debentures
STRIPS - Separately Traded Registered Interest and Principal Security
Unsec. - Unsecured
Unsub. - Unsubordinated
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) The principal amount has been deposited in escrow with custodian as
collateral for reverse repurchase agreements outstanding at 12/31/99. See
Note 4.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-86
<PAGE> 199
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $76,356,855) $74,225,166
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 155,441
- ---------------------------------------------------------------------
Interest 787,843
- ---------------------------------------------------------------------
Paydowns 3,579
- ---------------------------------------------------------------------
Investment for deferred compensation plan 28,170
- ---------------------------------------------------------------------
Other assets 694
- ---------------------------------------------------------------------
Total assets 75,200,893
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Reverse repurchase agreement 4,036,250
- ---------------------------------------------------------------------
Capital stock reacquired 286,100
- ---------------------------------------------------------------------
Deferred compensation plan 28,170
- ---------------------------------------------------------------------
Accrued advisory fees 29,695
- ---------------------------------------------------------------------
Accrued administrative services fees 30,776
- ---------------------------------------------------------------------
Accrued operating expenses 28,680
- ---------------------------------------------------------------------
Total liabilities 4,439,671
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $70,761,222
- ---------------------------------------------------------------------
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 6,659,813
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 10.63
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 4,021,531
- -----------------------------------------------------------------------------
Dividends 172,285
- -----------------------------------------------------------------------------
Total investment income 4,193,816
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 315,598
- -----------------------------------------------------------------------------
Administrative services fees 98,225
- -----------------------------------------------------------------------------
Custodian fees 25,266
- -----------------------------------------------------------------------------
Directors' fees 7,693
- -----------------------------------------------------------------------------
Interest expense 61,797
- -----------------------------------------------------------------------------
Other 56,941
- -----------------------------------------------------------------------------
Total expenses 565,520
- -----------------------------------------------------------------------------
Net investment income 3,628,296
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Net realized gain (loss) from investment securities (1,304,878)
- -----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of
investment securities (3,043,863)
- -----------------------------------------------------------------------------
Net gain (loss) on investment securities (4,348,741)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (720,445)
=============================================================================
See Notes to Financial Statements.
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
FS-87
<PAGE> 200
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,628,296 $ 2,530,613
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (1,304,878) 241,993
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (3,043,863) 445,919
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (720,445) 3,218,525
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (2,511,433) (1,611,964)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 15,808,419 22,778,324
- ------------------------------------------------------------------------------
Net increase in net assets 12,576,541 24,384,885
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 58,184,681 33,799,796
- ------------------------------------------------------------------------------
End of year $70,761,222 $58,184,681
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $70,864,760 $54,757,995
- ------------------------------------------------------------------------------
Undistributed net investment income 3,602,402 2,488,745
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,574,251) (245,110)
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (2,131,689) 1,183,051
- ------------------------------------------------------------------------------
$70,761,222 $58,184,681
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Government Securities Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 Fund's investment objective is to
achieve a high level of current income consistent with reasonable concern for
safety of principal by investing in debt securities issued, guaranteed or
otherwise backed by the United States Government.
The 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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
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 NYSE. 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
AIM V.I. GOVERNMENT SECURITIES FUND
FS-88
<PAGE> 201
the NYSE which would 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 and Investment Income - Securities transactions are
accounted for on a trade date basis. The Fund may engage in dollar roll
transactions with respect to mortgage backed securities issued by GNMA,
FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
backed security held in the Fund to a financial institution such as a bank
or broker-dealer, and simultaneously agrees to repurchase a substantially
similar security (same type, coupon and maturity) from the institution at a
later date at an agreed upon price. The mortgage backed securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with prepayment
histories. During the period between the sale and repurchase, the Fund will
not be entitled to receive interest and principal payments on securities
sold. Proceeds of the sale will be invested in short-term instruments, and
the income from these investments, together with any additional fee income
received on the sale, could generate income for the Fund exceeding the
yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities in a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale
of the securities may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation
to repurchase the securities.
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 is
recorded on the ex-dividend date. On December 31, 1999, undistributed net
investment income was decreased by $3,206, undistributed net realized gains
decreased by $24,263 and paid-in capital increased by $27,469 as a result of
differing book/tax treatment of paydown gains (losses) and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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. The Fund has a capital loss
carryforward of $1,524,195 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
NOTE 2 - 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 the annual rate
of 0.50% on the first $200 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $98,225 of which AIM retained
$44,501 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,666
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
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 agree-
upon price and date. Proceeds from reverse repurchase agreements are treated
as borrowings. The Fund will use the proceeds of a reverse repurchase
agreement (which are considered to be borrowings under the 1940 Act) to
purchase other permitted securities either maturing, or under an agreement to
resell, at a date simultaneous with or prior to the expiration of the reverse
repurchase agreement. The Fund will enter into a reverse repurchase agreement
only when the interest income to be earned from the investment of proceeds of
the transaction is greater than the interest expense of the transaction. 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 year
ended December 31, 1999 was $4,078,750, while borrowings averaged $1,626,949
per day with a weighted average interest rate of 3.77%.
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-89
<PAGE> 202
NOTE 5 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $25,069,118 and $22,447,811, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 39,243
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,207,183)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(2,167,940)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $76,393,106.
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 3,277,124 $ 36,037,021 3,062,093 $ 34,224,621
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 235,153 2,511,433 144,183 1,611,964
- ------------------------------------------------------------------------------
Issued in connection with
acquisitions* 465,003 5,110,012 -- --
- ------------------------------------------------------------------------------
Reacquired (2,523,037) (27,850,047) (1,168,506) (13,058,261)
- ------------------------------------------------------------------------------
1,454,243 $ 15,808,419 2,037,770 $ 22,778,324
==============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable U.S. Government Income Fund (Variable
Government Income Fund) pursuant to a plan of reorganization approved by
Variable U.S. Government Income Fund's shareholders on August 25, 1999. The
acquisition was accomplished by a tax-free exchange of 465,003 shares of the
Fund for 482,118 shares of Variable U.S. Government Income Fund outstanding
as of the close of business on October 15, 1999. Variable U.S. Government
Income Fund's net assets at that date were $5,110,012, including ($270,877)
of unrealized depreciation, were combined with those of the Fund. The
aggregate net assets of the Fund immediately before the acquisition were
$65,275,738.
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 11.18 $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24
- -------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.63 0.63 0.59 0.58 0.54 0.53
- -------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) (0.78) 0.20 0.22 (0.35) 0.74 (0.88)
- -------------------------------------------------------------------------------------------
Total from investment
operations (0.15) 0.83 0.81 0.23 1.28 (0.35)
- -------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.40) (0.32) (0.01) (0.53) (0.50) (0.50)
- -------------------------------------------------------------------------------------------
Net asset value, end of
period $ 10.63 $ 11.18 $ 10.67 $ 9.87 $ 10.17 $ 9.39
- -------------------------------------------------------------------------------------------
Total return(b) (1.32)% 7.73% 8.16% 2.29% 13.84% (3.42)%
- -------------------------------------------------------------------------------------------
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $70,761 $58,185 $33,800 $24,527 $19,545 $12,887
- -------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets
including interest
expense 0.90%(c) 0.76% 0.87% 0.91% 1.19%(d) 0.95%(e)
- -------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets
excluding interest
expense 0.80%(c) 0.76% 0.87% 0.91% 0.95%(d) 0.95%(e)
- -------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets 5.75%(c) 5.70% 5.85% 5.80% 5.78%(d) 5.51%(f)
- -------------------------------------------------------------------------------------------
Ratio of interest expense
to average net assets 0.10%(c) -- -- -- -- --
- -------------------------------------------------------------------------------------------
Portfolio turnover rate 41% 78% 66% 32% 41% 29%
===========================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $63,119,520.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements was
1.10% for January 1995.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements was 5.35% for January 1995.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-90
<PAGE> 203
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the four years in the period
then ended, the eleven month period ended December 31, 1995 and the period May
2, 1994 (date operations commenced) through January 31, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth and Income Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, the eleven month period ended December
31, 1995 and the period May 2, 1994 (date operations commenced) through January
31, 1995 in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GROWTH AND INCOME FUND
FS-91
<PAGE> 204
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS AND OTHER EQUITY INTERESTS - 93.07%
BANKS (MONEY CENTER) - 2.23%
Chase Manhattan Corp. (The) 700,000 $ 54,381,250
- -----------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.80%
AT&T Corp. - Liberty Media Group-Class A(a) 275,000 15,606,250
- -----------------------------------------------------------------------------
Comcast Corp. - Class A(a) 850,000 42,712,500
- -----------------------------------------------------------------------------
MediaOne Group, Inc.(a) 450,000 34,565,625
- -----------------------------------------------------------------------------
92,884,375
- -----------------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.29%
Monsanto Co. 200,000 7,125,000
- -----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 8.06%
Corning, Inc. 150,000 19,340,625
- -----------------------------------------------------------------------------
JDS Uniphase Corp.(a) 200,000 32,262,500
- -----------------------------------------------------------------------------
Lucent Technologies, Inc. 440,000 32,917,500
- -----------------------------------------------------------------------------
Motorola, Inc. 250,000 36,812,500
- -----------------------------------------------------------------------------
QUALCOMM Inc.(a) 84,400 14,875,500
- -----------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 250,000 47,500,000
- -----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 200,000 13,137,500
- -----------------------------------------------------------------------------
196,846,125
- -----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 3.75%
Dell Computer Corp.(a) 400,000 20,400,000
- -----------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 920,000 71,242,500
- -----------------------------------------------------------------------------
91,642,500
- -----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 3.07%
Cisco Systems, Inc.(a) 700,000 74,987,500
- -----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.57%
EMC Corp.(a) 349,999 38,237,391
- -----------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 17.17%
America Online, Inc.(a) 350,000 26,403,125
- -----------------------------------------------------------------------------
At Home Corp. - Series A(a) 300,000 12,862,500
- -----------------------------------------------------------------------------
Intuit Inc.(a) 225,000 13,485,937
- -----------------------------------------------------------------------------
Microsoft Corp.(a) 1,000,000 116,750,000
- -----------------------------------------------------------------------------
Novell, Inc.(a) 3,150,000 125,803,125
- -----------------------------------------------------------------------------
Oracle Corp.(a) 300,000 33,618,750
- -----------------------------------------------------------------------------
VERITAS Software Corp.(a) 300,000 42,937,500
- -----------------------------------------------------------------------------
Yahoo! Inc.(a) 60,000 25,961,250
- -----------------------------------------------------------------------------
USWeb Corp.(a) 150,000 6,665,625
- -----------------------------------------------------------------------------
Whitman-Hart, Inc.(a) 280,000 15,015,000
- -----------------------------------------------------------------------------
419,502,812
- -----------------------------------------------------------------------------
ELECTRIC COMPANIES - 1.36%
Houston Industries, Inc. - $3.29 Conv. Pfd. 275,000 33,137,500
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 2.69%
General Electric Co. 425,000 $ 65,768,750
- -----------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.36%
Linear Technology Corp. 160,000 11,450,000
- -----------------------------------------------------------------------------
Texas Instruments, Inc. 225,000 21,796,875
- -----------------------------------------------------------------------------
33,246,875
- -----------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 1.05%
Applied Materials, Inc.(a) 150,000 19,003,125
- -----------------------------------------------------------------------------
Teradyne, Inc.(a) 100,000 6,600,000
- -----------------------------------------------------------------------------
25,603,125
- -----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.40%
American Express Co. 425,000 70,656,250
- -----------------------------------------------------------------------------
Citigroup, Inc. 850,000 47,228,125
- -----------------------------------------------------------------------------
Freddie Mac 300,000 14,118,750
- -----------------------------------------------------------------------------
132,003,125
- -----------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 7.51%
American Home Products Corp. 575,000 22,676,562
- -----------------------------------------------------------------------------
Bristol-Myers Squibb Co. 575,000 36,907,812
- -----------------------------------------------------------------------------
Johnson & Johnson 450,000 41,906,250
- -----------------------------------------------------------------------------
Warner-Lambert Co. 1,000,000 81,937,500
- -----------------------------------------------------------------------------
183,428,124
- -----------------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 1.25%
Pharmacia & Upjohn, Inc. 162,700 7,321,500
- -----------------------------------------------------------------------------
Schering-Plough Corp. 550,000 23,203,125
- -----------------------------------------------------------------------------
30,524,625
- -----------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES) - 1.37%
Guidant Corp.(a) 500,000 23,500,000
- -----------------------------------------------------------------------------
Medtronic, Inc. 270,000 9,838,125
- -----------------------------------------------------------------------------
33,338,125
- -----------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.43%
American International Group, Inc. 550,000 59,468,750
- -----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 4.90%
Goldman Sachs Group, Inc. (The) 225,000 21,192,188
- -----------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 150,000 12,525,000
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co. 509,100 72,674,025
- -----------------------------------------------------------------------------
Schwab (Charles) Corp. (The) 350,000 13,431,250
- -----------------------------------------------------------------------------
119,822,463
- -----------------------------------------------------------------------------
LODGING-HOTELS - 0.69%
Carnival Corp. 350,000 16,734,375
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-92
<PAGE> 205
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MANUFACTURING (DIVERSIFIED) - 3.98%
Tyco International Ltd. 2,250,000 $ 87,468,750
- --------------------------------------------------------------------
United Technologies Corp. 150,000 9,750,000
- --------------------------------------------------------------------
97,218,750
- --------------------------------------------------------------------
OIL (DOMESTIC INTEGRATED) - 0.36%
Conoco Inc. - Class B 350,000 8,706,250
- --------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 1.40%
Exxon Mobil Corp. 425,000 34,239,063
- --------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.95%
Halliburton Co. 225,000 9,056,250
- --------------------------------------------------------------------
Schlumberger Ltd. 225,000 12,656,250
- --------------------------------------------------------------------
Transocean Sedco Forex Inc. 43,650 1,470,459
- --------------------------------------------------------------------
23,182,959
- --------------------------------------------------------------------
RAILROADS - 0.61%
Kansas City Southern Industries, Inc. 200,000 14,925,000
- --------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 2.30%
Home Depot, Inc. (The) 450,000 30,853,125
- --------------------------------------------------------------------
Lowe's Cos., Inc. 425,000 25,393,750
- --------------------------------------------------------------------
56,246,875
- --------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.78%
Best Buy Co., Inc.(a) 450,000 22,584,375
- --------------------------------------------------------------------
Tandy Corp. 425,000 20,904,688
- --------------------------------------------------------------------
43,489,063
- --------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.52%
Kohl's Corp.(a) 177,500 12,813,281
- --------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 2.12%
Wal-Mart Stores, Inc. 750,000 51,843,750
- --------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 3.45%
Costco Companies, Inc.(a) 120,000 10,950,000
- --------------------------------------------------------------------
Dayton Hudson Corp. 1,000,000 73,437,500
- --------------------------------------------------------------------
84,387,500
- --------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.47%
Amazon.com, Inc.(a) 150,000 11,418,750
- --------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.43%
Young & Rubicam Inc. 150,000 10,612,500
- --------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.14%
Concord EFS, Inc.(a) 412,500 10,621,875
- --------------------------------------------------------------------
First Data Corp. 350,000 17,259,375
- --------------------------------------------------------------------
27,881,250
- --------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.01%
Nextel Communications, Inc. - Class A(a) 240,000 24,750,000
- --------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELECOMMUNICATIONS (LONG DISTANCE) - 0.98%
MCI WorldCom, Inc.(a) 450,000 $ 23,878,125
- ------------------------------------------------------------------------------
TELEPHONE - 1.62%
GTE Corp. 140,000 9,878,750
- ------------------------------------------------------------------------------
SBC Communications, Inc. 350,000 17,062,500
- ------------------------------------------------------------------------------
US West, Inc. 175,000 12,600,000
- ------------------------------------------------------------------------------
39,541,250
- ------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests (Cost
$1,506,613,509) 2,273,817,156
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
CORPORATE BONDS & NOTES - 2.19%
COMPUTERS (HARDWARE) - 0.19%
Candescent Technology Corp., Sr. Conv. Sub. Deb.,
7.00%, 05/01/03 (Acquired 04/17/98-11/30/98; Cost
$5,888,863)(b) $6,000,000 4,680,000
- ------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 1.53%
VERITAS Software Corp., Conv. Unsec. Notes, 5.25%,
11/01/04 3,750,000 37,490,625
- ------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.47%
Amazon.com, Inc., Conv. Sub. Deb., 4.75%, 02/01/09 10,000,000 11,362,500
- ------------------------------------------------------------------------------
Total Corporate Bonds & Notes (Cost $21,427,063) 53,533,125
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 4.60%
STIC Liquid Assets Portfolio(c) 56,233,089 56,233,089
- ------------------------------------------------------------------------------
STIC Prime Portfolio(c) 56,233,089 56,233,089
- ------------------------------------------------------------------------------
Total Money Market Funds (Cost $112,466,178) 112,466,178
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.86% (COST $1,640,506,750) 2,439,816,459
- ------------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.14% 3,447,521
- ------------------------------------------------------------------------------
NET ASSETS - 100.00% $2,443,263,980
==============================================================================
</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 this security has been determined in
accordance with procedures established by the Board of Directors. The
market value of this security at 12/31/99 represents 0.19% of the Fund's
net assets.
(c) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinate
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-93
<PAGE> 206
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,640,506,750) $2,439,816,459
- ------------------------------------------------------------------------
Receivables for:
Investments sold 8,981,263
- ------------------------------------------------------------------------
Capital stock sold 1,356,527
- ------------------------------------------------------------------------
Dividends and interest 1,442,965
- ------------------------------------------------------------------------
Investment for deferred compensation plan 32,290
- ------------------------------------------------------------------------
Other assets 2,860
- ------------------------------------------------------------------------
Total assets 2,451,632,364
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,825,541
- ------------------------------------------------------------------------
Capital stock reacquired 1,633,624
- ------------------------------------------------------------------------
Deferred compensation plan 32,290
- ------------------------------------------------------------------------
Accrued advisory fees 1,177,844
- ------------------------------------------------------------------------
Accrued administrative services fees 644,499
- ------------------------------------------------------------------------
Accrued operating expenses 54,586
- ------------------------------------------------------------------------
Total liabilities 8,368,384
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,443,263,980
========================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ------------------------------------------------------------------------
Outstanding 77,338,464
- ------------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 31.59
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $16,291 foreign withholding tax) $ 12,399,500
- ------------------------------------------------------------------------------
Interest 4,576,574
- ------------------------------------------------------------------------------
Total investment income 16,976,074
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,438,977
- ------------------------------------------------------------------------------
Administrative services fees 2,156,876
- ------------------------------------------------------------------------------
Custodian fees 145,809
- ------------------------------------------------------------------------------
Directors' fees 14,383
- ------------------------------------------------------------------------------
Other 442,382
- ------------------------------------------------------------------------------
Total expenses 13,198,427
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (4,998)
- ------------------------------------------------------------------------------
Net expenses 13,193,429
- ------------------------------------------------------------------------------
Net investment income 3,782,645
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 75,519,935
- ------------------------------------------------------------------------------
Foreign currencies 915
- ------------------------------------------------------------------------------
Option contracts (3,870,423)
- ------------------------------------------------------------------------------
71,650,427
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 486,666,488
- ------------------------------------------------------------------------------
Foreign currencies (9,359)
- ------------------------------------------------------------------------------
Option contracts 1,110,542
- ------------------------------------------------------------------------------
487,767,671
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 559,418,098
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $563,200,743
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-94
<PAGE> 207
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,782,645 $ 12,149,523
- -------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and futures and option
contracts 71,650,427 5,086,770
- -------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
futures and option contracts 487,767,671 224,324,487
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 563,200,743 241,560,780
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (11,988,578) (4,873,870)
- -------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains (8,277,648) (12,029,125)
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 638,270,694 398,288,439
- -------------------------------------------------------------------------------
Net increase in net assets 1,181,205,211 622,946,224
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 1,262,058,769 639,112,545
- -------------------------------------------------------------------------------
End of year $2,443,263,980 $1,262,058,769
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,574,186,117 $ 935,990,892
- -------------------------------------------------------------------------------
Undistributed net investment income 3,411,046 11,997,368
- -------------------------------------------------------------------------------
Undistributed net realized gain on sales from
investment securities, foreign currencies and
futures and option contracts 66,361,018 2,532,381
- -------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
and option contracts 799,305,799 311,538,128
- -------------------------------------------------------------------------------
$2,443,263,980 $1,262,058,769
===============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Growth and Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 Fund's investment objective is to seek
growth of capital with current income as a secondary objective.
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 preparation 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 closing bid price on that day. 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 closing bid
price. 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 based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. 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. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
AIM V.I. GROWTH AND INCOME FUND
FS-95
<PAGE> 208
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 NYSE. 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 NYSE which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, paid-in-capital was increased by $795, undistributed
net investment income was decreased by $380,389 and undistributed net
realized gains increased by $379,594 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications above.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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, 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 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $2,156,876 of which AIM
retained $102,711 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $6,283
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $4,998 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$4,998 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
AIM V.I. GROWTH AND INCOME FUND
FS-96
<PAGE> 209
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
----------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ------------
<S> <C> <C>
Beginning of year 2,667 $ 617,471
- -------------------------------------------------------------------------------
Written 7,350 7,711,801
- -------------------------------------------------------------------------------
Closed (5,917) (6,761,366)
- -------------------------------------------------------------------------------
Exercised (1,100) (161,695)
- -------------------------------------------------------------------------------
Expired (3,000) (1,406,211)
- -------------------------------------------------------------------------------
End of year -- $ --
===============================================================================
</TABLE>
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $2,173,804,512 and $1,547,643,195, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $808,508,094
- ------------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (17,623,361)
- ------------------------------------------------------------------------------
Net unrealized appreciation of investment securities $790,884,733
==============================================================================
Cost of investments for tax purposes is $1,648,931,726.
</TABLE>
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 27,157,175 $712,881,530 19,890,074 $409,625,526
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 704,177 20,266,226 751,578 16,902,995
- ------------------------------------------------------------------------------
Reacquired (3,653,912) (94,877,062) (1,379,171) (28,240,082)
- ------------------------------------------------------------------------------
24,207,440 $638,270,694 19,262,481 $398,288,439
==============================================================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-97
<PAGE> 210
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- JANUARY 31,
1999(A) 1998(A) 1997 1996 1995 1995
---------- ---------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
- -------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.06 0.26 0.13 0.16 0.14 0.11
- -------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 8.05 4.95 3.74 2.36 3.11 (0.02)
- -------------------------------------------------------------------------------------------------
Total from investment
operations 8.11 5.21 3.87 2.52 3.25 0.09
- -------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
- -------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.11) (0.24) (0.02) (0.03) (0.41) --
- -------------------------------------------------------------------------------------------------
Total distributions (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
- -------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
=================================================================================================
Total return(b) 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
=================================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
=================================================================================================
Ratio of expenses to
average net assets 0.77%(c) 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
=================================================================================================
Ratio of net investment
income to average net
assets 0.22%(c) 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
=================================================================================================
Portfolio turnover rate 93% 140% 135% 148% 145% 96%
=================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,718,996,207.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
AIM V.I. GROWTH AND INCOME FUND
FS-98
<PAGE> 211
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1999, the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the four years in the period then ended,
the eleven month period ended December 31, 1995 and the year ended January 31,
1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Growth Fund, as of December 31, 1999, the results of its operations for
the year then ended, the changes in its net assets for each of the two years in
the period then ended and the financial highlights for each of the four years
in the period then ended, the eleven month period ended December 31, 1995 and
the year ended January 31, 1995 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GROWTH FUND
FS-99
<PAGE> 212
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY INTERESTS - 87.52%
BIOTECHNOLOGY - 0.56%
Amgen Inc.(a) 66,000 $ 3,964,125
- ----------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 9.21%
AT&T Corp.-Liberty Media Group-Class A(a) 200,000 11,350,000
- ----------------------------------------------------------------------
Cablevision Systems Corp.-Class A(a) 52,300 3,948,650
- ----------------------------------------------------------------------
Clear Channel Communications, Inc.(a) 89,925 8,025,806
- ----------------------------------------------------------------------
Comcast Corp.-Class A 378,500 19,019,625
- ----------------------------------------------------------------------
Cox Communications, Inc.-Class A(a) 110,000 5,665,000
- ----------------------------------------------------------------------
Infinity Broadcasting Corp.-Class A(a) 454,950 16,463,503
- ----------------------------------------------------------------------
UnitedGlobalCom Inc.-Class A(a) 5,500 388,437
- ----------------------------------------------------------------------
64,861,021
- ----------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 11.72%
Comverse Technology, Inc.(a) 36,500 5,283,375
- ----------------------------------------------------------------------
General Instrument Corp.(a) 159,200 13,532,000
- ----------------------------------------------------------------------
JDS Uniphase Corp.(a) 41,000 6,613,812
- ----------------------------------------------------------------------
Lucent Technologies Inc. 88,000 6,583,500
- ----------------------------------------------------------------------
Motorola, Inc. 61,000 8,982,250
- ----------------------------------------------------------------------
Nokia Oyj-ADR (Finland) 59,000 11,210,000
- ----------------------------------------------------------------------
Nortel Networks Corp. (Canada) 160,000 16,160,000
- ----------------------------------------------------------------------
QUALCOMM Inc.(a) 49,600 8,742,000
- ----------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson-ADR (Sweden) 28,000 1,839,250
- ----------------------------------------------------------------------
Tellabs, Inc.(a) 56,000 3,594,500
- ----------------------------------------------------------------------
82,540,687
- ----------------------------------------------------------------------
COMPUTERS (HARDWARE) - 5.31%
Apple Computer, Inc.(a) 56,000 5,757,500
- ----------------------------------------------------------------------
Gateway Inc.(a) 193,800 13,965,712
- ----------------------------------------------------------------------
Sun Microsystems, Inc.(a) 228,000 17,655,750
- ----------------------------------------------------------------------
37,378,962
- ----------------------------------------------------------------------
COMPUTERS (NETWORKING) - 3.23%
3Com Corp.(a) 61,400 2,885,800
- ----------------------------------------------------------------------
Cabletron Systems, Inc.(a) 155,000 4,030,000
- ----------------------------------------------------------------------
Cisco Systems, Inc.(a) 148,000 15,854,500
- ----------------------------------------------------------------------
22,770,300
- ----------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.12%
Advanced Digital Information Corp.(a) 23,100 1,123,237
- ----------------------------------------------------------------------
EMC Corp.(a) 70,000 7,647,500
- ----------------------------------------------------------------------
Lexmark International Group, Inc.-Class A(a) 68,000 6,154,000
- ----------------------------------------------------------------------
14,924,737
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 13.93%
America Online, Inc.(a)(b) 218,000 $ 16,445,375
- --------------------------------------------------------------------------
At Home Corp.-Series A(a) 260,000 11,147,500
- --------------------------------------------------------------------------
BMC Software, Inc.(a) 37,100 2,965,681
- --------------------------------------------------------------------------
Citrix Systems, Inc.(a) 101,000 12,423,000
- --------------------------------------------------------------------------
Compuware Corp.(a)(b) 24,000 894,000
- --------------------------------------------------------------------------
Gemstar International Group Ltd.(a) 1,400 99,750
- --------------------------------------------------------------------------
Intuit Inc.(a) 77,000 4,615,187
- --------------------------------------------------------------------------
Microsoft Corp.(a) 117,000 13,659,750
- --------------------------------------------------------------------------
Oracle Corp.(a) 105,000 11,766,562
- --------------------------------------------------------------------------
Rational Software Corp.(a) 76,200 3,743,325
- --------------------------------------------------------------------------
Unisys Corp.(a) 39,700 1,267,919
- --------------------------------------------------------------------------
VERITAS Software Corp.(a) 47,100 6,741,187
- --------------------------------------------------------------------------
Yahoo! Inc.(a) 28,500 12,331,594
- --------------------------------------------------------------------------
98,100,830
- --------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 4.00%
General Electric Co. 60,000 9,285,000
- --------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V. ADR
(Netherlands) 26,680 3,601,800
- --------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Netherlands) 46,000 6,250,054
- --------------------------------------------------------------------------
Sanmina Corp.(a) 51,600 5,153,550
- --------------------------------------------------------------------------
Symbol Technologies, Inc. 60,450 3,842,353
- --------------------------------------------------------------------------
28,132,757
- --------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.64%
PE Corp-PE Biosystems Group 9,900 1,191,094
- --------------------------------------------------------------------------
Waters Corp.(a) 63,000 3,339,000
- --------------------------------------------------------------------------
4,530,094
- --------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 6.69%
Analog Devices, Inc.(a) 60,000 5,580,000
- --------------------------------------------------------------------------
Atmel Corp.(a) 70,000 2,069,375
- --------------------------------------------------------------------------
Cypress Semiconductor Corp.(a) 125,000 4,046,875
- --------------------------------------------------------------------------
Intel Corp. 82,000 6,749,625
- --------------------------------------------------------------------------
LSI Logic Corp.(a) 75,000 5,062,500
- --------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 27,200 4,360,500
- --------------------------------------------------------------------------
Texas Instruments Inc. 87,000 8,428,125
- --------------------------------------------------------------------------
Xilinx, Inc.(a) 238,000 10,821,562
- --------------------------------------------------------------------------
47,118,562
- --------------------------------------------------------------------------
ENTERTAINMENT - 2.36%
Time Warner Inc. 200,000 14,487,500
- --------------------------------------------------------------------------
TV Guide, Inc.-Class A(a) 49,300 2,119,900
- --------------------------------------------------------------------------
16,607,400
- --------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH FUND
FS-100
<PAGE> 213
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR) - 1.44%
Applied Materials, Inc.(a) 43,000 $ 5,447,563
- -------------------------------------------------------------------------------
Teradyne, Inc.(a) 71,500 4,719,000
- -------------------------------------------------------------------------------
10,166,563
- -------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.65%
American Express Co. 40,000 6,650,000
- -------------------------------------------------------------------------------
Fannie Mae 96,500 6,025,219
- -------------------------------------------------------------------------------
Freddie Mac 127,000 5,976,938
- -------------------------------------------------------------------------------
18,652,157
- -------------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 4.65%
Bristol-Myers Squibb Co. 97,000 6,226,188
- -------------------------------------------------------------------------------
Johnson & Johnson 135,000 12,571,875
- -------------------------------------------------------------------------------
Warner-Lambert Co. 170,000 13,929,375
- -------------------------------------------------------------------------------
32,727,438
- -------------------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 1.27%
Pharmacia & Upjohn, Inc. 66,800 3,006,000
- -------------------------------------------------------------------------------
Schering-Plough Corp. 140,000 5,906,250
- -------------------------------------------------------------------------------
8,912,250
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.40%
Guidant Corp.(a) 210,000 9,870,000
- -------------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 1.15%
American International Group, Inc. 74,900 8,098,563
- -------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.12%
Morgan Stanley Dean Witter & Co. 55,000 7,851,250
- -------------------------------------------------------------------------------
LODGING-HOTELS - 1.65%
Carnival Corp. 132,800 6,349,500
- -------------------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 107,000 5,276,438
- -------------------------------------------------------------------------------
11,625,938
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.33%
Tyco International Ltd. 60,000 2,332,500
- -------------------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 3.05%
Home Depot, Inc. (The) 211,500 14,500,969
- -------------------------------------------------------------------------------
Lowe's Cos., Inc. 117,000 6,990,750
- -------------------------------------------------------------------------------
21,491,719
- -------------------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.62%
Best Buy Co., Inc.(a) 71,000 3,563,313
- -------------------------------------------------------------------------------
Circuit City Stores-Circuit City Group 98,000 4,416,125
- -------------------------------------------------------------------------------
Tandy Corp. 70,000 3,443,125
- -------------------------------------------------------------------------------
11,422,563
- -------------------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 1.36%
Dollar Tree Stores, Inc.(a) 19,000 920,313
- -------------------------------------------------------------------------------
Wal-Mart Stores, Inc. 125,000 8,640,625
- -------------------------------------------------------------------------------
9,560,938
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (GENERAL MERCHANDISE) - 1.69%
Costco Wholesale Corp.(a) 70,000 $ 6,387,500
- --------------------------------------------------------------------------
Dayton Hudson Corp. 75,100 5,515,156
- --------------------------------------------------------------------------
11,902,656
- --------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.37%
Tiffany & Co. 29,200 2,606,100
- --------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.32%
Intimate Brands, Inc. 51,300 2,212,313
- --------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 0.90%
Concord EFS, Inc.(a) 82,600 2,126,950
- --------------------------------------------------------------------------
First Data Corp. 85,000 4,191,563
- --------------------------------------------------------------------------
6,318,513
- --------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 2.30%
China Telecom Ltd. (Hong Kong)(a) 302,800 1,889,213
- --------------------------------------------------------------------------
Nextel Communications, Inc.-Class A(a) 70,000 7,218,750
- --------------------------------------------------------------------------
Phone.com, Inc.(a) 24,000 2,782,500
- --------------------------------------------------------------------------
Western Wireless Corp.-Class A(a) 64,300 4,292,025
- --------------------------------------------------------------------------
16,182,488
- --------------------------------------------------------------------------
TELEPHONE - 0.48%
NTL Inc.(a) 26,900 3,355,775
- --------------------------------------------------------------------------
Total Common Stocks & Other Equity
Interests (Cost $358,123,935) 616,219,199
- --------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. TREASURY SECURITIES - 0.19%
U.S. TREASURY BILLS - 0.19%(C)
5.04%, 03/23/00 (Cost $1,384,375) $1,400,000(d) 1,384,460
- --------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 12.47%
STIC Liquid Assets Portfolio(e) 43,892,366 43,892,366
- --------------------------------------------------------------------------
STIC Prime Portfolio(e) 43,892,366 43,892,366
- --------------------------------------------------------------------------
Total Money Market Funds (Cost $87,784,732) 87,784,732
- --------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.18%
(Cost $447,293,042) 705,388,391
==========================================================================
LIABILITIES LESS OTHER ASSETS - (0.18%) (1,292,711)
==========================================================================
NET ASSETS - 100.00% $ 704,095,680
==========================================================================
</TABLE>
Investment Abbreviation:
ADR- American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options. See Note 7.
(c) 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 8.
(e) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-101
<PAGE> 214
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $447,293,042) $705,388,391
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $461,827) 461,723
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 1,990,444
- ----------------------------------------------------------------------
Variation margin 56,950
- ----------------------------------------------------------------------
Dividends and interest 461,605
- ----------------------------------------------------------------------
Investment for deferred compensation plan 31,028
- ----------------------------------------------------------------------
Other assets 1,794
- ----------------------------------------------------------------------
Total assets 708,391,935
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 248,419
- ----------------------------------------------------------------------
Investments purchased 450,371
- ----------------------------------------------------------------------
Deferred compensation plan 31,028
- ----------------------------------------------------------------------
Options written (Premiums received $1,540,128) 2,964,913
- ----------------------------------------------------------------------
Accrued advisory fees 348,576
- ----------------------------------------------------------------------
Accrued administrative services fees 183,516
- ----------------------------------------------------------------------
Accrued operating expenses 69,432
- ----------------------------------------------------------------------
Total liabilities 4,296,255
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $704,095,680
======================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 21,831,388
======================================================================
Net asset value, offering and redemption price per share $ 32.25
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $23,617 foreign withholding tax) $ 2,486,344
- --------------------------------------------------------------------------
Interest 1,239,393
- --------------------------------------------------------------------------
Total investment income 3,725,737
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,026,404
- --------------------------------------------------------------------------
Administrative services fees 328,584
- --------------------------------------------------------------------------
Custodian fees 73,045
- --------------------------------------------------------------------------
Directors' fees 7,337
- --------------------------------------------------------------------------
Other 109,536
- --------------------------------------------------------------------------
Total expenses 3,544,906
- --------------------------------------------------------------------------
Less: Expenses paid indirectly (3,198)
- --------------------------------------------------------------------------
Net expenses 3,541,708
- --------------------------------------------------------------------------
Net investment income 184,029
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 38,221,411
- --------------------------------------------------------------------------
Foreign currencies (110,061)
- --------------------------------------------------------------------------
Futures contracts 508,914
- --------------------------------------------------------------------------
Option contracts (12,194,041)
- --------------------------------------------------------------------------
26,426,223
- --------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 137,668,951
- --------------------------------------------------------------------------
Foreign currencies (5,504)
- --------------------------------------------------------------------------
Futures contracts 714,213
- --------------------------------------------------------------------------
Option contracts (1,101,525)
- --------------------------------------------------------------------------
137,276,135
- --------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
futures and option contracts 163,702,358
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $163,886,387
==========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-102
<PAGE> 215
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 184,029 $ 1,230,060
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and futures and option
contracts 26,426,223 22,257,031
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
futures and option contracts 137,276,135 68,057,550
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 163,886,387 91,544,641
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,318,758) (1,180,373)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (23,117,297) (22,129,920)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 192,730,597 44,828,633
- ------------------------------------------------------------------------------
Net increase in net assets 332,180,929 113,062,981
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 371,914,751 258,851,770
- ------------------------------------------------------------------------------
End of year $704,095,680 $371,914,751
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $421,529,258 $228,798,661
- ------------------------------------------------------------------------------
Undistributed net investment income 44,231 1,289,508
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and futures and
option contracts 25,138,608 21,719,134
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and futures and option
contracts 257,383,583 120,107,448
- ------------------------------------------------------------------------------
$704,095,680 $371,914,751
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS.
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Growth Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. 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 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.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-103
<PAGE> 216
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income decreased by
$110,548 and undistributed net realized gains increased by $110,548 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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. Futures Contracts - The Fund may purchase or sell 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 that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options - The Fund may write call options, 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.
I. 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, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
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.
AIM V.I. GROWTH FUND
FS-104
<PAGE> 217
NOTE 2 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $328,584 of which AIM retained
$73,728 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $4,242
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $3,198 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$3,198 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $552,667,552 and $450,435,698, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $260,081,257
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (2,336,308)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $257,744,949
===========================================================================
</TABLE>
Cost of investments for tax purposes is $447,643,442.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
Call Option Contracts
---------------------
Number of Premiums
Contracts Received
--------- -----------
<S> <C> <C>
Beginning of period 1,197 $ 739,850
- ---------------------------------------------------------------------------
Written 17,911 19,016,706
- ---------------------------------------------------------------------------
Closed (16,025) (17,191,184)
- ---------------------------------------------------------------------------
Exercised (1,380) (890,464)
- ---------------------------------------------------------------------------
Expired (157) (134,780)
- ---------------------------------------------------------------------------
End of period 1,546 $ 1,540,128
===========================================================================
</TABLE>
AIM V.I. GROWTH FUND
FS-105
<PAGE> 218
Open call option contracts written at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
December 31,
1999
Contract Strike Number of Premiums Market Unrealized
Issue Month Price Contracts Received Value Depreciation
- ----- -------- ------ --------- ---------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
American Online, Inc. Apr-00 $60 1,306 $1,459,851 $2,783,413 $(1,323,562)
- -------------------------------------------------------------------------------------
Compuware Corp. Jan-00 30 240 80,277 181,500 (101,223)
- -------------------------------------------------------------------------------------
1,546 $1,540,128 $2,964,913 $(1,424,785)
=====================================================================================
</TABLE>
NOTE 8 - FUTURES CONTRACTS
On December 31, 1999, $1,397,000 principal amount of U.S. Treasury obligations
was pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
No. of Month/ Unrealized
Contract Contracts Commitment Appreciation
- -------- --------- ------------ ------------
<S> <C> <C> <C>
S&P 500 Index 67 March 00/Buy $714,213
- --------------------------------------------------
</TABLE>
NOTE 9 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
Shares Amount Shares Amount
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 8,907,542 $247,736,478 2,345,258 $52,301,342
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 820,552 24,436,055 1,005,621 23,310,293
- -----------------------------------------------------------------------------
Reacquired (2,893,968) (79,441,936) (1,407,943) (30,783,002)
- -----------------------------------------------------------------------------
6,834,126 $192,730,597 1,942,936 $44,828,633
=============================================================================
</TABLE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the
Fund during each of the years in the four-year period ended December 31,
1999, the eleven months ended December 31, 1995 and the year ended
January 31, 1995.
<TABLE>
<CAPTION>
December 31,
--------------------------------------------------- January 31,
1999(a) 1998 1997 1996 1995 1995
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
- ---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.01 0.08 0.08 0.07 0.09 0.06
- ---------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 8.63 6.57 4.27 2.52 3.65 (0.88)
- ---------------------------------------------------------------------------------------------
Total from investment
operations 8.64 6.65 4.35 2.59 3.74 (0.82)
- ---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.06) (0.09) (0.09) (0.06) (0.01) (0.06)
- ---------------------------------------------------------------------------------------------
Distributions from net
realized gains (1.13) (1.59) (0.68) (0.72) -- --
- ---------------------------------------------------------------------------------------------
Total distributions (1.19) (1.68) (0.77) (0.78) (0.01) (0.06)
- ---------------------------------------------------------------------------------------------
Net asset value, end of
period $ 32.25 $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71
=============================================================================================
Total return(b) 35.24% 34.12% 26.87% 18.09% 34.89% (7.11)%
=============================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $704,096 $371,915 $258,852 $178,638 $102,600 $45,497
=============================================================================================
Ratio of expenses to
average net assets 0.73%(c) 0.72% 0.73% 0.78% 0.84%(d) 0.95%
=============================================================================================
Ratio of net investment
income to average net
assets 0.04%(c) 0.41% 0.54% 0.79% 0.95%(d) 0.71%
=============================================================================================
Portfolio turnover rate 101% 133% 132% 143% 125% 179%
=============================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $483,567,224.
(d) Annualized.
AIM V.I. GROWTH FUND
FS-106
<PAGE> 219
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. High Yield Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets and the financial highlights for the year
then ended and for the period May 1, 1998 (commencement of operations) through
December 31, 1998. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. High Yield Fund, as of December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets and the financial
highlights for the year then ended and for the period May 1, 1998 (commencement
of operations) through December 31, 1998 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. HIGH YIELD FUND
FS-107
<PAGE> 220
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES - 87.92%
AEROSPACE/DEFENSE - 1.49%
Precision Partners, Inc., Sr. Sub. Notes, 12.00%,
03/15/09(a) $ 500,000 $ 377,500
- -------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.75%
Convergent Communications - Series B, Sr. Unsec. Notes,
13.00%, 04/01/08 250,000 188,750
- -------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.59%
Equinix Inc., Sr. Notes, 13.00%, 12/01/07(a)(b) 630,000 653,625
- -------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.23%
ONO Finance PLC (United Kingdom), Sr. Gtd. Sub. Notes,
13.00%, 05/01/09 550,000 563,750
- -------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 9.83%
Hollywood Casino Corp., 1st Mortgage Notes, 13.00%,
08/01/06(a) 1,000,000 1,075,000
- -------------------------------------------------------------------------------
Venetian Casino Resort LLC, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 1,000,000 867,500
- -------------------------------------------------------------------------------
Resort at Summerlin LP - Series B, Sr. Unsec. Sub.
Notes, 13.00%, 12/15/07 768,000 541,440
- -------------------------------------------------------------------------------
2,483,940
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.29%
DJ Orthopedics, LLC/DJ Orthopedics Capital Corp., Sr.
Unsec. Gtd. Sub. Notes, 12.63%, 06/15/09 1,100,000 1,083,500
- -------------------------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES - 3.92%
Winsloew Furniture, Inc., Sr. Sub. Notes, 12.75%,
08/15/07(a)(b) 1,100,000 990,000
- -------------------------------------------------------------------------------
HOUSEWARES - 1.40%
Decora Industries, Inc. - Series B, Sr. Sec. Gtd.
Notes, 11.00%, 05/01/05 440,000 354,200
- -------------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 2.59%
Marvel Enterprises, Inc., Sr. Unsec. Gtd. Sub. Notes,
12.00%, 06/15/09 700,000 654,500
- -------------------------------------------------------------------------------
LODGING - HOTELS - 0.48%
Stena Line A.B. (Sweden), Sr. Unsec. Yankee Notes,
10.63%, 06/01/08 200,000 121,000
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.57%
GST Equipment Funding, Sr. Sec. Notes, 13.25%, 05/01/07 400,000 397,000
- -------------------------------------------------------------------------------
METALS MINING - 1.95%
Bulong Operations PTV Ltd., Sr. Sec. Notes, 12.50%,
12/15/08 700,000 493,500
- -------------------------------------------------------------------------------
PERSONAL CARE - 4.45%
American Tissue Inc., Sr. Sec. Notes, 12.50%,
07/15/06(a) 1,100,000 1,124,750
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
PHOTOGRAPHY/IMAGING - 1.65%
Polaroid Corp., Sr. Unsec. Notes, 11.50%, 02/15/06 $ 420,000 $ 417,900
- ------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.84%
Vista Eyecare, Inc. - Series B, Sr. Unsec. Gtd. Sub.
Notes, 12.75%, 10/15/05 525,000 212,625
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 13.27%
KMC Telecom Holdings, Inc., Sr. Notes, 13.50%,
05/15/09(a) 1,000,000 1,005,000
- ------------------------------------------------------------------------------
Spectrasite Holdings, Inc.,
Sr. Disc. Notes, 12.00%, 07/15/08(c) 400,000 240,000
- ------------------------------------------------------------------------------
Sr. Unsec. Disc. Notes, 11.25%, 04/15/09(c) 70,000 37,800
- ------------------------------------------------------------------------------
Worldwide Fiber Inc. (Canada), Sr. Notes, 12.00%,
08/01/09(a) 1,000,000 1,037,500
- ------------------------------------------------------------------------------
Jazztel PLC (United Kingdom), Sr. Unsec. Notes,
14.00%, 04/01/09 1,000,000 1,032,500
- ------------------------------------------------------------------------------
3,352,800
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 17.03%
DTI Holdings, Inc. - Series B, Sr. Unsec. Disc. Notes,
12.50%, 03/01/08(c) 500,000 179,375
- ------------------------------------------------------------------------------
Destia Communications, Inc., Sr. Unsec. Notes, 13.50%,
07/15/07 650,000 690,625
- ------------------------------------------------------------------------------
GST Network Funding, Inc., Sr. Sec. Disc. Notes,
10.50%, 05/01/08(c) 1,000,000 487,500
- ------------------------------------------------------------------------------
Primus Telecommunications Group, Inc., Sr. Notes,
12.75%, 10/15/09(a) 1,000,000 1,045,000
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. (Netherlands), Sr.
Notes, 13.25%, 05/15/08 100,000 107,000
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 11.88%, 07/15/09 400,000 408,000
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 13.25%, 05/15/08 200,000 214,000
- ------------------------------------------------------------------------------
Long Distance International, Inc., Sr. Unsec. Notes,
12.25%, 04/15/08 140,000 81,550
- ------------------------------------------------------------------------------
Tele1 Europe B.V. (Netherlands), Sr. Unsec. Notes,
13.00%, 05/15/09(a)(b) 1,000,000 1,055,000
- ------------------------------------------------------------------------------
Viatel, Inc., Sr. Notes, 11.50%, 03/15/09(a) 34,302 34,988
- ------------------------------------------------------------------------------
4,303,038
- ------------------------------------------------------------------------------
TELEPHONE - 10.01%
Logix Communications Enterprises, Sr. Unsec. Notes,
12.25%, 06/15/08 550,000 430,375
- ------------------------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec. Notes, 15.00%, 07/01/08 460,000 442,750
- ------------------------------------------------------------------------------
FirstWorld Communications Inc., Sr. Unsec. Disc.
Notes, 13.00%, 04/15/08(c) 350,000 211,750
- ------------------------------------------------------------------------------
NEXTLINK Communications, Inc., Sr., Unsec., Disc.,
Notes, 12.25%, 06/01/09(c) 500,000 310,000
- ------------------------------------------------------------------------------
NTL Communications Corp. - Series B, Sr. Unsec. Notes,
12.38%, 10/01/08(a)(c) 750,000 530,625
- ------------------------------------------------------------------------------
PTC International Finance II SA (Luxembourg), Sr. Gtd.
Sub. Notes, 11.25%, 12/01/09 (Acquired 11/16/99; Cost
$591,168)(d) 600,000 603,000
- ------------------------------------------------------------------------------
2,528,500
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. HIGH YIELD FUND
FS-108
<PAGE> 221
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
TEXTILES (APPAREL) - 6.13%
Perry Ellis International, Inc. - Series B, Sr. Unsec.
Gtd. Sub. Notes, 12.25%, 04/01/06 $1,100,000 $ 1,105,500
- ------------------------------------------------------------------------------
Cherokee International LCC - Series B, Sr. Unsec. Sub.
Notes, 10.50%, 05/01/09 500,000 442,500
- ------------------------------------------------------------------------------
1,548,000
- ------------------------------------------------------------------------------
TRUCKS & PARTS - 1.45%
FleetPride Inc., Sr. Unsec. Gtd. Sub. Notes, 12.00%,
08/01/05 400,000 366,000
- ------------------------------------------------------------------------------
Total Corporate Bonds & Notes
(Cost $23,039,502) 22,214,878
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
COMMON STOCKS - 0.08%
COMPUTERS (NETWORKING) - 0.08%
Convergent Communications, Inc. (Cost $27)(e) 1,350 21,431
- ------------------------------------------------------------------------------
WARRANTS - 3.08%
FINANCIAL (DIVERSIFIED) - 0.22%
ONO Finance PLC (United Kingdom), expiring 05/31/09(f) 550 55,000
- ------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.00%
Resort At Summerlin LP, expiring 12/15/07(f) 600 6
- ------------------------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES - 0.22%
Winsloew Furniture, Inc., expiring 08/15/07 (Acquired
12/06/99; Cost $0)(d)(f) 1,100 55,000
- ------------------------------------------------------------------------------
IRON & STEEL - 0.00%
Gulf States Steel, Inc., expiring 04/15/03(f) 60 1
- ------------------------------------------------------------------------------
SHIPPING - 0.00%
Millenium Seacarriers, expiring 07/15/03(f) 100 125
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.50%
Jazztel PLC (United Kingdom), expiring 04/01/09(f) 2,250 378,844
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.92%
DTI Holdings, Inc., expiring 03/01/08(f) 2,500 300
- ------------------------------------------------------------------------------
Long Distance International, Inc., expiring
04/13/08(f) 140 350
- ------------------------------------------------------------------------------
Tele1 Europe B.V. - Wts. (Netherlands), expiring
05/15/08(f) 650 110,662
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. (Netherlands),
expiring 05/15/08 (Acquired 05/20/98-11/17/98; Cost
$0)(d)(f) 300 120,075
- ------------------------------------------------------------------------------
231,387
- ------------------------------------------------------------------------------
TELEPHONE - 0.22%
AirGate PCS Inc., expiring 10/01/09(f) 170 14,875
- ------------------------------------------------------------------------------
Firstworld Communications Inc., expiring 04/15/08(f) 350 42,000
- ------------------------------------------------------------------------------
56,875
- ------------------------------------------------------------------------------
Total Warrants (Cost $3,696) 777,238
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS - 6.11%
STIC Liquid Assets Portfolio(g) 772,070 $ 772,070
- -------------------------------------------------------------------
STIC Prime Portfolio(g) 772,070 772,070
- -------------------------------------------------------------------
Total Money Market Funds (Cost $1,544,140) 1,544,140
- -------------------------------------------------------------------
TOTAL INVESTMENTS - 97.19%
(COST $24,587,365) 24,557,687
- -------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 2.81% 710,499
- -------------------------------------------------------------------
NET ASSETS - 100.00% $25,268,186
- -------------------------------------------------------------------
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Represents a security sold under Rule 144A, which is exempt from
registration and may be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1993, as amended.
(b) Consists of more than one class of securities traded together as a unit.
In addition to the security listed, each unit represents common or
preferred shares of the issuer.
(c) Step Bond issued at a discount. The interest rate represents the coupon
rate at which the bond will accrue at a specified future date.
(d) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/99 was $778,075 which
represents 3.08% of the Fund's net assets.
(e) Non-income producing security.
(f) Non-income producing security acquired as part of a unit with or in
exchange for other securities.
(g) The money market fund has the same investment advisor as the Fund.
Abbreviations:
Conv. - Convertible
Ctfs. - Certificates
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
FS-109
<PAGE> 222
STATEMENT OF ASSETS AND LIABILITIES
December 31 , 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,587,365) $ 24,557,687
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 8,404
- ----------------------------------------------------------------------
Interest 723,352
- ----------------------------------------------------------------------
Investment for deferred compensation plan 8,677
- ----------------------------------------------------------------------
Total assets 25,298,120
- ----------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 8,677
- ----------------------------------------------------------------------
Accrued administrative services fees 14,621
- ----------------------------------------------------------------------
Accrued operating expenses 6,636
- ----------------------------------------------------------------------
Total liabilities 29,934
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 25,268,186
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 2,800,045
======================================================================
Net asset value, offering and redemption price per share $ 9.02
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $2,006,435
- ----------------------------------------------------------------------------
Dividends 12,823
- ----------------------------------------------------------------------------
Total investment income 2,019,258
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 103,575
- ----------------------------------------------------------------------------
Administrative services fees 61,929
- ----------------------------------------------------------------------------
Custodian fees 19,477
- ----------------------------------------------------------------------------
Directors' fees 8,011
- ----------------------------------------------------------------------------
Printing fees 11,566
- ----------------------------------------------------------------------------
Professional fees 24,496
- ----------------------------------------------------------------------------
Other 5,565
- ----------------------------------------------------------------------------
Total expenses 234,619
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (4,800)
- ----------------------------------------------------------------------------
Fees waived by advisor (45,183)
- ----------------------------------------------------------------------------
Net expenses 184,636
- ----------------------------------------------------------------------------
Net investment income 1,834,622
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Net realized gain (loss) from investment securities (517,194)
- ----------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities 296,072
- ----------------------------------------------------------------------------
Net gain (loss) from investment securities (221,122)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,613,500
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
FS-110
<PAGE> 223
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $1,834,622 $ 323,361
- -----------------------------------------------------------------------------
Net realized gain (loss) from investment securities (517,194) (367,230)
- -----------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities 296,072 (325,750)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 1,613,500 (369,619)
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,900,359) (330,305)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 17,588,744 8,666,225
- -----------------------------------------------------------------------------
Net increase in net assets 17,301,885 7,966,301
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,966,301 --
- -----------------------------------------------------------------------------
End of period $25,268,186 $7,966,301
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $26,250,824 $8,662,066
- -----------------------------------------------------------------------------
Undistributed net investment income (62,636) (2,785)
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (890,324) (367,230)
- -----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (29,678) (325,750)
- -----------------------------------------------------------------------------
$25,268,186 $7,966,301
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. High Yield Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. 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 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 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 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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. HIGH YIELD FUND
FS-111
<PAGE> 224
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$5,886, undistributed net realized gains decreased by $5,900 and paid-in
capital increased by $14 as a result of differing book/tax
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
The Fund has a capital loss carryforward of $792,625 as of December 31, 1999
which may be carried forward to offset future taxable gains, if any, which
expires in varying increments, if not previously utilized, in the year 2007.
NOTE 2 - 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 the annual rate of 0.625%
on the first $200 million of the Fund's average daily net assets, plus 0.55%
on the next $300 million of the Fund's average daily net assets, plus 0.50% on
the next $500 million of the Fund's average daily net assets, plus 0.45% on
the Fund's average daily net assets in excess of $1 billion. During the year
ended December 31, 1999, AIM waived fees of $45,183.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $61,929 of which AIM retained
$0 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,445
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $4,800 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$4,800 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $34,955,641 and $19,296,933, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 1,328,551
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,358,229)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $ (29,678)
==========================================================================
</TABLE>
Investments have the same cost for tax and financial statement purposes.
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold 2,064,369 $19,155,692 910,186 $8,767,632
- -----------------------------------------------------------------------
Issued as reinvestment of
dividends 211,621 1,900,359 37,577 330,305
- -----------------------------------------------------------------------
Reacquired (377,620) (3,467,307) (46,088) (431,712)
- -----------------------------------------------------------------------
1,898,370 $17,588,744 901,675 $8,666,225
=======================================================================
</TABLE>
AIM V.I. HIGH YIELD FUND
FS-112
<PAGE> 225
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(A) 1998
------- ------
<S> <C> <C>
Net asset value, beginning of period $ 8.84 $10.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income 1.03 0.39
- -------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.10) (1.15)
- -------------------------------------------------------------------------------
Total from investment operations 0.93 (0.76)
- -------------------------------------------------------------------------------
Less dividends from net investment income (0.75) (0.40)
- -------------------------------------------------------------------------------
Net asset value, end of period $ 9.02 $ 8.84
===============================================================================
Total return(b) 10.52% (7.61)%
===============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $25,268 $7,966
===============================================================================
Ratio of expenses to average net assets(c) 1.14%(d) 1.13%(e)
===============================================================================
Ratio of net investment income to average net assets(f) 11.07%(d) 9.75%(e)
===============================================================================
Portfolio turnover rate 127% 39%
===============================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.42% and 2.50% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $16,571,951.
(e) Annualized.
(f) 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 10.80% and 8.36% (annualized) for 1999 and 1998,
respectively .
AIM V.I. HIGH YIELD FUND
FS-113
<PAGE> 226
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. International Equity Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 1999, the related statement of operations for the year then ended,
the statement of changes in net assets for each of the two years in the period
then ended and the financial highlights for each of the four years in the
period then ended, the eleven month period ended December 31, 1995 and the year
ended January 31, 1995. These financial statements and financial highlights are
the responsibility of the Fund's management. Our responsibility is to express
an opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. International Equity Fund, as of December 31, 1999, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended and the financial highlights for each of
the four years in the period then ended, the eleven month period ended December
31, 1995 and the year ended January 31, 1995.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. INTERNATIONAL EQUITY FUND
FS-114
<PAGE> 227
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 94.30%
AUSTRALIA - 1.12%
AMP Ltd. (Insurance - Life/Health) 120,800 $ 1,335,723
- -------------------------------------------------------------------------------
Brambles Industries Ltd. (Air Freight) 37,700 1,043,340
- -------------------------------------------------------------------------------
Cable & Wireless Optus Ltd. (Telephone)(a) 268,000 896,227
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 26,200 142,527
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. - Installment Receipts
(Telephone)(a) 466,800 1,646,912
- -------------------------------------------------------------------------------
5,064,729
- -------------------------------------------------------------------------------
BELGIUM - 0.31%
UCB S.A. (Manufacturing - Diversified) 32,000 1,386,486
- -------------------------------------------------------------------------------
BRAZIL - 1.25%
Embratel Participacoes S.A. - ADR (Telecommunications-
Long Distance) 45,100 1,228,975
- -------------------------------------------------------------------------------
Embratel Participacoes S.A. - Pfd.
(Telecommunications - Long Distance) 11,800 303,737
- -------------------------------------------------------------------------------
Petroleo Brasileiro S.A. - Petrobras-Pfd.
(Oil & Gas - Exploration & Production) 9,015 2,295,439
- -------------------------------------------------------------------------------
Tele Centro Sul Participacoes S.A. - ADR (Telephone) 11,970 1,086,277
- -------------------------------------------------------------------------------
Telecommunicacoes de Sao Paulo - Pfd. (Telephone)(a) 3,984 96,601
- -------------------------------------------------------------------------------
Telesp Participacoes S.A. - ADR (Telephone) 27,200 664,700
- -------------------------------------------------------------------------------
5,675,729
- -------------------------------------------------------------------------------
CANADA - 6.71%
BCE Inc. (Telephone) 86,000 7,814,661
- -------------------------------------------------------------------------------
Bombardier Inc. - Class B (Aerospace/Defense) 162,600 3,340,324
- -------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 113,334 11,446,734
- -------------------------------------------------------------------------------
Research in Motion Ltd. (Communications Equipment) 73,400 3,392,074
- -------------------------------------------------------------------------------
Rogers Communications, Inc. - Class B
(Telecommunications-Cellular/Wireless)(a) 76,300 1,866,133
- -------------------------------------------------------------------------------
Shaw Communications Inc. - Class B
(Broadcasting - Television, Radio & Cable) 33,600 1,109,291
- -------------------------------------------------------------------------------
Toronto-Dominion Bank (The) (Banks-Regional) 56,200 1,508,869
- -------------------------------------------------------------------------------
30,478,086
- -------------------------------------------------------------------------------
FINLAND - 3.96%
Nokia Oyj (Communications Equipment) 75,543 13,685,445
- -------------------------------------------------------------------------------
Sonera Oyj (Telecommunications -Cellular/Wireless) 62,950 4,311,378
- -------------------------------------------------------------------------------
17,996,823
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - 12.32%
Accor S.A. (Lodging - Hotels) 56,000 $ 2,703,647
- -------------------------------------------------------------------------------
Altran Technologies S.A. (Services - Commercial &
Consumer) 10,471 6,323,123
- -------------------------------------------------------------------------------
AXA (Insurance - Multi-Line) 33,032 4,601,116
- -------------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 49,800 4,591,103
- -------------------------------------------------------------------------------
Carrefour S.A. (Retail - Food Chains) 54,300 10,006,458
- -------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail - General
Merchandise) 33,200 8,754,505
- -------------------------------------------------------------------------------
PSA Peugeot Citroen (Automobiles) 8,500 1,928,258
- -------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 16,800 3,905,831
- -------------------------------------------------------------------------------
Societe Television Francaise 1 (Broadcasting -
Television, Radio & Cable) 13,905 7,277,237
- -------------------------------------------------------------------------------
Total Fina S.A. - ADR (Oil - International Integrated) 3,644 252,347
- -------------------------------------------------------------------------------
Total Fina S.A. - Class B (Oil - International
Integrated) 42,103 5,614,630
- -------------------------------------------------------------------------------
55,958,255
- -------------------------------------------------------------------------------
GERMANY - 4.99%
EM.TV & Merchandising A.G. (Broadcasting -Television,
Radio & Cable) 21,385 1,377,468
- -------------------------------------------------------------------------------
Mannesmann A.G. (Machinery - Diversified) 75,441 18,183,976
- -------------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 1,135 3,107,112
- -------------------------------------------------------------------------------
22,668,556
- -------------------------------------------------------------------------------
HONG KONG - 3.39%
China Telecom Ltd. (Telecommunications -
Cellular/Wireless)(a) 1,046,000 6,526,147
- -------------------------------------------------------------------------------
Cosco Pacific Ltd. (Financial - Diversified) 3,138,000 2,603,731
- -------------------------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banks - Regional) 374,000 1,929,298
- -------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail - Food Chains) 299,000 4,346,433
- -------------------------------------------------------------------------------
15,405,609
- -------------------------------------------------------------------------------
INDONESIA - 0.20%
Gulf Indonesia Resources Ltd. (Oil - International
Integrated)(a) 111,400 905,125
- -------------------------------------------------------------------------------
IRELAND - 0.74%
CRH PLC (Construction - Cement & Aggregates) 156,100 3,346,376
- -------------------------------------------------------------------------------
ITALY - 2.47%
Banca Popolare di Brescia (Banks - Regional) 100,800 8,912,397
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 205,000 2,288,114
- -------------------------------------------------------------------------------
11,200,511
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-115
<PAGE> 228
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN - 26.88%
Advantest Corp. (Electronics - Instrumentation) 27,200 $ 7,191,187
- ------------------------------------------------------------------------------
Alps Electric Co., Ltd. (Electronics - Component
Distributors) 139,000 2,121,919
- ------------------------------------------------------------------------------
DDI Corp. (Telecommunications) 400 5,483,476
- ------------------------------------------------------------------------------
Fast Retailing Co. Ltd. (Retail - Specialty Apparel) 44 17,923
- ------------------------------------------------------------------------------
Hirose Electric Co. Ltd. (Electronics - Component
Distributors) 23,600 5,294,257
- ------------------------------------------------------------------------------
Hoya Corp. (Manufacturing - Specialized) 32,000 2,522,399
- ------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics - Component
Distributors) 72,000 972,925
- ------------------------------------------------------------------------------
Kyocera Corp. (Electronics - Component Distributors) 36,100 9,367,442
- ------------------------------------------------------------------------------
Matsushita Communication Industrial Co., Ltd.
(Telephone) 41,000 10,839,657
- ------------------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronics -
Component Distributors) 42,000 9,870,257
- ------------------------------------------------------------------------------
NEC Corp. (Computers - Hardware) 238,000 5,674,712
- ------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 384 6,580,171
- ------------------------------------------------------------------------------
NTT Data Corp. (Computers - Software & Services) 228 5,246,512
- ------------------------------------------------------------------------------
NTT Mobile Communications Network, Inc.
(Telecommunications - Cellular/Wireless) 273 10,505,655
- ------------------------------------------------------------------------------
Orix Corp. (Financial - Diversified) 4,400 991,804
- ------------------------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment & Supplies) 200,000 3,771,848
- ------------------------------------------------------------------------------
Rohm Co. Ltd. (Electronics - Component Distributors) 8,600 3,536,842
- ------------------------------------------------------------------------------
Sanix Inc. (Services - Commercial & Consumer) 21,400 2,346,928
- ------------------------------------------------------------------------------
Sharp Corp. (Electrical Equipment) 106,000 2,714,223
- ------------------------------------------------------------------------------
Sony Corp. (Electrical Equipment) 39,800 11,808,470
- ------------------------------------------------------------------------------
Takeda Chemical Industries Ltd. (Health Care -Drugs -
Generic & Other) 73,000 3,609,792
- ------------------------------------------------------------------------------
Tokyo Electron Ltd. (Electronics - Semiconductors) 27,000 3,701,346
- ------------------------------------------------------------------------------
Trend Micro Inc. (Computers - Software & Services)(a) 21,900 5,532,632
- ------------------------------------------------------------------------------
Ushio, Inc. (Electronics - Component Distributors) 121,000 2,334,100
- ------------------------------------------------------------------------------
122,036,477
- ------------------------------------------------------------------------------
MEXICO - 3.22%
Cifra S.A. de C.V. - Series C (Retail - General
Merchandise)(a) 1,014,000 1,930,613
- ------------------------------------------------------------------------------
Coca-Cola Femsa S.A. - ADR (Beverages -
Non-Alcoholic) 70,000 1,229,375
- ------------------------------------------------------------------------------
Fomento Economico Mexicano, S.A. de C.V. - ADR
(Beverages-Alcoholic) 74,709 3,324,550
- ------------------------------------------------------------------------------
Grupo Modelo S.A. de C.V. - Series C
(Beverages - Alcoholic) 523,000 1,435,145
- ------------------------------------------------------------------------------
Grupo Televisa S.A.-GDR (Entertainment)(a) 60,160 4,105,920
- ------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V. - Class A
(Paper & Forest Products) 226,000 882,533
- ------------------------------------------------------------------------------
Telefonos de Mexico S.A. - ADR (Telephone) 15,068 1,695,150
- ------------------------------------------------------------------------------
14,603,286
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS - 3.33%
Aegon N.V. (Insurance Brokers) 22,300 $ 2,152,364
- -------------------------------------------------------------------------------
CMG PLC (Computers - Software & Services) 26,000 1,933,793
- -------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Electrical Equipment) 34,960 4,750,041
- -------------------------------------------------------------------------------
United Pan-Europe Communications N.V. (Broadcasting -
Television, Radio & Cable)(a) 18,500 2,364,654
- -------------------------------------------------------------------------------
Verenigde Nederlandse Uitgeversbedrijven (Publishing) 74,400 3,907,232
- -------------------------------------------------------------------------------
15,108,084
- -------------------------------------------------------------------------------
SINGAPORE - 1.37%
Datacraft Asia Ltd. (Communications Equipment) 134,000 1,112,200
- -------------------------------------------------------------------------------
DBS Group Holdings Ltd. (Banks - Money Center)(a) 143,979 2,360,028
- -------------------------------------------------------------------------------
Keppel Corp. Ltd. (Engineering & Construction) 331,000 866,503
- -------------------------------------------------------------------------------
Singapore Press Holdings Ltd. (Publishing -Newspapers) 87,563 1,897,927
- -------------------------------------------------------------------------------
6,236,658
- -------------------------------------------------------------------------------
SOUTH KOREA - 2.07%
Korea Electric Power Corp. - ADR (Electric Companies) 65,376 1,095,048
- -------------------------------------------------------------------------------
Korea Telecom Corp. - ADR (Telephone) 53,530 4,001,367
- -------------------------------------------------------------------------------
L.G. Chemical Ltd. (Chemicals - Diversified) 66,000 2,086,658
- -------------------------------------------------------------------------------
Pohang Iron & Steel Co. Ltd. - ADR (Iron & Steel) 62,915 2,202,025
- -------------------------------------------------------------------------------
9,385,098
- -------------------------------------------------------------------------------
SPAIN - 2.02%
Banco Popular Espanol S.A. (Banks - Major Regional) 22,900 1,492,339
- -------------------------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 306,743 7,656,293
- -------------------------------------------------------------------------------
9,148,632
- -------------------------------------------------------------------------------
SWEDEN - 2.42%
Hennes & Mauritz A.B. - Class B (Retail - Specialty
Apparel) 166,476 5,575,480
- -------------------------------------------------------------------------------
NetCom A.B. - Class B (Telecommunications -
Cellular/Wireless)(a) 77,200 5,425,056
- -------------------------------------------------------------------------------
11,000,536
- -------------------------------------------------------------------------------
SWITZERLAND - 3.52%
ABB Ltd. (Electrical Equipment)(a) 14,000 1,712,303
- -------------------------------------------------------------------------------
Adecco S.A. (Services - Commercial & Consumer) 3,395 2,643,849
- -------------------------------------------------------------------------------
Ares-Serono Group - Class B (Health Care -
Drugs - Generic & Other)(a) 1,660 3,544,558
- -------------------------------------------------------------------------------
Compagnie Financiere Richemont A.G. (Tobacco) 1,845 4,403,065
- -------------------------------------------------------------------------------
Zurich Allied A.G. (Insurance - Multi-Line) 6,458 3,682,638
- -------------------------------------------------------------------------------
15,986,413
- -------------------------------------------------------------------------------
TAIWAN - 1.07%
Far Eastern Textile Ltd. - GDR (Textiles-Apparel)(a) 100,000 2,415,000
- -------------------------------------------------------------------------------
GT Taiwan Fund (Investment Management)(a)(b) 15,291 237,473
- -------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR
(Computers-Hardware) 49,000 2,205,000
- -------------------------------------------------------------------------------
4,857,473
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-116
<PAGE> 229
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
THAILAND - 0.32%
Siam Commercial Bank Public Co. Ltd. (Banks -Major
Regional)(a) 32,800 40,276
- -----------------------------------------------------------------------------
Siam Commercial Bank Public Co. Ltd. (Banks -Major
Regional), Wts. expiring 05/10/12(a) 846,000 393,070
- -----------------------------------------------------------------------------
Siam Commercial Bank Public Co. Ltd. - $1.365 Conv.
Pfd. (Banks - Regional) (Acquired 04/29/99; Cost
$593,771)(a)(c) 846,000 1,033,214
- -----------------------------------------------------------------------------
1,466,560
- -----------------------------------------------------------------------------
UNITED KINGDOM - 10.62%
Barclays PLC (Banks - Major Regional) 157,100 4,520,388
- -----------------------------------------------------------------------------
BP Amoco PLC (Oil & Gas - Refining & Marketing) 322,608 3,242,697
- -----------------------------------------------------------------------------
British Telecommunications PLC (Communications
Equipment) 185,030 4,520,359
- -----------------------------------------------------------------------------
COLT Telecom Group PLC (Communications Equipment)(a) 87,000 4,451,776
- -----------------------------------------------------------------------------
Compass Group PLC (Services - Commercial & Consumer) 213,596 2,931,594
- -----------------------------------------------------------------------------
Hays PLC (Services - Commercial & Consumer) 373,500 5,946,472
- -----------------------------------------------------------------------------
Logica PLC (Computer Software & Services) 119,200 3,073,782
- -----------------------------------------------------------------------------
Marconi PLC (Communications Equipment) 432,540 7,651,217
- -----------------------------------------------------------------------------
Shell Transport & Trading Co. (Oil - International
Integrated) 327,200 2,718,257
- -----------------------------------------------------------------------------
Vodafone AirTouch PLC (Telecommunications -
Cellular/Wireless) 835,495 4,138,284
- -----------------------------------------------------------------------------
Vodafone AirTouch PLC-ADR (Telecommunications -
Cellular/Wireless) 1,750 86,625
- -----------------------------------------------------------------------------
WPP Group PLC (Services-Advertising/Marketing) 313,000 4,957,985
- -----------------------------------------------------------------------------
48,239,436
- -----------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$241,321,728) 428,154,938
- -----------------------------------------------------------------------------
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED CORPORATE BONDS & NOTES -
0.05%
SHIPPING - 0.05%
Costco Treasury Co. Ltd., Conv. Gtd. Bonds, 1.00%,
03/13/03 (Cost $188,156) 246,000 246,195
- -----------------------------------------------------------------------------
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS - 4.62%
STIC Liquid Assets Portfolio(d) 10,486,050 10,486,050
- -----------------------------------------------------------------------------
STIC Prime Portfolio(d) 10,486,050 10,486,050
- -----------------------------------------------------------------------------
Total Money Market Funds (Cost $20,972,100) 20,972,100
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.97%
(Cost $262,481,984) 449,373,233
=============================================================================
OTHER ASSETS LESS LIABILITIES - 1.03% 4,686,318
=============================================================================
NET ASSETS - 100.00% $454,059,551
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The security is managed by an affiliate of the advisor.
(c) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of this security has been determined in
accordance with procedures established by the Board of Directors. The
market value at 12/31/99 represents 0.23% of the Fund's net assets.
(d) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Wts. - Warrants
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-117
<PAGE> 230
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $262,481,984) $449,373,233
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $5,268,520) 5,196,151
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 130,765
- ----------------------------------------------------------------------
Investments sold 71,542
- ----------------------------------------------------------------------
Dividends and interest 667,995
- ----------------------------------------------------------------------
Investment for deferred compensation plan 30,156
- ----------------------------------------------------------------------
Other assets 1,881
- ----------------------------------------------------------------------
Total assets 455,471,723
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 913,583
- ----------------------------------------------------------------------
Deferred compensation plan 30,156
- ----------------------------------------------------------------------
Accrued advisory fees 264,916
- ----------------------------------------------------------------------
Accrued administrative services fees 97,409
- ----------------------------------------------------------------------
Accrued operating expenses 106,108
- ----------------------------------------------------------------------
Total liabilities 1,412,172
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $454,059,551
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 15,503,433
======================================================================
Net asset value, offering and redemption price per share $ 29.29
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $359,411 foreign withholding tax) $ 3,034,915
- -----------------------------------------------------------------------------
Interest 713,358
- -----------------------------------------------------------------------------
Total investment income 3,748,273
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,066,153
- -----------------------------------------------------------------------------
Administrative services fees 172,703
- -----------------------------------------------------------------------------
Custodian fees 273,972
- -----------------------------------------------------------------------------
Directors' fees 9,419
- -----------------------------------------------------------------------------
Other 174,377
- -----------------------------------------------------------------------------
Total expenses 2,696,624
- -----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,257)
- -----------------------------------------------------------------------------
Net expenses 2,695,367
- -----------------------------------------------------------------------------
Net investment income 1,052,906
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 28,518,935
- -----------------------------------------------------------------------------
Foreign currencies (108,248)
- -----------------------------------------------------------------------------
28,410,687
- -----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 127,676,389
- -----------------------------------------------------------------------------
Foreign currencies (127,150)
- -----------------------------------------------------------------------------
127,549,239
- -----------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 155,959,926
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $157,012,832
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-118
<PAGE> 231
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,052,906 $ 1,852,329
- -----------------------------------------------------------------------------
Net realized gain from investment securities and
foreign currencies 28,410,687 13,261,554
- -----------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities and foreign currencies 127,549,239 15,969,669
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 157,012,832 31,083,552
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment
income (2,918,487) (1,910,166)
- -----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (12,247,382) --
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 71,898,276 118,341
- -----------------------------------------------------------------------------
Net increase in net assets 213,745,239 29,291,727
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 240,314,312 211,022,585
- -----------------------------------------------------------------------------
End of year $454,059,551 $240,314,312
=============================================================================
Net assets consist of:
Capital (par value and additional paid-in) $256,736,054 $170,399,034
- -----------------------------------------------------------------------------
Undistributed net investment income (loss) (84,098) 1,934,360
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 10,606,640 11,825,802
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 186,800,955 56,155,116
- -----------------------------------------------------------------------------
$454,059,551 $240,314,312
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. International Equity Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be 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 Fund. 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 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.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
AIM V.I. INTERNATIONAL EQUITY FUND
FS-119
<PAGE> 232
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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$152,877, undistributed net realized gains decreased by $17,382,467 and
paid-in capital increased by $17,535,344 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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. The Fund has a capital loss
carryforward of $9,708,288 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
NOTE 2 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $172,703 of which AIM retained
$64,730 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,451
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,257 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,257 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $300,468,441 and $252,489,998, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $187,651,533
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,838,689)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $185,812,844
===========================================================================
Cost of investments for tax purposes is $263,560,389.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-120
<PAGE> 233
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
Shares Amount Shares Amount
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 6,613,497 $145,638,150 2,410,075 $46,643,002
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 582,183 15,165,869 101,067 1,910,166
- -----------------------------------------------------------------------------
Issued in connection with
acquisitions* 2,243,929 49,699,501 -- --
- -----------------------------------------------------------------------------
Reacquired (6,185,749) (138,605,244) (2,581,125) (48,434,827)
- -----------------------------------------------------------------------------
3,253,860 $ 71,898,276 (69,983) $ 118,341
=============================================================================
</TABLE>
* As of the close of business on October 22, 1999, the Fund acquired all the
net assets of the following funds: GT Global Variable International Fund, GT
Global Variable Europe Fund, GT Global Variable Natural Resources Fund, GT
Global Variable Infrastructure Fund, GT Global Variable New Pacific Fund, GT
Global Variable Latin America Fund and GT Global Variable Emerging Markets
Fund, collectively (the "Variable Funds"), pursuant to a plan of
reorganization approved by the Variable Funds shareholders on August 25,
1999. The acquisitions were accomplished by a tax-free exchange of 2,243,929
shares of the Fund for the respective shares of each of the Variable Funds
outstanding as of the close of business October 22, 1999 (see following
table) and by combining the net assets of the Fund as of that date with
those of the respective Variable Funds outlined in the following table:
<TABLE>
<CAPTION>
Shares Net Assets Immediately Appreciation/
Variable Funds: Exchanged before acquisitions (Depreciation) Included
- ------------------------ --------- ---------------------- -----------------------
<S> <C> <C> <C>
GT Global Variable
International Fund 398,165 $ 4,159,686 $ 591,925
- ----------------------------------------------------------------------------------
GT Global Variable
Europe Fund 2,101,240 16,722,795 1,876,631
- ----------------------------------------------------------------------------------
GT Global Variable
Natural Resources Fund 426,574 5,000,655 167,642
- ----------------------------------------------------------------------------------
GT Global Variable
Infrastructure Fund 253,110 3,837,109 609,331
- ----------------------------------------------------------------------------------
GT Global Variable New
Pacific Fund 857,885 7,747,489 1,306,187
- ----------------------------------------------------------------------------------
GT Global Variable Latin
America Fund 731,544 7,915,791 (1,572,891)
- ----------------------------------------------------------------------------------
GT Global Variable
Emerging Markets Fund 544,479 4,315,976 117,775
- ----------------------------------------------------------------------------------
</TABLE>
The net assets of the Fund immediately before the acquisitions were
$285,111,544.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995, and the year ended January 31, 1995.
<TABLE>
<CAPTION>
December 31,
------------------------------------------------- January 31,
1999(a) 1998 1997 1996 1995 1995
-------- -------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
- ---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.15 0.10 0.07 0.07 0.06
- ---------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 10.59 2.50 1.03 2.67 2.58 (1.49)
- ---------------------------------------------------------------------------------------------
Total from investment
operations 10.67 2.65 1.13 2.74 2.65 (1.43)
- ---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.19) (0.16) (0.08) (0.04) (0.02) (0.03)
- ---------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.81) -- (0.28) -- -- --
- ---------------------------------------------------------------------------------------------
Total distributions (1.00) (0.16) (0.36) (0.04) (0.02) (0.03)
- ---------------------------------------------------------------------------------------------
Net asset value, end of
period $ 29.29 $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03
=============================================================================================
Total return(b) 55.04 15.49% 6.94% 20.05% 24.04% (11.48)%
=============================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $454,060 $240,314 $211,023 $165,738 $82,257 $55,019
=============================================================================================
Ratio of expenses to
average net assets 0.97(c) 0.91% 0.93% 0.96% 1.15%(d) 1.27%(e)
=============================================================================================
Ratio of net investment
income to average net
assets 0.38(c) 0.80% 0.68% 0.78% 0.75%(d) 0.60%(e)
=============================================================================================
Portfolio turnover rate 97% 76% 57% 59% 67% 64%
=============================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $277,307,465.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.28% and 0.59%, respectively.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-121
<PAGE> 234
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Money Market Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
1999, the related statement of operations for the year then ended, the
statement of changes in net assets for each of the two years in the period then
ended and the financial highlights for each of the four years in the period
then ended, the eleven month period ended December 31, 1995 and the year ended
January 31, 1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Money Market Fund, as of December 31, 1999, the results of its operations
for the year then ended, the changes in its net assets for each of the two
years in the period then ended and the financial highlights for each of the
four years in the period then ended, the eleven month period ended December 31,
1995 and the year ended January 31, 1995 in conformity with generally accepted
accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. MONEY MARKET FUND
FS-122
<PAGE> 235
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C> <C>
COMMERCIAL PAPER - 43.23%(a)
ASSET-BACKED SECURITIES - COMMERCIAL LOANS/LEASES -
4.18%
Centric Capital Corp.
6.02%, 01/31/00 $ 4,000 $ 3,979,933
- ----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - CONSUMER RECEIVABLES - 4.59%
Old Line Funding Corp.
6.00%, 01/12/00 2,400 2,395,600
- ----------------------------------------------------------------------------
Thunder Bay Funding Inc.
5.79%, 03/24/00 2,000 1,973,302
- ----------------------------------------------------------------------------
4,368,902
- ----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - MULTI-PURPOSE - 22.95%
Bavaria TRR Corp.
5.48%, 01/27/00 1,500 1,494,064
- ----------------------------------------------------------------------------
5.92%, 03/23/00 1,000 986,516
- ----------------------------------------------------------------------------
Enterprise Funding Corp.
6.05%, 02/03/00 4,000 3,977,817
- ----------------------------------------------------------------------------
Falcon Asset Securitization Corp.
6.25%, 01/07/00 4,000 3,995,833
- ----------------------------------------------------------------------------
Monte Rosa Capital Corp.
6.04%, 02/15/00 594 589,515
- ----------------------------------------------------------------------------
5.98%, 03/09/00 3,000 2,966,113
- ----------------------------------------------------------------------------
Park Avenue Receivables Corp.
5.81%, 03/08/00 2,000 1,978,374
- ----------------------------------------------------------------------------
Quincy Capital Corp.
5.95%, 01/28/00 1,863 1,854,686
- ----------------------------------------------------------------------------
Three Rivers Funding Corp.
7.00%, 01/12/00 4,000 3,991,444
- ----------------------------------------------------------------------------
21,834,362
- ----------------------------------------------------------------------------
ASSET-BACKED SECURITIES - TRADE RECEIVABLES - 6.30%
Asset Securitization Floating Rate Notes(b)
6.09%, 03/10/00 3,000 2,999,624
- ----------------------------------------------------------------------------
Variable Funding Capital
5.42%, 01/18/00 1,000 997,441
- ----------------------------------------------------------------------------
5.68%, 01/21/00 2,000 1,993,689
- ----------------------------------------------------------------------------
5,990,754
- ----------------------------------------------------------------------------
AUTOMOBILE - 2.07%
Daimler-Chrysler North America Holding
5.87%, 03/22/00 2,000 1,973,585
- ----------------------------------------------------------------------------
FINANCE (MULTIPLE INDUSTRY) - 1.05%
General Electric Capital Corp., Floating Rate
Notes(b)
4.98%, 08/21/00 1,000 998,667
- ----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 2.09%
Credit Suisse First Boston, Inc.
5.74%, 02/18/00 2,000 1,984,693
- ----------------------------------------------------------------------------
Total Commercial Paper (Cost $41,130,896) 41,130,896
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <C> <C>
CERTIFICATES OF DEPOSIT - 1.05%
Bank Austria
5.65%, 07/06/00 (Cost $999,755) $ 1,000 $ 999,755
- -----------------------------------------------------------------------------
MASTER NOTE AGREEMENTS - 8.30%(c)
Merrill Lynch Mortgage Capital Inc.
4.76%, 08/17/00(d) 3,900 3,900,000
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter, Discover & Co.
4.60%, 03/01/00(e) 4,000 4,000,000
- -----------------------------------------------------------------------------
Total Master Note Agreements
(Cost $7,900,000) 7,900,000
- -----------------------------------------------------------------------------
PROMISSORY NOTES - 3.15%
Goldman, Sachs & Co.
4.90%, 02/24/00 (Cost $3,000,000) 3,000 3,000,000
- -----------------------------------------------------------------------------
Total Investments (excluding repurchase agreements)
(Cost $53,030,651) 53,030,651
- -----------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 43.47%(f)
Bear, Stearns & Co., Inc.,
3.10%(g) 3,000 3,000,000
- -----------------------------------------------------------------------------
CIBC Oppenheimer Corp.
3.25%, 01/03/00(h) 14,862 14,862,435
- -----------------------------------------------------------------------------
Goldman, Sachs & Co.
5.64%, 01/07/00(i) 3,500 3,500,000
- -----------------------------------------------------------------------------
Greenwich Capital Markets, Inc.
3.30%, 01/03/00(j) 20,000 20,000,000
- -----------------------------------------------------------------------------
Total Repurchase Agreements
(Cost $41,362,435) 41,362,435
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.20% 94,393,086(k)
- -----------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.80% 759,083
- -----------------------------------------------------------------------------
NET ASSETS - 100.00% $95,152,169
=============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Some commercial paper is traded on a discount basis. In such cases, the
interest rate shown represents the rate of discount paid or received at
the time of purchase by the Fund.
(b) The coupon rate shown on floating rate notes represents the rate at period
end.
(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 portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon one business days notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown
is the rate in effect on 12/31/99.
(e) The portfolio may demand prepayment of notes purchased under the Master
Note Purchase Agreement upon three business days notice to the issuer.
Interest rates on master notes are redetermined periodically. Rate shown
is the rate in effect on 12/31/99.
(f) Collateral on repurchase agreements, including the Fund's pro-rata
interest in joint repurchase agreements, is taken into possession by the
Fund upon entering into the repurchase agreement. The collateral is marked
to market daily to ensure its market value as being 102% of the sales
price of the repurchase agreement. The investments in some repurchase
agreements are through participation in joint accounts with other mutual
funds, private accounts and certain non-registered investment companies
managed by the investment advisor or its affiliates.
(g) Joint open repurchase agreement entered into 10/05/98. Either party may
terminate the agreement upon demand. Interest rates, par and collateral
are redetermined daily. Collateralized by $350,000,000 U.S. Government
obligations, 0% to 8.22% due 01/18/00 to 06/11/18 with an aggregate market
value at 12/31/99 of $357,624,183.
(h) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$285,077,188 and collateralized by $285,000,000 U.S. Government and
Treasury obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an
aggregate market value at 12/31/99 of $290,700,000.
(i) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$100,501,333 and collateralized by $100,000,000 U.S. Government and
Treasury obligations, 0% to 8.625% due 06/30/00 to 12/15/43 with an
aggregate market value at 12/31/99 of $102,004,901.
(j) Joint repurchase agreement entered into 12/31/99 with a maturing value of
$240,066,000 and collateralized by $240,000,000 U.S. Government and
Treasury obligations, 5% to 10% due 02/01/00 to 12/01/29 with an aggregate
market value at 12/31/99 of $244,803,339.
(k) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-123
<PAGE> 236
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value (cost
$53,030,651) $ 53,030,651
- --------------------------------------------------------------------------
Repurchase agreements (cost $41,362,435) 41,362,435
- --------------------------------------------------------------------------
Receivables for:
Capital stock sold 756,435
- --------------------------------------------------------------------------
Interest receivable 111,773
- --------------------------------------------------------------------------
Investment for deferred compensation plan 28,768
- --------------------------------------------------------------------------
Other assets 276
- --------------------------------------------------------------------------
Total assets 95,290,338
- --------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 19,925
- --------------------------------------------------------------------------
Deferred compensation plan 28,768
- --------------------------------------------------------------------------
Accrued advisory fees 32,663
- --------------------------------------------------------------------------
Accrued administrative service fees 29,815
- --------------------------------------------------------------------------
Accrued operating expenses 26,998
- --------------------------------------------------------------------------
Total liabilities 138,169
- --------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 95,152,169
==========================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- --------------------------------------------------------------------------
Outstanding 95,152,112
- --------------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 1.00
==========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $4,113,561
- ----------------------------------------------------------------
EXPENSES:
Advisory fees 317,031
- ----------------------------------------------------------------
Administrative services fees 70,016
- ----------------------------------------------------------------
Custodian fees 26,011
- ----------------------------------------------------------------
Directors' fees 8,841
- ----------------------------------------------------------------
Other 50,735
- ----------------------------------------------------------------
Total expenses 472,634
- ----------------------------------------------------------------
Net investment income 3,640,927
- ----------------------------------------------------------------
Net increase in net assets resulting from operations $3,640,927
================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-124
<PAGE> 237
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,640,927 $ 3,115,776
- ---------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,640,927 3,115,776
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment
income (3,640,927) (3,115,776)
- ---------------------------------------------------------------------------
Net increase from capital stock transactions 31,061,846 5,455,702
- ---------------------------------------------------------------------------
Net increase in net assets 31,061,846 5,455,702
- ---------------------------------------------------------------------------
NET ASSETS:
Beginning of year 64,090,323 58,634,621
- ---------------------------------------------------------------------------
End of year $95,152,169 $64,090,323
===========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $95,152,112 $64,090,266
- ---------------------------------------------------------------------------
Undistributed net realized gain from investment
securities 57 57
- ---------------------------------------------------------------------------
$95,152,169 $64,090,323
===========================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Money Market Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. 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 Fund's investment objective is to seek to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The 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 preparation 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 and Investment Income - 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.
C. Distributions - It is the policy of the Fund to declare and pay dividends
from net investment income daily. Such distributions are paid daily.
Distributions from net realized capital gains, if any, are generally paid
annually and recorded on ex-dividend date.
D. 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 - 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 the annual rate of 0.40% on
the first $200 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $70,016 of which AIM retained
$44,311 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
AIM V.I. MONEY MARKET FUND
FS-125
<PAGE> 238
the Fund. Certain officers and directors of the Company are officers of AIM
and AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,541
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
AIM V.I. MONEY MARKET FUND
FS-126
<PAGE> 239
NOTE 5 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
--------------------------- -------------------------
SHARES AMOUNT SHARES AMOUNT
------------ ------------- ----------- ------------
<S> <C> <C> <C> <C>
Sold 113,630,564 $ 113,630,564 100,181,770 $100,181,770
- -------------------------------------------------------------------------------
Issued as reinvestment
of dividends 3,640,927 3,640,927 3,115,776 3,115,776
- -------------------------------------------------------------------------------
Issued in connection
with acquisitions* 29,800,869 29,800,869 -- --
- -------------------------------------------------------------------------------
Reacquired (116,010,514) $(116,010,514) (97,841,844) $(97,841,844)
- -------------------------------------------------------------------------------
31,061,846 $ 31,061,846 5,455,702 $ 5,455,702
===============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable Money Market Fund ("Variable Money Market
Fund") pursuant to a plan of reorganization approved by Variable Money
Market Fund's shareholders on August 25, 1999. The acquisition was
accomplished by a tax-free exchange of 29,800,869 shares of the Fund for
29,800,869 shares of Variable Money Market Fund outstanding as of the close
of business on October 15, 1999. Variable Money Market Fund net assets at
that date of $29,800,869 were combined with those of the Fund. The net
assets of the Fund immediately before the acquisition were $80,730,864.
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JANUARY 31,
1999 1998 1997 1996 1995 1995
------- ------- ------- ------- ------- -----------
<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 0.05 0.05 0.05 0.05 0.05 0.04
- -----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.04)
- -----------------------------------------------------------------------------------------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------
Total return 4.66% 5.06% 5.14% 4.97% 5.22% 3.98%
- -----------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $95,152 $64,090 $58,635 $63,529 $65,506 $31,017
- -----------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.60%(a) 0.58% 0.59% 0.55% 0.53%(b) 0.63%(c)
- -----------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets 4.59%(a) 4.94% 5.01% 4.84% 5.40%(b) 4.14%(c)
- -----------------------------------------------------------------------------------------
</TABLE>
(a) Ratios are based on average net assets of $79,257,738.
(b) Annualized.
(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.
AIM V.I. MONEY MARKET FUND
FS-127
<PAGE> 240
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Telecommunications Fund (formerly, GT Global Variable Telecommunications
Fund), a series of shares of common stock of AIM Variable Insurance Funds, Inc.
including the schedule of investments as of December 31, 1999, the related
statement of operations, the statement of changes in net assets and the
financial highlights for the year then ended. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit. The statement of changes in net assets
for the year ended December 31, 1998 and the financial highlights for each of
the four years in the period then ended were audited by other auditors whose
report dated February 19, 1999, expressed an unqualified opinion thereon.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Telecommunications Fund, as of December 31, 1999, the results of its
operations, the changes in its net assets and the financial highlights for the
year then ended in conformity with generally accepted accounting principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. TELECOMMUNICATIONS FUND
FS-128
<PAGE> 241
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC STOCKS - 68.87%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.01%
Comcast Corp. - Class A 18,600 $ 934,650
- ----------------------------------------------------------------
UnitedGlobalCom Inc. - Class A(a) 33,000 2,330,625
- ----------------------------------------------------------------
3,265,275
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 15.76%
CIENA Corp.(a) 10,000 575,000
- ----------------------------------------------------------------
Corning, Inc. 15,000 1,934,062
- ----------------------------------------------------------------
General Instrument Corp.(a) 12,000 1,020,000
- ----------------------------------------------------------------
Harmonic, Inc.(a) 20,000 1,898,750
- ----------------------------------------------------------------
JDS Uniphase Corp.(a) 40,000 6,452,500
- ----------------------------------------------------------------
Lucent Technologies Inc. 3,000 224,437
- ----------------------------------------------------------------
Motorola, Inc. 27,900 4,108,275
- ----------------------------------------------------------------
Proxim, Inc.(a) 8,000 880,000
- ----------------------------------------------------------------
17,093,024
- ----------------------------------------------------------------
COMPUTERS (NETWORKING) - 5.02%
Cabletron Systems, Inc.(a) 18,000 468,000
- ----------------------------------------------------------------
Cisco Systems, Inc.(a) 46,400 4,970,600
- ----------------------------------------------------------------
5,438,600
- ----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.93%
EMC Corp.(a) 19,200 2,097,600
- ----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 21.07%
America Online, Inc.(a) 31,200 2,353,650
- ----------------------------------------------------------------
BEA Systems, Inc.(a) 9,000 629,437
- ----------------------------------------------------------------
eBay, Inc.(a) 25,000 3,129,687
- ----------------------------------------------------------------
FreeMarkets, Inc.(a) 7,900 2,696,369
- ----------------------------------------------------------------
InfoSpace.com, Inc.(a) 6,000 1,284,000
- ----------------------------------------------------------------
Inktomi Corp.(a) 16,000 1,420,000
- ----------------------------------------------------------------
Microsoft Corp.(a) 42,000 4,903,500
- ----------------------------------------------------------------
Oracle Corp.(a) 15,000 1,680,938
- ----------------------------------------------------------------
RealNetworks, Inc.(a) 5,300 637,656
- ----------------------------------------------------------------
Yahoo! Inc.(a) 9,500 4,110,531
- ----------------------------------------------------------------
22,845,768
- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.83%
EchoStar Communications Corp.(a) 9,200 897,000
- ----------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.71%
General Motors Corp. - Class H(a) 8,000 768,000
- ----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.69%
Alpha Industries, Inc.(a) 13,000 745,063
- ----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.30%
PMC-Sierra, Inc.(a) 2,000 320,625
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.42%
Knight/Trimark Group, Inc. - Class A(a) 10,000 $ 460,000
- ------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.60%
GoTo.com, Inc.(a) 11,000 646,250
- ------------------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.79%
Brocade Communications Systems, Inc.(a) 11,000 1,947,000
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 5.69%
Infonet Services Corp.(a) 17,800 467,250
- ------------------------------------------------------------------------------
Level 3 Communications, Inc.(a) 23,000 1,883,125
- ------------------------------------------------------------------------------
Phone.com, Inc.(a) 5,000 579,688
- ------------------------------------------------------------------------------
Powertel, Inc.(a) 3,000 301,125
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 44,000 2,937,000
- ------------------------------------------------------------------------------
6,168,188
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.29%
Global TeleSystems Group, Inc.(a) 61,600 2,132,900
- ------------------------------------------------------------------------------
MCI WorldCom, Inc.(a) 27,000 1,432,688
- ------------------------------------------------------------------------------
3,565,588
- ------------------------------------------------------------------------------
TELEPHONE - 7.76%
Bell Atlantic Corp. 23,000 1,415,938
- ------------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(a) 9,000 529,875
- ------------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(a) 7,000 581,438
- ------------------------------------------------------------------------------
NTL Inc.(a) 25,915 3,232,896
- ------------------------------------------------------------------------------
Qwest Communications International, Inc.(a) 28,000 1,204,000
- ------------------------------------------------------------------------------
RCN Corp.(a) 10,000 485,000
- ------------------------------------------------------------------------------
SBC Communications, Inc. 19,900 970,125
- ------------------------------------------------------------------------------
8,419,272
- ------------------------------------------------------------------------------
Total Domestic Stocks (Cost $39,763,183) 74,677,253
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 24.61%
AUSTRALIA - 0.37%
Telstra Corp. Ltd.-Installment Receipts (Telephone)(a) 115,500 407,494
- ------------------------------------------------------------------------------
CANADA - 3.09%
BCE Inc. (Telephone) 18,934 1,720,498
- ------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 16,200 1,636,200
- ------------------------------------------------------------------------------
3,356,698
- ------------------------------------------------------------------------------
FINLAND - 2.93%
Nokia Oyj - ADR (Communications Equipment) 16,700 3,173,000
- ------------------------------------------------------------------------------
GERMANY - 3.18%
Mannesmann A.G. (Machinery - Diversified) 14,300 3,446,940
- ------------------------------------------------------------------------------
HONG KONG - 1.27%
China Telecom Ltd. (Telecommunications -
Cellular/Wireless)(a) 220,000 1,372,612
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. TELECOMMUNICATIONS FUND
FS-129
<PAGE> 242
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
IRELAND - 1.18%
Esat Telecom Group PLC - ADR (Telecommunications -
Long Distance)(a) 14,000 $ 1,281,000
- -------------------------------------------------------------------------------
JAPAN - 6.93%
Kyocera Corp. (Electronics-Component Distributors) 8,400 2,179,682
- -------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 97 1,662,179
- -------------------------------------------------------------------------------
NTT Mobile Communications Network, Inc.
(Telecommunications-Cellular/Wireless) 80 3,078,580
- -------------------------------------------------------------------------------
Sony Corp. (Electrical Equipment) 2,000 593,390
- -------------------------------------------------------------------------------
7,513,831
- -------------------------------------------------------------------------------
NETHERLANDS - 2.17%
KPNQWest N.V. (Telecommunications - Long Distance)(a) 35,300 2,348,380
- -------------------------------------------------------------------------------
SPAIN - 1.10%
Telefonica S.A. (Telephone)(a) 47,751 1,191,871
- -------------------------------------------------------------------------------
SWEDEN - 0.91%
Telefonaktiebolaget LM Ericsson - ADR (Communications
Equipment) 15,000 985,312
- -------------------------------------------------------------------------------
UNITED KINGDOM - 1.48%
Vodafone AirTouch PLC (Telecommunications-
Cellular/Wireless) 324,000 1,604,802
- -------------------------------------------------------------------------------
Total Foreign Stocks & Other Equity Interests (Cost
$8,714,354) 26,681,940
- -------------------------------------------------------------------------------
MONEY MARKET FUNDS - 6.59%
STIC Liquid Assets Portfolio(b) 3,569,530 3,569,530
- -------------------------------------------------------------------------------
STIC Prime Portfolio(b) 3,569,530 3,569,530
- -------------------------------------------------------------------------------
Total Money Market Funds (Cost $7,139,060) 7,139,060
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS - 100.07%
(COST $55,616,597) 108,498,253
- -------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (0.07%) (70,489)
- -------------------------------------------------------------------------------
NET ASSETS - 100.00% $108,427,764
===============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
a) Non-income producing security.
b) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. TELECOMMUNICATIONS FUND
FS-130
<PAGE> 243
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $55,616,597) $108,498,253
- ----------------------------------------------------------------------
Receivables for:
Foreign currencies, at value (cost $2,012) 2,019
- ----------------------------------------------------------------------
Dividends and interest 39,637
- ----------------------------------------------------------------------
Total assets 108,539,909
- ----------------------------------------------------------------------
LIABILITIES:
Accrued advisory fees 85,794
- ----------------------------------------------------------------------
Accrued administrative service fees 4,247
- ----------------------------------------------------------------------
Accrued operating expenses 22,104
- ----------------------------------------------------------------------
Total liabilities 112,145
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $108,427,764
======================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 3,290,020
======================================================================
Net asset value, offering and redemption price per share $ 32.96
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $11,255 foreign withholding tax) $ 262,469
- -----------------------------------------------------------------------------
Interest 170,817
- -----------------------------------------------------------------------------
Security lending 52,600
- -----------------------------------------------------------------------------
Total investment income 485,886
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 756,068
- -----------------------------------------------------------------------------
Administrative services fees 34,698
- -----------------------------------------------------------------------------
Custodian fees 34,246
- -----------------------------------------------------------------------------
Directors' fees 8,147
- -----------------------------------------------------------------------------
Printing fees 54,930
- -----------------------------------------------------------------------------
Interest expense 4,428
- -----------------------------------------------------------------------------
Other 62,933
- -----------------------------------------------------------------------------
Total expenses 955,450
- -----------------------------------------------------------------------------
Less: Expense reductions (650)
- -----------------------------------------------------------------------------
Net expenses 954,800
- -----------------------------------------------------------------------------
Net investment income (loss) (468,914)
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 21,278,655
- -----------------------------------------------------------------------------
Foreign currencies (240,556)
- -----------------------------------------------------------------------------
Forward currency contracts 26,029
- -----------------------------------------------------------------------------
21,064,128
- -----------------------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 36,821,340
- -----------------------------------------------------------------------------
Foreign currencies 325
- -----------------------------------------------------------------------------
Forward currency contracts 44,287
- -----------------------------------------------------------------------------
36,865,952
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
forward currency contracts 57,930,080
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $57,461,166
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. TELECOMMUNICATIONS FUND
FS-131
<PAGE> 244
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (468,914) $ (37,295)
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency
contracts 21,064,128 6,543,917
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
forward currency contracts 36,865,952 6,878,850
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 57,461,166 13,385,472
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (15,618,065) (5,760,403)
- ------------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (2,874,672) (6,351,877)
- ------------------------------------------------------------------------------
Net increase in net assets 38,968,429 1,273,192
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 69,459,335 68,186,143
- ------------------------------------------------------------------------------
End of year $108,427,764 $69,459,335
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 44,082,800 $46,957,472
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward
currency contracts 11,463,291 6,486,142
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency
contracts 52,881,673 16,015,721
- ------------------------------------------------------------------------------
$108,427,764 $69,459,335
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1--SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Telecommunications Fund (the "Fund"), (formerly named the GT Global
Variable Telecommunications Fund),is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Prior to October 18, 1999, the Fund was a
series portfolio of GT Global Variable Investment Trust (the "Trust")
organized as a Delaware business trust registered under the 1940 Act. Pursuant
to an agreement and plan of reorganization between the Company and the Trust,
the Fund was reorganized as a portfolio of the Company effective October 18,
1999. Matters affecting each portfolio will be 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 Fund. 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 Fund's
investment objective is to achieve long-term growth of capital.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. TELECOMMUNICATIONS FUND
FS-132
<PAGE> 245
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$468,914 and undistributed net realized gains decreased by $468,914 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
NOTE 2 - 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 the annual rate of 1.00% of
the Fund's average daily net assets.
Effective July 1, 1999, the Company entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services and other administrative services to the Fund.
Prior to July 1, 1999, AIM was the pricing and accounting agent for the Fund.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount
is allocated to and paid by each such fund based on its relative average daily
net assets. For the year ended December 31, 1999, AIM was paid $34,698 of
which AIM retained $34,698 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $156 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3 - EXPENSE REDUCTIONS
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $18 under an expense offset arrangement and AIM directed
certain portfolio trades to brokers who then paid $632 of the Fund's expenses.
The effect of the above arrangement resulted in a reduction of the Fund's
total expenses of $650 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period. Prior
to May 28, 1999, the Fund, along with certain other funds advised and/or
administered by AIM, had a line of credit with BankBoston and State Street
Bank & Trust Company. The arrangements with the banks allowed the Fund and
certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000.
During the year ended December 31, 1999, the average outstanding daily
balance of bank loans for the Fund was $79,497 with a weighted average
interest rate of 5.57%. Interest expense for the Fund for the year ended
December 31, 1999 was $4,428.
AIM V.I. TELECOMMUNICATIONS FUND
FS-133
<PAGE> 246
NOTE 6 - PORTFOLIO SECURITIES LOANED
At December 31, 1999, there were no securities on loans to brokers. For the
year ended December 31, 1999, the Fund received fees of $52,600 for securities
lending.
For international securities, cash collateral is received by the fund against
loaned securities in an amount at least equal to 105% of the market value of
the loaned securities at the inception of each loan. The collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the market
value of the loaned securities during the period of the loan. The cash
collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $88,854,506 and $107,703,816, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $53,172,990
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (497,109)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $52,675,881
==========================================================================
</TABLE>
Cost of investments for tax purposes is $55,822,372.
AIM V.I. TELECOMMUNICATIONS FUND
FS-134
<PAGE> 247
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 6,650,710 148,837,352 2,494,268 49,416,214
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 763,720 15,618,065 293,286 5,760,403
- -----------------------------------------------------------------------------
Reacquired (7,487,234) (167,330,089) (3,130,421) (61,528,494)
- -----------------------------------------------------------------------------
(72,804) $ (2,874,672) (342,867) $(6,351,877)
=============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the five-year period ended December 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 20.66 $ 18.40 $ 18.14 $ 16.87 $ 13.98
- -------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.14) (0.01) (0.02) (0.05) 0.02
- -------------------------------------------------------------------------------
Net gains on securities
(both realized and
unrealized) 18.46 3.99 2.59 3.31 3.26
- -------------------------------------------------------------------------------
Total from investment
operations 18.32 3.98 2.57 3.26 3.28
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- (0.02) (0.03)
- -------------------------------------------------------------------------------
Distributions from net
realized capital gains (6.02) (1.72) (2.31) (1.97) (0.36)
- -------------------------------------------------------------------------------
Total distributions (6.02) (1.72) (2.31) (1.99) (0.39)
- -------------------------------------------------------------------------------
Net asset value, end of
period $ 32.96 $ 20.66 $ 18.40 $ 18.14 $ 16.87
===============================================================================
Total return 106.52% 22.11% 14.56% 19.34% 23.66%
===============================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $108,428 $69,459 $68,186 $63,258 $50,778
===============================================================================
Ratio of expenses to
average net assets
including interest
expense:
with waivers 1.27%(a) 1.17% 1.11% 1.12% 1.20%
===============================================================================
without waivers 1.27%(a) 1.18% 1.16% 1.17% 1.26%
===============================================================================
Ratio of expenses to
average net assets
excluding interest
expense:
with waivers 1.26%(a) 1.16% 1.11% 1.12% 1.20%
===============================================================================
without waivers 1.26%(a) 1.17% 1.16% 1.17% 1.26%
===============================================================================
Ratio of net investment
income to average net
assets:
with waivers (0.62)%(a) (0.04)% (0.10)% (0.26)% 0.16%
===============================================================================
without waivers (0.62)%(a) (0.05)% (0.15)% (0.31)% 0.10%
===============================================================================
Ratio of interest expense
to average net assets 0.01%(a) 0.01% -- -- --
- -------------------------------------------------------------------------------
Portfolio turnover rate 124% 73% 91% 77% 70%
===============================================================================
</TABLE>
(a) Ratios are based on average net assets of $75,606,845.
AIM V.I. TELECOMMUNICATIONS FUND
FS-135
<PAGE> 248
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 1999, the
related statement of operations for the year then ended, the statement of
changes in net assets for each of the two years in the period then ended and
the financial highlights for each of the four years in the period then ended,
the eleven month period ended December 31, 1995 and the year ended January 31,
1995. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and financial highlights based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
December 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of AIM
V.I. Value Fund, as of December 31, 1999, the results of its operations for the
year then ended, the changes in its net assets for each of the two years in the
period then ended and the financial highlights for each of the four years in
the period then ended, the eleven month period ended December 31, 1995 and the
year ended January 31, 1995 in conformity with generally accepted accounting
principles.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. VALUE FUND
FS-136
<PAGE> 249
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER
EQUITY INTERESTS - 89.17%
BANKS (MONEY CENTER) - 1.21%
Chase Manhattan Corp. (The) 370,000 $ 28,744,375
- -------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 8.78%
Comcast Corp. - Class A 2,264,000 113,766,000
- -------------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 1,538,500 79,232,750
- -------------------------------------------------------------------------
MediaOne Group, Inc. 212,000 16,284,250
- -------------------------------------------------------------------------
209,283,000
- -------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 9.99%
Comverse Technology, Inc.(a) 62,000 8,974,500
- -------------------------------------------------------------------------
Lucent Technologies, Inc. 150,000 11,221,875
- -------------------------------------------------------------------------
Motorola, Inc. 272,000 40,052,000
- -------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 936,000 177,840,000
- -------------------------------------------------------------------------
238,088,375
- -------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 8.99%
Apple Computer, Inc.(a) 675,000 69,398,437
- -------------------------------------------------------------------------
Gateway, Inc.(a) 967,000 69,684,437
- -------------------------------------------------------------------------
International Business Machines Corp. 362,400 39,139,200
- -------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 465,000 36,008,437
- -------------------------------------------------------------------------
214,230,511
- -------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.42%
EMC Corp.(a) 84,000 9,177,000
- -------------------------------------------------------------------------
Lexmark International Group, Inc. - Class A(a) 536,000 48,508,000
- -------------------------------------------------------------------------
57,685,000
- -------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.11%
At Home Corp. - Class A(a) 1,021,500 43,796,812
- -------------------------------------------------------------------------
BMC Software, Inc.(a) 184,000 14,708,500
- -------------------------------------------------------------------------
Citrix Systems, Inc.(a) 55,100 6,777,300
- -------------------------------------------------------------------------
Microsoft Corp.(a) 360,000 42,030,000
- -------------------------------------------------------------------------
Unisys Corp.(a) 1,200,500 38,340,969
- -------------------------------------------------------------------------
145,653,581
- -------------------------------------------------------------------------
CONSUMER FINANCE - 0.21%
Providian Financial Corp. 54,000 4,917,375
- -------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.45%
Solectron Corp.(a) 114,000 10,844,250
- -------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.07%
Waters Corp.(a) 31,800 1,685,400
- -------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.44%
Analog devices, Inc.(a) 135,000 12,555,000
- -------------------------------------------------------------------------
Texas Instruments, Inc. 225,000 21,796,875
- -------------------------------------------------------------------------
34,351,875
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ENTERTAINMENT - 3.10%
Time Warner, Inc. 1,020,000 $73,886,250
- --------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 2.85%
Applied Materials, Inc.(a) 423,000 53,588,812
- --------------------------------------------------------------------
Teradyne, Inc.(a) 217,600 14,361,600
- --------------------------------------------------------------------
67,950,412
- --------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 3.58%
American Express Co. 139,500 23,191,875
- --------------------------------------------------------------------
Associates First Capital Corp. - Class A 885,000 24,282,187
- --------------------------------------------------------------------
Citigroup, Inc. 553,000 30,726,062
- --------------------------------------------------------------------
Freddie Mac 152,000 7,153,500
- --------------------------------------------------------------------
85,353,624
- --------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 1.54%
Bristol-Myers Squibb Co. 487,000 31,259,313
- --------------------------------------------------------------------
Warner-Lambert Co. 66,000 5,407,875
- --------------------------------------------------------------------
36,667,188
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 1.80%
Pharmacia & Upjohn, Inc. 954,500 42,952,500
- --------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.51%
Guidant Corp. 1,272,000 59,784,000
- --------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.33%
Colgate-Palmolive Co. 324,500 21,092,500
- --------------------------------------------------------------------
Kimberly-Clark Corp. 162,000 10,570,500
- --------------------------------------------------------------------
31,663,000
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 3.63%
American International Group, Inc. 689,500 74,552,188
- --------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 255,000 12,080.625
- --------------------------------------------------------------------
86,632,813
- --------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 2.41%
Morgan Stanley, Dean Witter, Discover & Co. 403,200 57,556,800
- --------------------------------------------------------------------
LODGING - HOTELS - 1.40%
Carnival Corp. 697,000 33,325,313
- --------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 2.67%
Tyco International Ltd. 1,636,500 63,618,938
- --------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.79%
Weyerhaeuser Co. 262,700 18,865,144
- --------------------------------------------------------------------
RESTAURANTS - 0.38%
McDonald's Corp. 222,000 8,949,375
- --------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
FS-137
<PAGE> 250
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (BUILDING SUPPLIES) - 0.79%
Lowe's Companies, Inc. 315,000 $ 18,821,250
- ------------------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.83%
Best Buy Co., Inc.(a) 867,500 43,537,656
- ------------------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 1.86%
Kroger Co.(a) 1,551,500 29,284,563
- ------------------------------------------------------------------------------
Safeway, Inc.(a) 423,000 15,042,938
- ------------------------------------------------------------------------------
44,327,501
- ------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 6.67%
Costco Companies, Inc.(a) 481,000 43,891,250
- ------------------------------------------------------------------------------
Dayton Hudson Corp. 1,568,500 115,186,719
- ------------------------------------------------------------------------------
159,077,969
- ------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 1.79%
Omnicom Group, Inc. 427,000 42,700,000
- ------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 1.87%
First Data Corp. 902,000 44,479,875
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 4.79%
Nextel Communications, Inc. - Class A(a) 1,106,500 114,107,813
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.91%
MCI WorldCom, Inc.(a) 858,000 45,527,625
==============================================================================
Total Common Stock & Other Equity Interests (Cost
$1,438,984,696) 2,125,268,788
- ------------------------------------------------------------------------------
MONEY MARKET FUNDS - 10.57%
STIC Liquid Assets Portfolio(b) 125,968,253 125,968,253
- ------------------------------------------------------------------------------
STIC Prime Portfolio(b) 125,968,253 125,968,253
- ------------------------------------------------------------------------------
Total Money Market Funds
(Cost $251,936,506) 251,936,506
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.74%
(Cost $1,690,921,202) 2,377,205,294
==============================================================================
OTHER ASSETS LESS LIABILITIES - 0.26% 6,161,277
==============================================================================
NET ASSETS - 100.00% $2,383,366,571
==============================================================================
</TABLE>
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
Investment Abbreviations:
ADR - American Depositary Receipt
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-138
<PAGE> 251
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,690,921,202) $2,377,205,294
- ------------------------------------------------------------------------
Receivables for:
Capital stock sold 2,728,571
- ------------------------------------------------------------------------
Dividends and interest 1,462,392
- ------------------------------------------------------------------------
Forward currency contracts 5,679,138
- ------------------------------------------------------------------------
Investment for deferred compensation plan 37,479
- ------------------------------------------------------------------------
Other assets 7,519
- ------------------------------------------------------------------------
Total assets 2,387,120,393
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 1,689,552
- ------------------------------------------------------------------------
Deferred compensation 37,479
- ------------------------------------------------------------------------
Accrued administrative services fee 761,567
- ------------------------------------------------------------------------
Accrued advisory fees 1,175,738
- ------------------------------------------------------------------------
Accrued directors' fees 3,466
- ------------------------------------------------------------------------
Accrued operating expenses 86,020
- ------------------------------------------------------------------------
Total liabilities 3,753,822
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,383,366,571
========================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ------------------------------------------------------------------------
Outstanding 71,145,803
- ------------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 33.50
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $71,503 foreign withholding tax) $ 10,174,160
- -----------------------------------------------------------------------------
Interest 6,250,806
- -----------------------------------------------------------------------------
Total investment income 16,424,966
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,380,472
- -----------------------------------------------------------------------------
Administrative services fees 2,155,772
- -----------------------------------------------------------------------------
Custodian fees 187,195
- -----------------------------------------------------------------------------
Directors' fees 18,731
- -----------------------------------------------------------------------------
Other 243,466
- -----------------------------------------------------------------------------
Total expenses 12,985,636
- -----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,407)
- -----------------------------------------------------------------------------
Net expenses 12,984,229
- -----------------------------------------------------------------------------
Net investment income 3,440,737
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES, FORWARD CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 107,241,613
- -----------------------------------------------------------------------------
Foreign currencies (13,279)
- -----------------------------------------------------------------------------
Forward currency contracts 3,016,134
- -----------------------------------------------------------------------------
Option contracts 1,566,750
- -----------------------------------------------------------------------------
111,811,218
- -----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 355,199,826
- -----------------------------------------------------------------------------
Foreign currencies 404
- -----------------------------------------------------------------------------
Forward currency contracts 5,354,529
- -----------------------------------------------------------------------------
Option contracts (7,521)
- -----------------------------------------------------------------------------
360,547,238
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, forward
currency contracts and option contracts 472,358,456
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $475,799,193
========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. VALUE FUND
FS-139
<PAGE> 252
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,440,737 $ 6,184,686
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies, forward currency
contracts and futures and option contracts 111,811,218 30,475,488
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies,
forward currency contracts and futures and
option contracts 360,547,238 230,113,292
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 475,799,193 266,773,466
- ------------------------------------------------------------------------------
Distributions to shareholders from net
investment income (6,235,364) (5,622,957)
- ------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains (32,606,763) (49,732,413)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 725,025,960 319,123,956
- ------------------------------------------------------------------------------
Net increase in net assets 1,161,983,026 530,542,052
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 1,221,383,545 690,841,493
- ------------------------------------------------------------------------------
End of year $2,383,366,571 $1,221,383,545
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,579,989,967 $ 855,502,720
- ------------------------------------------------------------------------------
Undistributed net investment income 3,383,602 6,191,169
- ------------------------------------------------------------------------------
Undistributed net realized gain from
investment securities, foreign currencies,
forward currency contracts and futures and
option contracts 108,030,109 28,274,001
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, forward
currency contracts and futures and option
contracts 691,962,893 331,415,655
- ------------------------------------------------------------------------------
$2,383,366,571 $1,221,383,545
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Value Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be 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 Fund. 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 Fund's investment objective is to achieve long-term growth of
capital by investing primarily in equity securities judged by the Fund's
investment advisor to be undervalued relative to the investment advisor's
appraisal of 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.
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 preparation 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 closing bid price on that day. 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
closing bid price. 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 based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. 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. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. VALUE FUND
FS-140
<PAGE> 253
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. 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 NYSE. 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 NYSE
which would 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 and Investment Income - 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 is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$12,940, undistributed net realized gains increased by $551,653 and paid-in
capital increased by $538,713 as a result of differing book/tax treatment
of foreign currency transactions and other reclassifications. Net assets of
the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. 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.
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. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
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.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
SETTLEMENT ------------------------
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
---------- -------- ----------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
01/21/00 EUR 60,350,000 $ 64,175,189 $ 60,831,794 $3,343,395
01/21/00 EUR 24,750,000 26,014,463 24,949,485 1,064,978
01/24/00 EUR 27,000,000 28,494,595 27,223,830 1,270,765
-----------------------------------------------------------------------
112,100,000 $118,684,247 $113,005,109 $5,679,138
=======================================================================
</TABLE>
G. Covered Call Options - The Fund may write call options, 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
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
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.
AIM V.I. VALUE FUND
FS-141
<PAGE> 254
NOTE 2 - 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 the 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.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $2,155,772 of which AIM
retained $107,813 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $6,262
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,407 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,407 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $1,517,968,122 and $956,466,504, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $713,240,314
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (33,618,676)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $679,621,638
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,697,583,656.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION
CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period 200 83,771
- ------------------------------------------
Written 7,578 $4,253,471
- ------------------------------------------
Closed (1,251) (683,197)
- ------------------------------------------
Exercised (3,321) (1,874,685)
- ------------------------------------------
Expired (3,206) (1,779,360)
==========================================
End of period -- --
==========================================
</TABLE>
AIM V.I. VALUE FUND
FS-142
<PAGE> 255
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 30,095,501 $884,324,432 13,690,852 $321,377,374
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 1,227,239 38,842,126 2,225,788 55,355,370
- ------------------------------------------------------------------------------
Reacquired (6,712,560) (198,140,598) (2,542,811) (57,608,788)
- ------------------------------------------------------------------------------
24,610,180 $725,025,960 13,373,829 $319,123,956
==============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- JANUARY 31,
1999(A) 1998 1997 1996 1995 1995
---------- ---------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
- -------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.06 0.09 0.08 0.30 0.11 0.10
- -------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 7.76 6.59 4.05 2.09 4.18 (0.35)
- -------------------------------------------------------------------------------------------------
Total from investment
operations 7.82 6.68 4.13 2.39 4.29 (0.25)
- -------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.09) (0.13) (0.19) (0.10) (0.01) (0.09)
- -------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.48) (1.13) (0.59) (0.92) -- --
- -------------------------------------------------------------------------------------------------
Total distributions (0.57) (1.26) (0.78) (1.02) (0.01) (0.09)
- -------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 33.50 $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83
- -------------------------------------------------------------------------------------------------
Total return(b) 29.90% 32.41% 23.69% 15.02% 36.25% (2.03)%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $2,383,367 $1,221,384 $690,841 $369,735 $257,212 $109,257
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.76%(c) 0.66% 0.70% 0.73% 0.75%(d) 0.82%
- -------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets 0.20%(c) 0.68% 1.05% 2.00% 1.11%(d) 1.17%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 100% 127% 129% 145% 143%
=================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,709,245,315.
(d) Annualized.
AIM V.I. VALUE FUND
FS-143
<PAGE> 256
PART C
OTHER INFORMATION
Item 23. Exhibits
Exhibit
Number Description
------- -----------
a (1) - (a) Articles of Incorporation of Registrant, as
filed with the State of Maryland on January 22,
1993, were filed as an Exhibit to Registrant's
Initial Registration Statement on January 25,
1993, and were filed electronically as an Exhibit
to Post-Effective Amendment No. 7 on April 29,
1996, and are incorporated herein by reference.
- (b) Amendment to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 13, 1993, was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on April
29, 1996, and is incorporated herein by reference.
- (c) Amendment to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 15, 1993, was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on April
29, 1996, and is incorporated herein by reference.
- (d) Amendment to Articles of Incorporation of
Registrant, as filed with the State of Maryland on
April 12, 1995, was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 6 on
April 26, 1995, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on April
29, 1996, and is incorporated herein by reference.
- (e) Articles Supplementary to Articles of
Incorporation of Registrant, as filed with the
State of Maryland on April 12, 1994, were filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 3 on May 2, 1994, and were filed
electronically as an Exhibit to Post-Effective
Amendment No. 7 on April 29, 1996, and are
incorporated herein by reference.
- (f) Articles Supplementary to Articles of
Incorporation of Registrant, as filed with the
State of Maryland on February 4, 1998 was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
- (g) Articles Supplementary to Articles of
Incorporation of Registrant, as filed with the
State of Maryland on September 30, 1998, was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
- (h) Articles Supplementary to Articles of
Incorporation of Registrant, as filed with the
State of Maryland on July 8, 1999, was filed
electronically
C-1
<PAGE> 257
as an Exhibit to Registrant's Post-Effective
Amendment No. 13 on July 13, 1999, and is
incorporated herein by reference.
- (i) Articles Supplementary to Articles of
Incorporation of Registrant, as filed with the
State of Maryland on September 27, 1999 was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 14 on September 28,
1999, and is incorporated herein by reference.
(2) - Agreement and Declaration of Trust of Registrant,
dated December 6, 1999 is hereby filed
electronically.
b (1) - (a) By-Laws of Registrant were filed as an Exhibit
to Registrant's Initial Registration Statement on
January 25, 1993 and were filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996.
- (b) First Amendment, dated March 14, 1995, to
By-Laws of Registrant was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996.
(2) - Amended and Restated By-Laws, dated effective
December 11, 1996, were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997.
(3) - By-Laws of Registrant dated effective December 8,
1999 is hereby filed electronically.
c - Instruments Defining Rights of Security Holders -
None.
d (1) - Investment Advisory Agreement, dated March 31,
1993, between Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1 on April 19, 1993.
(2) - (a) Master Investment Advisory Agreement, dated
October 18, 1993, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996.
- (b) Amendment, dated April 28, 1994, to Master
Investment Advisory Agreement, dated October 18,
1993, between Registrant and A I M Advisors, Inc.
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on May 2, 1994, and
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
April 29, 1996.
(3) - (a) Master Investment Advisory Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997 and incorporated herein by
reference.
- (b) Amendment No. 1, dated April 15, 1998, to
Master Investment Advisory Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's
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Post-Effective Amendment No. 10 on October 2, 1998
and incorporated herein by reference.
- (c) Amendment No. 2, dated December 14, 1998, to
Master Investment Advisory Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999, and is incorporated
herein by reference.
- (d) Amendment No. 3, dated September 24, 1999, to
Master Investment Advisory Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999, and is incorporated
herein by reference.
- (e) Amendment No. 4, dated December 29, 1999, to
Master Investment Advisory Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 15 on February 16, 2000, and is incorporated
herein by reference.
(4) - Form of Master Investment Advisory Agreement
between Registrant and A I M Advisors, Inc. was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 15 on February 16, 2000, and is
incorporated herein by reference.
(5) - Sub-Advisory Agreement, dated December 14, 1998,
between A I M Advisors, Inc. and INVESCO Asset
Management Limited was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 15 on
February 16, 2000, and is incorporated herein by
reference.
(6) - Form of Sub-Advisory Agreement between A I M
Advisors, Inc. and INVESCO Asset Management
Limited was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 15 on February 16,
2000, and is incorporated herein by reference.
(7) - Sub-Advisory Agreement, dated December 29, 1999,
between A I M Advisors, Inc. and H.S. Dent
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 15 on February 16, 2000, and is incorporated
herein by reference.
(8) - (a) Foreign Country Selection and Mandatory
Securities Depository Responsibilities Delegation
Agreement, dated September 9, 1998, between
Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and incorporated herein by reference.
- (b) Amendment No. 1, dated September 28, 1998, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement
between Registrant and A I M Advisors, Inc. was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 11 on February 18,
1999, and is incorporated herein by reference.
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- (c) Amendment No. 2, dated December 14, 1998, to
Foreign Country Selection and Mandatory Securities
Depository Responsibilities Delegation Agreement
between Registrant and A I M Advisors, Inc. was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 11 on February 18,
1999, and is incorporated herein by reference.
e (1) - (a) Master Distribution Agreement, dated October
18, 1993, between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996.
- (b) Amendment, dated April 28, 1994, to Master
Distribution Agreement, dated October 18, 1993,
between Registrant and AIM Distributors, Inc. was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 3 on May 2, 1994, and was filed
electronically as an Exhibit to Post-Effective
Amendment No. 7 on April 29, 1996.
(2) - (a) Master Distribution Agreement, dated February
28, 1997, between Registrant and A I M
Distributors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997 was filed electronically as an
Exhibit to Post-Effective Amendment No. 10 on
October 2, 1998 and incorporated herein by
reference.
- (b) Amendment No. 1, dated April 15, 1998, to
Master Distribution Agreement, dated February 28,
1997, between Registrant and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998 and incorporated herein by
reference.
- (c) Amendment No. 2, dated December 14, 1998, to
Master Distribution Agreement, dated February 28,
1997, between Registrant and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on
February 18, 1999 and is incorporated herein by
reference.
- (d) Amendment No. 3, dated September 24, 1999, to
Master Distribution Agreement, dated February 28,
1997, between Registrant and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and incorporated herein by
reference.
- (e) Amendment No. 4, dated December 29, 1999, to
Master Distribution Agreement, dated February 28,
1997, between Registrant and A I M Distributors,
Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 15 on
February 16, 2000, and is incorporated herein by
reference.
(3) - Distribution Agreement, dated March 31, 1993,
between Registrant and A I M Distributors, Inc.
was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1 on April 19, 1993.
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f (1) - Retirement Plan of Registrant's Non-Affiliated
Directors, effective March 8, 1994, was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 4 on November 3, 1994.
(2) - Retirement Plan of Registrant's Non-Affiliated
Directors, effective March 8, 1994, as restated
September 18, 1995, was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 7 on April 29, 1996, and is incorporated
herein by reference.
(3) - Form of Deferred Compensation Agreement of
Registrant's Non-Affiliated Directors was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 4 on November 3, 1994.
(4) - Form of Deferred Compensation Agreement of
Registrant's Non-Affiliated Directors, as approved
on December 5, 1995, was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996, and is
incorporated herein by reference.
(5) - Form of Deferred Compensation Agreement was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
g (1) - (a) Custodian Agreement, dated March 31, 1993,
between Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 1 on November 5,
1993, and was filed electronically as an Exhibit
to Post-Effective Amendment No. 7 on April 29,
1996, and is incorporated herein by reference.
- (b) Amendment No. 1, dated April 25, 1994, to
Custodian Agreement, dated March 31, 1993, between
Registrant and State Street Bank and Trust Company
was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on May 2, 1994, and
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (c) Amendment No. 2, dated September 19, 1995, to
Custodian Agreement, dated March 31, 1993, between
Registrant and State Street Bank and Trust Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (d) Amendment, dated September 9, 1998, to
Custodian Agreement, dated March 31, 1993, between
Registrant and State Street Bank and Trust Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
h (1) - Administrative Services Agreement, dated March 31,
1993, between the Registrant and A I M Advisors,
Inc. was filed as an Exhibit to Registrant's
Pre-Effective Amendment No. 1 on April 19, 1993.
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(2) - (a) Master Administrative Services Agreement,
dated October 18, 1993, between the Registrant and
A I M Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996.
- (b) Amendment No. 1, dated April 28, 1994, to
Master Administrative Services Agreement, dated
October 18, 1993, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 3 on May
2, 1994, and was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 7 on April 29, 1996.
(3) - Master Administrative Services Agreement, dated
February 28, 1997, between Registrant and A I M
Advisors, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997.
(4) - (a) Master Administrative Services Agreement, as
amended, dated May 1, 1998, between Registrant and
A I M Advisors, Inc. was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 10 on October 2, 1998, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated December 14, 1998, to
Master Administrative Services Agreement, as
amended, dated May 1, 1998, between Registrant and
A I M Advisors, Inc. was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999, and is
incorporated herein by reference.
- (c) Amendment No. 2, dated September 24, 1999, to
Master Administrative Services Agreement, as
amended, dated May 1, 1998, between Registrant and
A I M Advisors, Inc. was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 23, 1999, and is
incorporated herein by reference.
- (d) Amendment No. 3, dated November 15, 1999 to
Master Administrative Services Agreement, as
amended, May 1, 1998, between Registrant and
A I M Advisors, Inc. was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 15 on February 16, 2000, and is
incorporated herein by reference.
- (e) Amendment No. 4, dated December 29, 1999, to
Master Administrative Services Agreement, as
amended, dated May 1, 1998, between Registrant and
A I M Advisors, Inc. was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 15 on February 16, 2000, and is
incorporated herein by reference.
(5) - (a) Transfer Agency Agreement, dated March 19,
1993, between Registrant and State Street Bank and
Trust Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 1 on
November 5, 1993, and was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated April 25, 1994, to
Transfer Agency Agreement, dated March 19, 1993,
between Registrant and State Street Bank and Trust
Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 3 on May 2, 1994, and
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
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(6) - Participation Agreement, dated February 25, 1993,
between Registrant, Connecticut General Life
Insurance Company and A I M Distributors, Inc. was
filed as an Exhibit to Registrant's Pre-Effective
Amendment No. 1 on April 19, 1993, and was filed
electronically as an Exhibit to Post-Effective
Amendment No. 7 on April 29, 1996, and is
incorporated herein by reference.
(7) - (a) Participation Agreement, dated February 10,
1995, between Registrant and Citicorp Life
Insurance Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 5 on
February 28, 1995, and was filed electronically as
an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated February 3, 1997, to
Participation Agreement dated February 10, 1995,
between Registrant and Citicorp Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on
February 13, 1998, and is incorporated herein by
reference.
(8) - (a) Participation Agreement, dated February 10,
1995, between Registrant and First Citicorp Life
Insurance Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 5 on
February 28, 1995 and was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated February 3, 1997, to
Participation Agreement, dated February 10, 1995,
between Registrant and First Citicorp Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
(9) - (a) Participation Agreement, dated December 19,
1995, between Registrant and Glenbrook Life and
Annuity Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 7 on April 29, 1996, and is incorporated
herein by reference.
- (a)(i) Side Letter Agreement, dated December 1,
1995, among Registrant and Glenbrook Life and
Annuity Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8, and
is incorporated herein by reference.
- (b) Amendment No. 1, dated November 7, 1997, to
Participation Agreement, dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (c) Amendment No. 2, dated September 2, 1997, to
Participation Agreement, dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity
Company was filed electronically as an
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Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
- (d) Amendment No. 3, dated January 26, 1998, to
Participation Agreement, dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (e) Amendment No. 4, dated May 1, 1998, to
Participation Agreement, dated December 19, 1995,
between Registrant and Glenbrook Life and Annuity
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (f) Amendment No. 5, dated January 12, 1999, to
the Participation Agreement, dated December 19,
1995, between Registrant and Glenbrook Life and
Annuity Insurance Company was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999, and is
hereby incorporated by reference.
(10) - Participation Agreement, dated March 4, 1996,
between Registrant and IDS Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 7 on
April 29, 1996.
(11) - (a) Participation Agreement, dated October 7,
1996, between Registrant and IDS Life Insurance
Company (supersedes and replaces Participation
Agreement dated March 4, 1996) was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 8 on April 23, 1997, and is incorporated
herein by reference.
- (a)(i) Side Letter Agreement, dated September 27,
1996, between Registrant, IDS Life Insurance
Company and IDS Life Insurance Company of New York
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on
February 13, 1998, and is incorporated herein by
reference.
- (b) Amendment 1, dated November 11, 1997, the
Participation Agreement, dated October 7, 1996,
between registrant and IDS Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on
February 18, 1999, and is incorporated herein by
reference.
(12) - (a) Participation Agreement, dated October 7,
1996, between Registrant and IDS Life Insurance
Company of New York was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997, and is incorporated herein by
reference.
(b) Amendment No. 1, dated November 11, 1997, to
the Participation Agreement, dated October 7, 1996
between registrant and IDS Life Insurance Company
of New York was filed electronically as an Exhibit
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to Registrant's Post-Effective Amendment No. 11 on
February 18, 1999, and is incorporated herein by
reference.
(13) - Participation Agreement, dated April 8, 1996,
between Registrant and Connecticut General Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 7 on April 29, 1996, and is incorporated
herein by reference.
(14) - (a) Participation Agreement, dated September 21,
1996, between Registrant and Pruco Life Insurance
Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 8 on April 23, 1997,
and is incorporated herein by reference.
- (b) Amendment No. 1, dated July 1, 1997, to
Participation Agreement, dated September 21, 1996,
between Registrant and Pruco Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on
February 13, 1998, and is incorporated herein by
reference.
- (c) Amendment No. 2, dated August 1, 1998, to
Participation Agreement, dated September 21, 1996,
between Registrant and Pruco Life Insurance
Company was filed as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
(15) - (a) Participation Agreement, dated October 1,
1996, between Registrant and Allstate Life
Insurance Company of New York was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 8 on April 23, 1997, and is incorporated
herein by reference.
- (a)(i) Side Letter Agreement, dated October 1,
1996, between Registrant and Allstate Life
Insurance Company of New York was filed as Exhibit
to Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated November 7, 1997, to
Participation Agreement, dated October 1, 1996,
between Registrant and Allstate Life Insurance
Company of New York was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 12 on
April 29, 1999, and is incorporated herein by
reference.
(16) - (a) Participation Agreement, dated December 18,
1996, between Registrant and Merrill Lynch Life
Insurance Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997 and is incorporated herein by
reference.
- (a)(i) Side Letter Agreement, dated December 18,
1996, between Registrant and Merrill, Lynch,
Pierce, Fenner & Smith, Incorporated was filed as
an Exhibit to Registrant's Post-Effective
Amendment No. 8 on April 23, 1997, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated May 1, 1997, to
Participation Agreement, dated December 18, 1996,
between Registrant and Merrill Lynch Life
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Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
(17) - (a) Participation Agreement, dated December 18,
1996, between Registrant and ML Life Insurance
Company of New York was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated May 1, 1997, to
Participation Agreement, dated December 18, 1996,
by and between Registrant and ML Life Insurance
Company of New York was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
(18) - Participation Agreement, dated February 14, 1997,
between Registrant and Pruco Life Insurance
Company of New Jersey was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 8 on
April 23, 1997, and is incorporated herein by
reference.
(19) - Participation Agreement, dated April 30, 1997,
between Registrant and Prudential Insurance
Company of America was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
(20) - Participation Agreement, dated October 30, 1997,
between Registrant and American Centurion Life
Assurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
(21) - (a) Participation Agreement, dated October 30,
1997, between Registrant and American Enterprise
Life Insurance Company was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 9 on February 13, 1998, and is
incorporated herein by reference.
- (a)(i) Letter Agreement, dated October 30, 1997,
between American Enterprise Life Insurance Company
and American Centurion Life Assurance Company was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
(22) - Participation Agreement, dated November 20, 1997,
between Registrant and AIG Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on
February 13, 1998, and is incorporated herein by
reference.
(23) - Participation Agreement, dated November 20, 1997,
between Registrant and American International Life
Assurance Company of New York was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
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(24) - (a) Participation Agreement, dated November 4,
1997, between Registrant and Nationwide Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
- (b) Amendment No. 1, dated June 15, 1998, to
Participation Agreement, dated November 4, 1997,
between Registrant and Nationwide Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
(25) - (a) Participation Agreement, dated December 3,
1997, between Registrant and Security Life of
Denver was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 9 on
February 13, 1998, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated June 23, 1998, to
Participation Agreement, dated December 3, 1997,
between Registrant and Security Life of Denver was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
- (c) Amendment No. 2, dated May 20, 1999, to the
Participation Agreement, dated December 3, 1997,
between Registrant and Security Life of Denver
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 13 on July 13, 1999 and is incorporated herein
by reference.
- (d) Amendment No. 3 dated November 1, 1999,
between Registrant and Security Life of Denver
Insurance was filed electronically as an Exhibit
to Registrant's Post-Effective Amendment No. 15 on
February 16, 2000 and is incorporated herein by
reference.
(26) - (a) Participation Agreement, dated December 31,
1997, between Registrant and Cova Financial
Services Life Insurance Company was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 9 on February 13,
1998, and is incorporated herein by reference.
- (b) Amendment No. 1 dated April 23, 1999, between
Registrant and Cova Financial Services Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 15 on February 16, 2000 and is incorporated
herein by reference.
(27) - (a) Participation Agreement, dated December 31,
1997, between Registrant and Cova Financial Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 9 on February 13, 1998, and is incorporated
herein by reference.
- (b) Amendment No. 1, dated April 23, 1999, to the
Participation Agreement, dated December 31, 1997,
between Registrant and Cova Financial Life
Insurance Company was filed electronically as an
Exhibit
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to Registrant's Post-Effective Amendment No. 13 on
July 13, 1999 and is incorporated herein by
reference.
(28) - (a) Participation Agreement, dated February 2,
1998, between Registrant and The Guardian
Insurance & Annuity Company, Inc. was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
- (b) Amendment No. 1, dated July 1, 1999, between
Registrant and The Guardian Life Insurance &
Annuity Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999, and is incorporated
herein by reference.
(29) - (a) Participation Agreement, dated February 17,
1998, between Registrant and Sun Life Assurance
Company of Canada (U.S.) was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 10 on October 2, 1998, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated December 11, 1998, to
the Participation Agreement, dated February 17,
1998, between Registrant and Sun Life Assurance
Company of Canada (U.S.) was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999, and is
incorporated herein by reference.
(30) - Participation Agreement, dated April 1, 1998,
between Registrant and United Life & Annuity
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 10 on October 2, 1998, and is incorporated
herein by reference.
(31) - (a) Participation Agreement, dated April 21, 1998,
between Registrant and Keyport Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated December 28, 1998, to
the Participation Agreement, dated April 21, 1998,
between Registrant and Keyport Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on
February 18, 1999, and is incorporated herein by
reference.
(32) - (a) Participation Agreement, dated May 1, 1998,
between Registrant and PFL Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (b) Amendment No. 1, dated June 30, 1998, to
Participation Agreement, dated May 1, 1998,
between Registrant and PFL Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
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- (c) Amendment No. 2, dated November 27, 1998, to
the Participation Agreement, dated May 1, 1998,
between Registrant and PFL Life Insurance Company
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on
February 18, 1999 and is incorporated herein by
reference.
(33) - Participation Agreement, dated May 1, 1998,
between Registrant and Fortis Benefits Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
(34) - (a) Participation Agreement, dated June 1, 1998,
between Registrant and American General Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 10 on October 2, 1998, and is incorporated
herein by reference.
- (b) Amendment No. 1, dated January 1, 1999, to the
Participation Agreement, dated June 1, 1998,
between Registrant and American General Life
Insurance Company was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 12 on
April 29, 1999, and is incorporated herein by
reference.
(35) - (a) Participation Agreement, dated June 16, 1998,
between Registrant and Lincoln National Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 10 on October 2, 1998, and is incorporated
herein by reference.
- (b) Amendment No. 1, dated November 20, 1998, to
the Participation Agreement, dated June 16, 1998,
between Registrant and Lincoln National Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999, and is incorporated
herein by reference.
(36) - Participation Agreement, dated June 30, 1998,
between Registrant and Aetna Life Insurance and
Annuity Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 10 on October 2, 1998, and is incorporated
herein by reference.
(37) - Participation Agreement, dated July 1, 1998,
between Registrant and The Union Central Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999, and is incorporated
herein by reference.
(38) - Participation Agreement, dated July 1, 1998,
between Registrant and United Investors Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999, and is incorporated
herein by reference.
(39) - Participation Agreement, dated July 2, 1998,
between Registrant and Hartford Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
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<PAGE> 269
(40) - (a) Participation Agreement, dated July 13, 1998,
between Registrant and Keyport Benefit Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 10 on October 2, 1998, and is incorporated
herein by reference.
- (b) Amendment No. 1, dated December 28, 1998 to
the Participation Agreement, dated July 13, 1998,
between Registrant and Keyport Benefit Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999 and is incorporated
herein by reference.
(41) - (a) Participation Agreement, dated July 27, 1998,
between Registrant and Allmerica Financial Life
Insurance and Annuity Company was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
- (b) Amendment No. 1, dated February 11, 2000 to
the Participation Agreement dated July 27, 1998
between Registrant and Allmerica Financial Life
Insurance and Annuity Company is hereby filed
electronically.
(42) - (a) Participation Agreement, dated July 27, 1998,
between Registrant and First Allmerica Financial
Life Insurance Company was filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 10 on October 2, 1998, and is
incorporated herein by reference.
- (b) Amendment No. 1, dated February 11, 2000, to
the Participation Agreement dated July 27, 1998
between Registrant and First Allmerica Financial
Life Insurance Company is hereby filed
electronically.
(43) - Participation Agreement, dated October 15, 1998,
between Registrant and Lincoln Life & Annuity
Insurance Company of New York was filed as an
Exhibit to Registrant's Post-Effective Amendment
No. 12 on April 29, 1999, and is incorporated
herein by reference.
(44) - (a) Participation Agreement, dated November 23,
1998, between Registrant and American General
Annuity Insurance Company was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is
incorporated herein by reference.
- (b) Amendment No. 1, dated July 1, 1999, to the
Participation Agreement, dated November 23, 1998,
between Registrant and American General Annuity
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and incorporated
herein by reference.
(45) - Participation Agreement, dated December 1, 1998,
between Registrant and the Prudential Insurance
Company of America was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 11 on February 18, 1999 and is incorporated
herein by reference.
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<PAGE> 270
(46) - Participation Agreement, dated February 1, 1999,
between Registrant and Sage Life Assurance of
America, Inc. was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 12 on
April 29, 1999, and is incorporated herein by
reference.
(47) - Participation Agreement, dated April 1, 1999,
between Registrant and Liberty Life Assurance
Company of Boston was filed as an Exhibit to
Registrant's Post-Effective Amendment No. 12 on
April 29, 1999, and is incorporated herein by
reference.
(48) - Participation Agreement, dated April 13, 1999,
between Registrant and Western-Southern Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 13 on July 13, 1999 and is incorporated herein
by reference.
(49) - Participation Agreement, dated May 1, 1999,
between Registrant and Columbus Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 13 on
July 13, 1999 and is incorporated herein by
reference.
(50) - Participation Agreement, dated April 26, 1999,
between Registrant and First Variable Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 13 on July 13, 1999 and is incorporated herein
by reference.
(51) - Participation Agreement, dated August 21, 1999,
between Registrant and Life Investors Insurance
Company of America was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and incorporated
herein by reference.
(52) - Participation Agreement, dated June 8, 1999,
between Registrant and The Principal Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 13 on July 13, 1999 and is incorporated herein
by reference.
(53) - Participation Agreement dated June 8, 1999,
between Registrant and Principal Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and is incorporated herein by
reference.
(54) - Participation Agreement, dated June 14, 1999,
between Registrant and Security First Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and is incorporated
herein by reference.
(55) - Participation Agreement, dated July 1, 1999,
between Registrant and Allstate Life Insurance
Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and is incorporated herein by
reference.
(56) - Participation Agreement, dated July 27, 1999,
between Registrant and Allianz Life Insurance
Company of North America was filed
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<PAGE> 271
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 14 on September 28,
1999 and is incorporated herein by reference.
(57) - Participation Agreement, dated July 27, 1999,
between Registrant and Preferred Life Insurance
Company of New York was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and is incorporated
herein by reference.
(58) - Participation Agreement dated August 31, 1999,
between Registrant and John Hancock Mutual Life
Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and is incorporated
herein by reference.
(59) - Participation Agreement, dated August 31, 1999,
between Registrant and The United States Life
Insurance Company in the City of New York was
filed electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 14 on September 28,
1999 and is incorporated herein by reference.
(60) - Participation Agreement, dated November 1, 1999,
between Registrant and AETNA Insurance Company of
America was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 15 on
February 16, 2000, and is incorporated herein by
reference.
(61) - Participation Agreement, dated January 28, 2000,
between Registrant and Northbrook Life Insurance
Company is hereby filed electronically.
(62) - Accounting Services Agreement, dated March 31,
1993, between the Registrant and State Street Bank
and Trust Company was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993, and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on April
29, 1996.
(63) - Agreement and Plan of Reorganization, dated
December 7, 1999, between Registrant and AIM
Variable Insurance Funds was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 15 on
February 16, 2000, and is hereby incorporated by
reference.
i (1) - (a) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding the AIM V.I. Capital
Appreciation Fund, the AIM V.I. Diversified Income
Fund, the AIM V.I. Government Securities Fund, the
AIM V.I. Growth Fund, the AIM V.I. International
Equity Fund, the AIM V.I. Money Market Fund and
the AIM V.I. Value Fund was filed as an Exhibit to
Registrant's Pre-Effective Amendment No. 1 on
April 19, 1993 and is incorporated herein by
reference.
- (b) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding the AIM V.I. Growth and
Income Fund and the AIM V.I. Utilities Fund
(presently the AIM V.I. Global Utilities Fund) was
filed as an Exhibit to Registrant's Post-Effective
Amendment No. 4 on November 3, 1994 and is
incorporated herein by reference.
- (c) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding the AIM V.I. Global
Utilities Fund name change was filed as an Exhibit
to Registrant's Post-Effective Amendment No. 6 on
April 26, 1995 and is incorporated herein by
reference.
C-16
<PAGE> 272
- (d) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding AIM V.I. Aggressive
Growth Fund, AIM V.I. Balanced Fund, AIM V.I.
Capital Development Fund and AIM V.I. High Yield
Fund was filed as an Exhibit to Registrant's
Post-Effective Agreement No. 9 on February 13,
1998 and is incorporated herein by reference.
- (e) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding AIM V.I. Global Growth
and Income Fund and AIM V.I. Telecommunications
Fund was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 10 on
October 2, 1998, and is incorporated herein by
reference.
- (f) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding AIM V.I. Blue Chip Fund
was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 13 on
July 13, 1999 and is incorporated herein by
reference.
- (g) Opinion and Consent of Messrs. Freedman, Levy,
Kroll & Simonds regarding AIM V.I. Dent
Demographic Trends Fund was filed electronically
as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and is
incorporated herein by reference.
- (h) Opinion and Consent of Messrs. Freedman,
Levy, Kroll & Simonds is hereby filed
electronically.
(2) - Consent of Messrs. Tait, Weller & Baker is hereby
filed electronically.
j - Other Opinions, Appraisals or Rulings and Consents
- None.
k - Financial Statements omitted from Item 22 - None.
l (1) - (a) Agreements Concerning Initial Capitalization
of the AIM V.I. Capital Appreciation Fund, the AIM
V.I. Diversified Income Fund, the AIM V.I.
Government Securities Fund, the AIM V.I. Growth
Fund, the AIM V.I. International Equity Fund, the
AIM V.I. Money Market Fund, and the AIM V.I. Value
Fund were filed as an Exhibit to Registrant's
Post-Effective Amendment No. 1 on November 5,
1993, and were filed electronically as an Exhibit
to Registrant's Post-Effective Amendment No. 7 on
April 29, 1996, and are incorporated herein by
reference.
- (b) Agreements Concerning Initial Capitalization
of the AIM V.I. Growth and Income Fund and the AIM
V.I. Utilities Fund were filed as an Exhibit to
Registrant's Post-Effective Amendment No. 4 on
November 3, 1994, and were filed electronically as
an Exhibit to Registrant's Post-Effective
Amendment No. 7 on April 29, 1996, and are
incorporated herein by reference.
- (c) Agreement Concerning Initial Capitalization of
the AIM V.I. Aggressive Growth Fund, the AIM V.I.
Balanced Fund, the AIM V.I. Capital Development
Fund and the AIM V.I. High Yield Fund was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 10 on October 2,
1998, and is incorporated herein by reference.
C-17
<PAGE> 273
- (d) Agreement Concerning Initial Capitalization of
the AIM V.I. Blue Chip Fund was filed
electronically as an Exhibit to Registrant's
Post-Effective Amendment No. 14 on September 28,
1999 and is incorporated herein by reference.
- (e) Agreement Concerning Initial Capitalization of
the AIM V.I. Dent Demographic Trends Fund is
hereby electronically.
m - Registrant's Plan pursuant to Rule 12b-1 under the
1940 Act - None.
n - Multiple Class Plan (Rule 18f-3) - None.
o (1) - The AIM Management Group Code of Ethics adopted
May 1, 1981 and as amended August 17, 1999
relating to A I M Management Group Inc. and A I M
Advisors, Inc. was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and is incorporated
herein by reference.
(2) - Code of Ethics of Registrant effective as of
February 25, 1993 was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment
No. 14 on September 28, 1999 and is incorporated
herein by reference.
Item 24. Persons Controlled by or Under Common Control with Registrant
Provide a list or diagram of all persons directly or indirectly
controlled by or under common control with the Registrant. For any person
controlled by another person, disclose the percentage of voting securities owned
by the immediately controlling person or other basis of that person's control.
For each company, also provide the state or other sovereign power under the laws
of which the company is organized.
None.
Item 25. Indemnification
State the general effect of any contract, arrangements or statute under
which any director, officer, underwriter or affiliated person of the Registrant
is insured or indemnified against any liability incurred in their official
capacity, other than insurance provided by any director, officer, affiliated
person or underwriter for their own protection.
Under the terms of the Maryland General Corporation Law and the
Registrant's Charter and By-Laws, the Registrant may indemnify any person
who was or is a director, officer, employee or agent of the Registrant to
the maximum extent permitted by the Maryland General Corporation Law. The
specific terms of such indemnification are reflected in the Registrant's
Charter and By-Laws, which are incorporated herein as part of this
Registration Statement. No indemnification will be provided by the
Registrant to any director or officer of the Registrant for any liability
to the Registrant or shareholders to which such director or officer would
otherwise be subject by reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of duty.
In addition, under the terms of the agreements described in response to
Item 24(b) of this Part C, various third parties have agreed to indemnify
the registrant, its directors and
C-18
<PAGE> 274
officers, and, in some cases, its investment advisor and/or principal
underwriter, against certain liabilities that may arise in connection
with the performance of the agreements. The specific terms of such
indemnification are set out in the agreements, and are incorporated
herein by reference.
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons
of the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in such Act and is, therefore, unenforceable. In the event that
a claim for indemnification against such liabilities (other than the
payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense
of any action, suit or proceeding) is asserted by such director, officer
or controlling person in connection with the securities being registered
hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it
is against public policy as expressed in such Act and will be governed by
the final adjudication of such issue. Insurance coverage is provided
under a joint Mutual Fund & Investment Advisory Professional Directors &
Officers Liability Policy, issued by ICI Mutual Insurance Company, with a
$35,000,000 limit of liability.
Item 26. Business and Other Connections of Investment Advisor
Describe any other business, profession, vocation or employment of a
substantial nature that each investment advisor of the Registrant, and each
director, officer or partner of the advisor, is or has been engaged within the
last two fiscal years for his or her own account or in the capacity of director,
officer, employee, partner, or trustee.
The only employment of a substantial nature of the Advisor's directors
and officers is with the Advisor and its affiliated companies. Reference
is also made to the caption "Fund Management--The Advisor" of the
Prospectus which comprises Part A of this Registration Statement, and to
the discussion under the caption "Management" of the Statement of
Additional Information which comprises Part B of this Registration
Statement, and to Item 29(b) of this Part C of the Registration
Statement.
Item 27. Principal Underwriters
(a)State the name of each investment company (other than the Registrant)
for which each principal underwriter currently distributing the Registrant's
securities also acts as a principal underwriter, depositor, or investment
advisor.
AIM Advisor Funds, Inc.
AIM Equity Funds, Inc. (Retail Classes)
AIM Funds Group
AIM Growth Series
AIM International Funds, Inc.
AIM Investment Funds
AIM Investment Securities Funds (Retail Classes)
AIM Series Trust
AIM Special Opportunities Funds
AIM Summit Fund, Inc.
AIM Tax-Exempt Funds, Inc.
GT Global Floating Rate Fund, Inc. d/b/a AIM Floating Rate Fund
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<PAGE> 275
(b) Provide the information required by the following table for each
director, officer, or partner of each principal underwriter named in the
response to item 20:
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Charles T. Bauer Chairman & Trustee Chairman & Trustee
Michael J. Cemo President & Director None
Gary T. Crum Director Senior Vice President
Robert H. Graham Senior Vice President & Director President & Trustee
William G. Littlepage Senior Vice President & Director None
James L. Salners Executive Vice President None
John Caldwell Senior Vice President None
Gordon J. Sprague Senior Vice President None
Michael C. Vessels Senior Vice President None
Marilyn M. Miller Senior Vice President None
Gene L. Needles Senior Vice President None
B. J. Thompson First Vice President None
Ofelia M. Mayo Vice President, General Counsel Assistant Secretary
& Assistant Secretary
James R. Anderson Vice President None
Dawn M. Hawley Vice President & Treasurer None
Mary K. Coleman Vice President None
Mary A. Corcoran Vice President None
Melville B. Cox Vice President & Chief Compliance Officer Vice President
Sidney M. Dilgren Vice President None
Tony D. Green Vice President None
Charles H. McLaughlin Vice President None
</TABLE>
- --------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-20
<PAGE> 276
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Terri L. Ransdell Vice President None
Carol F. Relihan Vice President Senior Vice President &
Secretary
Kamala C. Sachidanandan Vice President None
Frank V. Serebrin Vice President None
Christopher T. Simutis Vice President None
Gary K. Wendler Vice President None
Kathleen J. Pflueger Secretary Assistant Secretary
David E. Hessel Assistant Vice President, None
Assistant Treasurer & Controller
Luke P. Beausoleil Assistant Vice President None
Shelia R. Brown Assistant Vice President None
Scott E. Burman Assistant Vice President None
Tisha B. Christopher Assistant Vice President None
Glenda A. Dayton Vice President None
Mary E. Gentempo Assistant Vice President None
Simon R. Hoyle Assistant Vice President None
Kathryn A. Jordon Assistant Vice President None
Kim T. McAuliffe Assistant Vice President None
Ivy B. McLemore Vice President None
David B. O'Neil Assistant Vice President None
Rebecca Starling-Klatt Assistant Vice President None
Nicholas D. White Assistant Vice President None
Norman W. Woodson Vice President None
</TABLE>
- --------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-21
<PAGE> 277
<TABLE>
<CAPTION>
Name and Principal Position and Offices Position and Offices
Business Address* with Principal Underwriter with Registrant
- ---------------- -------------------------- ---------------
<S> <C> <C>
Nancy L. Martin Assistant General Counsel & Assistant Secretary
Assistant Secretary
Samuel D. Sirko Assistant General Counsel & Assistant Secretary
Assistant Secretary
P. Michelle Grace Assistant Secretary Assistant Secretary
Lisa A. Moss Assistant Secretary Assistant Secretary
Stephen I. Winer Assistant Secretary Assistant Secretary
</TABLE>
(c) Not Applicable
Item 28. Location of Accounts and Records
State the name and address of each person maintaining physical possession
of each account, book, or other document required to be maintained by section
31(a) [15 U.S.C. 80a-30(a)] and the rules under that section.
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas
77046-1173, will maintain physical possession of each such account, book
or other document of the Registrant at its principal executive offices,
except for those maintained by the Registrant's Custodian and Transfer
Agent State Street Bank and Trust Company, 225 Franklin Street, Boston,
Massachusetts 02110.
Item 29. Management Services
Provide a summary of the substantive provisions of any management-related
service contract not discussed in Part A or B, disclosing the parties to the
contract and the total amount paid and by whom for the Registrant's last three
fiscal years.
Not Applicable
- --------
* 11 Greenway Plaza, Suite 100, Houston, Texas 77046
C-22
<PAGE> 278
Item 30. Undertakings
In initial registration statements filed under the Securities Act,
provide an undertaking to file an amendment to the registration statement
with certified financial statements showing the initial capital received
before accepting subscriptions from more than 25 persons if the
Registrant intends to raise its initial capital under section 14(a)(3)
[15 U.S.C. 80a-14(a)(3)].
Not Applicable
C-23
<PAGE> 279
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Amendment
to its Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the city of Houston, Texas on the 17th day of
February, 2000.
REGISTRANT: AIM VARIABLE INSURANCE FUNDS
By: /s/ ROBERT H. GRAHAM
---------------------------------
Robert H. Graham, President
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to the Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated:
SIGNATURES TITLE DATE
---------- ----- ----
/s/ CHARLES T. BAUER Chairman & Trustee February 17, 2000
- --------------------------
(Charles T. Bauer)
/s/ ROBERT H. GRAHAM Trustee & President February 17, 2000
- -------------------------- (Principal Executive Officer)
(Robert H. Graham)
/s/ BRUCE L. CROCKETT Trustee February 17, 2000
- --------------------------
(Bruce L. Crockett)
/s/ OWEN DALY II Trustee February 17, 2000
- --------------------------
(Owen Daly II)
/s/ EDWARD K. DUNN, JR. Trustee February 17, 2000
- --------------------------
(Edward K. Dunn, Jr.)
/s/ JACK FIELDS Trustee February 17, 2000
- --------------------------
(Jack Fields)
/s/ CARL FRISCHLING Trustee February 17, 2000
- --------------------------
(Carl Frischling)
/s/ PREMA MATHAI-DAVIS Trustee February 17, 2000
- --------------------------
(Prema Mathai-Davis)
/s/ LEWIS F. PENNOCK Trustee February 17, 2000
- --------------------------
(Lewis F. Pennock)
/s/ LOUIS S. SKLAR Trustee February 17, 2000
- --------------------------
(Louis S. Sklar)
/s/ DANA R. SUTTON Vice President & February 17, 2000
- -------------------------- Treasurer (Principal Financial
(Dana R. Sutton) and Accounting Officer
<PAGE> 280
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<S> <C>
a(2) Agreement and Declaration of Trust of Registrant dated
December 6, 1999
b(3) By-Laws of Registrant dated effective December 8, 1999
h(41)(b) Amendment No. 1 to, dated February 11, 2000, between
Registrant and Allmerica Financial Life Insurance and
Annuity Company
h(42)(b) Amendment No. 1 to, dated February 11, 2000, between
Registrant and First Allmerica Financial Life Insurance
Company
h(61) Participation Agreement, dated January 28, 2000, between
Registrant and Northbrook Life Insurance Company
i(1)(h) Opinion and Consent of Messrs. Freedman, Levy, Kroll &
Simonds
i(2) Consent of Messrs. Tait, Weller & Baker
</TABLE>
<PAGE> 1
EXHIBIT a(2)
AGREEMENT AND DECLARATION OF TRUST
OF
AIM VARIABLE INSURANCE FUNDS
THIS AGREEMENT AND DECLARATION OF TRUST of AIM Variable Insurance Funds,
dated December 6, 1999, is among Charles T. Bauer and Robert H. Graham as
Trustees, and each person who becomes a Shareholder in accordance with the terms
hereinafter set forth.
NOW, THEREFORE, the Trustees do hereby declare that all money and
property contributed to the trust hereunder shall be held and managed in trust
under this Agreement for the benefit of the Shareholders as herein set forth
below.
ARTICLE I
NAME, DEFINITIONS, PURPOSE AND CERTIFICATE OF TRUST
Section 1.1. Name. The name of the business trust established hereby is
AIM Variable Insurance Funds, and the Trustees may transact the Trust's affairs
in that name. The Trust shall constitute a Delaware business trust in accordance
with the Delaware Act.
Section 1.2. Definitions. Whenever used herein, unless otherwise
required by the context or specifically provided:
(a) "Affiliated Person," "Company," "Person," and "Principal
Underwriter" shall have the meanings given them in the 1940 Act,
as modified by or interpreted by any applicable order or orders
of the Commission or any rules or regulations adopted or
interpretive releases of the Commission thereunder. The term
"Commission" shall have the meaning given it in the 1940 Act;
(b) "Agreement" means this Agreement and Declaration of Trust, as it
may be amended from time to time;
(c) "allocable" has the meaning specified in Section 2.5(d);
(d) "allocated" has the meaning specified in Section 2.5(d);
(e) "Bylaws" means the Bylaws referred to in Section 4.1(e), as from
time to time amended;
(f) "Class" means a portion of Shares of a Portfolio of the Trust
established in accordance with the provisions of Section 2.3(b);
(g) "Class Expenses" means expenses incurred by a particular Class
in connection with a shareholder services arrangement or a
distribution plan that is specific to such Class or any other
differing share of expenses or differing fees, in each case
pursuant to or to the extent permitted by Rule 18f-3 under the
1940 Act.
<PAGE> 2
(h) "Covered Persons" means a person who is or was a Trustee,
officer, employee or agent of the Trust, or is or was serving at
the request of the Trustees as a director, trustee, partner,
officer, employee or agent of a corporation, trust, partnership,
joint venture or other enterprise.
(i) The "Delaware Act" refers to the Delaware Business Trust Act, 12
Del. C. Section 3801 et seq., as such Act may be amended from
time to time;
(j) "Governing Instrument" means collectively this Agreement, the
Bylaws, all amendments to this Agreement and the Bylaws and
every resolution of the Trustees or any committee of the
Trustees that by its terms is incorporated by reference into
this Agreement or stated to constitute part of the Trust's
Governing Instrument or that is incorporated herein by Section
2.3 of this Agreement;
(k) "Majority Shareholder Vote" means "the vote of a majority of the
outstanding voting securities" (as defined in the 1940 Act) of
the Trust, Portfolio, or Class, as applicable;
(l) "Majority Trustee Vote" means the vote of a majority of the
Trustees.
(m) "New Class A Shares" has the meaning specified in Section
2.6(c);
(n) "New Class B Shares" has the meaning specified in Section
2.6(c);
(o) The "1940 Act" means the Investment Company Act of 1940, as
amended from time to time;
(p) "Outstanding Shares" means Shares shown on the books of the
Trust or its transfer agent as then issued and outstanding, and
includes Shares of one Portfolio that the Trust has purchased on
behalf of another Portfolio, but excludes Shares of a Portfolio
that the Trust has redeemed or repurchased;
(q) "Portfolio" means a series of Shares of the Trust established in
accordance with the provisions of Section 2.3(a);
(r) "Proportionate Interest" has the meaning specified in Section
2.5(d);
(s) "Purchasing Portfolio" has the meaning specified in Section
2.10;
(t) "Schedule A" has the meaning specified in Section 2.3(a);
(u) "Selling Portfolio" has the meaning specified in Section 2.10;
(v) "Shareholder" means a record owner of Outstanding Shares of the
Trust;
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(w) "Shares" means, as to a Portfolio or any Class thereof, the
equal proportionate transferable units of beneficial interest
into which the beneficial interest of such Portfolio of the
Trust or such Class thereof shall be divided and may include
fractions of Shares as well as whole Shares;
(x) The "Trust" means AIM Variable Insurance Funds, the Delaware
business trust established hereby, and reference to the Trust,
when applicable to one or more Portfolios, shall refer to each
such Portfolio;
(y) The "Trustees" means the Persons who have signed this Agreement
as trustees so long as they shall continue to serve as trustees
of the Trust in accordance with the terms hereof, and all other
Persons who may from time to time be duly appointed as Trustee
in accordance with the provisions of Section 3.4, or elected as
Trustee by the Shareholders, and reference herein to a Trustee
or to the Trustees shall refer to such Persons in their capacity
as Trustees hereunder; and
(z) "Trust Property" means any and all property, real or personal,
tangible or intangible, which is owned or held by or for the
account of the Trust or any Portfolio, or by the Trustees on
behalf of the Trust.
Section 1.3. Purpose. The purpose of the Trust is to conduct, operate
and carry on the business of an open-end management investment company
registered under the 1940 Act through one or more Portfolios investing primarily
in securities and to carry on such other business as the Trustees may from time
to time determine pursuant to their authority under this Agreement.
Section 1.4. Certificate of Trust. Immediately upon the execution of
this Agreement, the Trustees shall file a Certificate of Trust with respect to
the Trust in the Office of the Secretary of State of the State of Delaware
pursuant to the Delaware Act.
ARTICLE II
BENEFICIAL INTEREST
Section 2.1. Shares of Beneficial Interest. The beneficial interest in
the Trust shall be divided into an unlimited number of Shares, with par value of
$0.001 per Share. The Trustees may, from time to time, (a) authorize the
division of the Shares into one or more series, each of which constitutes a
Portfolio, and (b) may further authorize the division of the Shares of any
Portfolio into one or more separate and distinct Classes. All Shares issued
hereunder, including without limitation, Shares issued in connection with a
dividend or other distribution in Shares or a split or reverse split of Shares,
shall be fully paid and nonassessable.
Section 2.2. Issuance of Shares. The Trustees in their discretion may,
from time to time, without vote of the Shareholders, issue Shares, in addition
to the then issued and Outstanding Shares, to such party or parties and for such
amount and type of consideration, subject to applicable law, including cash or
securities, at such time or times and on such terms as the Trustees may deem
appropriate, and may in such manner acquire other assets (including the
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acquisition of assets subject to, and in connection with, the assumption of
liabilities) and businesses. In connection with any issuance of Shares, the
Trustees may issue fractional Shares. The Trustees may from time to time divide
or combine the Shares into a greater or lesser number without thereby changing
the proportionate beneficial interests in the Trust. Contributions to the Trust
may be accepted for, and Shares shall be redeemed as, whole Shares and/or
1/1,000th of a Share or integral multiples thereof.
Section 2.3. Establishment of Portfolios and Classes.
(a) The Trust shall consist of one or more separate and distinct
Portfolios, each with an unlimited number of Shares unless
otherwise specified. The Trustees hereby establish and designate
the Portfolios listed on Schedule A attached hereto and made a
part hereof ("Schedule A"). Each additional Portfolio shall be
established by the adoption of a resolution by the Trustees.
Each such resolution is hereby incorporated herein by this
reference and made a part of the Trust's Governing Instrument
whether or not expressly stated in such resolution, and shall be
effective upon the occurrence of both (i) the date stated
therein (or, if no such date is stated, upon the date of such
adoption) and (ii) the execution of an amendment either to this
Agreement or to Schedule A hereto establishing and designating
such additional Portfolio or Portfolios. The Shares of each
Portfolio shall have the relative rights and preferences
provided for herein and such rights and preferences as may be
designated by the Trustees in any amendment or modification to
the Trust's Governing Instrument. The Trust shall maintain
separate and distinct records of each Portfolio and shall hold
and account for the assets belonging thereto separately from the
other Trust Property and the assets belonging to any other
Portfolio. Each Share of a Portfolio shall represent an equal
beneficial interest in the net assets belonging to that
Portfolio, except to the extent of Class Expenses and other
expenses separately allocated to Classes thereof (if any Classes
have been established) as permitted herein.
(b) The Trustees may establish one or more Classes of Shares of any
Portfolio, each with an unlimited number of Shares unless
otherwise specified. Each Class so established and designated
shall represent a Proportionate Interest (as defined in Section
2.5(d)) in the net assets belonging to that Portfolio and shall
have identical voting, dividend, liquidation, and other rights
and be subject to the same terms and conditions, except that (1)
Class Expenses allocated to a Class for which such expenses were
incurred shall be borne solely by that Class, (2) other
expenses, costs, charges, and reserves allocated to a Class in
accordance with Section 2.5(e) may be borne solely by that
Class, (3) dividends declared and payable to a Class pursuant to
Section 7.1 shall reflect the items separately allocated thereto
pursuant to the preceding clauses, (4) each Class may have
separate rights to convert to another Class, exchange rights,
and similar rights, each as determined by the Trustees, and (5)
subject to Section 2.6(c), each Class may have exclusive voting
rights with respect to matters affecting only that Class. The
Trustees hereby establish for each Portfolio listed on Schedule
A the Classes listed thereon. Each additional Class for any or
all Portfolios shall be established
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by the adoption of a resolution by the Trustees, each of which
is hereby incorporated herein by this reference and made a
Governing Instrument whether or not expressly stated in such
resolution, and shall be effective upon the occurrence of both
(i) the date stated therein (or, if no such date is stated, upon
the date of such adoption) and (ii) the execution of an
amendment to this Agreement establishing and designating such
additional Class or Classes.
Section 2.4. Actions Affecting Portfolios and Classes. Subject to the
right of Shareholders, if any, to vote pursuant to Section 6.1, the Trustees
shall have full power and authority, in their sole discretion without obtaining
any prior authorization or vote of the Shareholders of any Portfolio, or Class
thereof, to establish and designate and to change in any manner any Portfolio of
Shares, or any Class or Classes thereof; to fix or change such preferences,
voting powers, rights, and privileges of any Portfolio, or Classes thereof, as
the Trustees may from time to time determine, including any change that may
adversely affect a Shareholder; to divide or combine the Shares of any
Portfolio, or Classes thereof, into a greater or lesser number; to classify or
reclassify or convert any issued Shares of any Portfolio, or Classes thereof,
into one or more Portfolios or Classes of Shares of a Portfolio; and to take
such other action with respect to the Shares as the Trustees may deem desirable.
A Portfolio and any Class thereof may issue any number of Shares but need not
issue any Shares. At any time that there are no Outstanding Shares of any
particular Portfolio or Class previously established and designated, the
Trustees may abolish that Portfolio or Class and the establishment and
designation thereof.
Section 2.5. Relative Rights and Preferences. Unless the establishing
resolution or any other resolution adopted pursuant to Section 2.3 otherwise
provides, Shares of each Portfolio or Class thereof established hereunder shall
have the following relative rights and preferences:
(a) Except as set forth in paragraph (e) of this Section 2.5, each
Share of a Portfolio, regardless of Class, shall represent an
equal pro rata interest in the assets belonging to such
Portfolio and shall have identical voting, dividend, liquidation
and other rights, preferences, powers, restrictions,
limitations, qualifications and designations and terms and
conditions with each other Share of such Portfolio.
(b) Shareholders shall have no preemptive or other right to
subscribe to any additional Shares or other securities issued by
the Trust or the Trustees, whether of the same or other
Portfolio (or Class).
(c) All consideration received by the Trust for the issue or sale of
Shares of a particular Portfolio, together with all assets in
which such consideration is invested or reinvested, all income,
earnings, profits, and proceeds thereof, including any proceeds
derived from the sale, exchange, or liquidation of such assets,
and any funds or payments derived from any reinvestment of such
proceeds in whatever form the same may be, shall be held and
accounted for separately from the other assets of the Trust and
of every other Portfolio and may be referred to herein as
"assets belonging to" that Portfolio. The assets belonging to a
particular Portfolio shall belong to that Portfolio for all
purposes, and to no
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other Portfolio, subject only to the rights of creditors of that
Portfolio. In addition, any assets, income, earnings, profits or
funds, or payments and proceeds with respect thereto, which are
not readily identifiable as belonging to any particular
Portfolio shall be allocated by the Trustees between and among
one or more of the Portfolios in such manner as the Trustees, in
their sole discretion, deem fair and equitable. Each such
allocation shall be conclusive and binding upon the Shareholders
of all Portfolios thereof for all purposes, and such assets,
income, earnings, profits, or funds, or payments and proceeds
with respect thereto shall be assets belonging to that
Portfolio.
(d) Each Class of a Portfolio shall have a proportionate undivided
interest (as determined by or at the direction of, or pursuant
to authority granted by, the Trustees, consistent with industry
practice) ("Proportionate Interest") in the net assets belonging
to that Portfolio. References herein to assets, expenses,
charges, costs, and reserves "allocable" or "allocated" to a
particular Class of a Portfolio shall mean the aggregate amount
of such item(s) of the Portfolio multiplied by the Class's
Proportionate Interest.
(e) A particular Portfolio shall be charged with the liabilities of
that Portfolio, and all expenses, costs, charges and reserves
attributable to any particular Portfolio shall be borne by such
Portfolio; provided that the Trustees may, in their sole
discretion, allocate or authorize the allocation of particular
expenses, costs, charges, and/or reserves of a Portfolio to
fewer than all the Classes thereof. Class Expenses shall, in all
cases, be allocated to the Class for which such Class Expenses
were incurred. Any general liabilities, expenses, costs, charges
or reserves of the Trust (or any Portfolio) that are not readily
identifiable as chargeable to or bearable by any particular
Portfolio (or any particular Class) shall be allocated and
charged by the Trustees between or among any one or more of the
Portfolios (or Classes) in such manner as the Trustees in their
sole discretion deem fair and equitable. Each such allocation
shall be conclusive and binding upon the Shareholders of all
Portfolios (or Classes) for all purposes. Without limitation of
the foregoing provisions of this Section 2.5(e), (i) the debts,
liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to a particular Portfolio
shall be enforceable against the assets of such Portfolio only,
and not against the assets of the Trust generally or assets
belonging to any other Portfolio, and (ii) none of the debts,
liabilities, obligations and expenses incurred, contracted for
or otherwise existing with respect to the Trust generally that
have not been allocated to a specified Portfolio, or with
respect to any other Portfolio, shall be enforceable against the
assets of such specified Portfolio. Notice of this contractual
limitation on inter-Portfolio liabilities shall be set forth in
the Trust's Certificate of Trust described to Section 1.4, and
upon the giving of such notice in the Certificate of Trust, the
statutory provisions of Section 3804 of the Delaware Act
relating to limitations on inter-Portfolio liabilities (and the
statutory effect under Section 3804 of setting forth such notice
in the Certificate of Trust) shall become applicable to the
Trust and each Portfolio.
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All references to Shares in this Agreement shall be deemed to be
shares of any or all Portfolios, or Classes thereof, as the context may require.
All provisions herein relating to the Trust shall apply equally to each
Portfolio of the Trust, and each Class thereof, except as the context otherwise
requires.
Section 2.6. Additional Rights and Preferences of Class B Shares. In
addition to the relative rights and preferences set forth in Section 2.5 and all
other provisions of this Agreement relating to Shares of the Trust generally,
any Class of any Portfolio designated as Class B Shares shall have the following
rights and preferences:
(a) Subject to the provisions of paragraph (c) below, all Class B
Shares other than those purchased through the reinvestment of
dividends and distributions shall automatically convert to Class
A Shares eight (8) years after the end of the calendar month in
which a Shareholder's order to purchase such shares was
accepted.
(b) Subject to the provisions of paragraph (c) below, Class B Shares
purchased through the reinvestment of dividends and
distributions paid in respect of Class B Shares will be
considered held in a separate sub-account, and will
automatically convert to Class A Shares in the same proportion
as any Class B Shares (other than those in the sub-account)
convert to Class A Shares. Other than this conversion feature,
the Class B Shares purchased through the reinvestment of
dividends and distributions paid in respect of Class B Shares
shall have all the rights and preferences, restrictions,
limitations as to dividends, qualifications and terms and
conditions of redemption of Class B Shares generally.
(c) If a Portfolio of the Trust implements any amendment to a Plan
of Distribution adopted under Rule 12b-1 promulgated under the
1940 Act (or adopts or implements a non-Rule 12b-1 shareholder
services plan that the Trustees have caused to be submitted to
the Shareholders for their approval) that the Trustees determine
would materially increase the charges that may be borne by the
Class A Shareholders under such plan, the Class B Shares will
stop converting to the Class A Shares unless the Class B Shares,
voting separately, approve the amendment or adoption. The
Trustees shall have sole discretion in determining whether such
amendment or adoption is submitted to a vote of the Class B
Shareholders. Should such amendment or adoption not be submitted
to a vote of the Class B Shareholders or, if submitted, should
the Class B Shareholders fail to approve such amendment or
adoption, the Trustees shall take such action as is necessary
to: (1) create a new class (the "New Class A Shares") which
shall be identical in all material respects to the Class A
Shares as they existed prior to the implementation of the
amendment or adoption; and (2) ensure that the existing Class B
Shares will be exchanged or converted into New Class A Shares no
later than the date such Class B Shares were scheduled to
convert to Class A Shares. If deemed advisable by the Trustees
to implement the foregoing, and at the sole discretion of the
Trustees, such action may include the exchange of all Class B
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Shares for a new class (the "New Class B Shares"), identical in
all material respects to the Class B Shares except that the New
Class B Shares will automatically convert into the New Class A
Shares. Such exchanges or conversions shall be effected in a
manner that the Trustees reasonably believe will not be subject
to federal taxation.
Section 2.7. Investment in the Trust. Investments may be accepted by the
Trust from such Persons, at such times, on such terms, and for such
consideration, which may consist of cash or tangible or intangible property or a
combination thereof, as the Trustees from time to time may authorize. At the
Trustees' sole discretion, such investments, subject to applicable law, may be
in the form of cash or securities in which the affected Portfolio is authorized
to invest, valued as provided in applicable law. Each such investment shall be
credited to the individual Shareholder's account in the form of full and
fractional Shares of the Trust, in such Portfolio (or Class) as the Shareholder
shall select.
Section 2.8. Personal Liability of Shareholders. As provided by
applicable law, no Shareholder of the Trust shall be personally liable for the
debts, liabilities, obligations and expenses incurred by, contracted for, or
otherwise existing with respect to, the Trust or any Portfolio (or Class)
thereof. Neither the Trust nor the Trustees, nor any officer, employee, or agent
of the Trust shall have any power to bind personally any Shareholder or, except
as provided herein or by applicable law, to call upon any Shareholder for the
payment of any sum of money or assessment whatsoever other than such as the
Shareholder may at any time personally agree to pay by way of subscription for
any Shares or otherwise. The Shareholders shall be entitled, to the fullest
extent permitted by applicable law, to the same limitation of personal liability
as is extended under the Delaware General Corporation Law to stockholders of
private corporations for profit. Every note, bond, contract or other undertaking
issued by or on behalf of the Trust or the Trustees relating to the Trust or to
any Portfolio shall include a recitation limiting the obligation represented
thereby to the Trust and its assets or to one or more Portfolios and the assets
belonging thereto (but the omission of such a recitation shall not operate to
bind any Shareholder or Trustee of the Trust).
Section 2.9. Assent to Agreement. Every Shareholder, by virtue of having
purchased a Share, shall be held to have expressly assented to, and agreed to be
bound by, the terms hereof. The death of a Shareholder during the continuance of
the Trust shall not operate to terminate the same nor entitle the representative
of any deceased Shareholder to an accounting or to take any action in court or
elsewhere against the Trust or the Trustees, but only to rights of said decedent
under this Trust.
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Section 2.10. Purchases of Shares Among Portfolios. The Trust may
purchase, on behalf of any Portfolio (the "Purchasing Portfolio"), Shares of
another Portfolio (the "Selling Portfolio") or any Class thereof. Shares of the
Selling Portfolio so purchased on behalf of the Purchasing Portfolio shall be
Outstanding Shares, and shall have all preferences, voting powers, rights and
privileges established for such Shares.
ARTICLE III
THE TRUSTEES
Section 3.1. Management of the Trust. The Trustees shall have exclusive
and absolute control over the Trust Property and over the business of the Trust
to the same extent as if the Trustees were the sole owners of the Trust Property
and business in their own right, but with such powers of delegation as may be
permitted by this Agreement. The Trustees shall have power to conduct the
business of the Trust and carry on its operations in any and all of its branches
and maintain offices both within and without the State of Delaware, in any and
all states of the United States of America, in the District of Columbia, in any
and all commonwealths, territories, dependencies, colonies, or possessions of
the United States of America, and in any and all foreign jurisdictions and to do
all such other things and execute all such instruments as they deem necessary,
proper or desirable in order to promote the interests of the Trust although such
things are not herein specifically mentioned. Any determination as to what is in
the interests of the Trust made by the Trustees in good faith shall be
conclusive. In construing the provisions of this Agreement, the presumption
shall be in favor of a grant of power to the Trustees.
The enumeration of any specific power in this Agreement shall not
be construed as limiting the aforesaid power. The powers of the Trustees may be
exercised without order of or resort to any court or other authority.
Section 3.2. Trustees. The number of Trustees shall be such number as
shall be fixed from time to time by a majority of the Trustees; provided,
however, that the number of Trustees shall in no event be less than two (2) nor
more than fifteen (15). The initial Trustees are those first identified above.
Section 3.3. Terms of Office of Trustees. The Trustees shall hold office
during the lifetime of this Trust, and until its termination as herein provided;
except that (a) any Trustee may resign his trusteeship or may retire by written
instrument signed by him and delivered to the other Trustees, which shall take
effect upon such delivery or upon such later date as is specified therein; (b)
any Trustee may be removed at any time by written instrument, signed by at least
two-thirds of the number of Trustees prior to such removal, specifying the date
when such removal shall become effective; (c) any Trustee who has died, become
physically or mentally incapacitated by reason of disease or otherwise, or is
otherwise unable to serve, may be retired by written instrument signed by a
majority of the other Trustees, specifying the date of his retirement; and (d) a
Trustee may be removed at any meeting of the Shareholders by a vote of the
Shareholders owning at least two-thirds of the Outstanding Shares.
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Section 3.4. Vacancies and Appointment of Trustees. In case of the
declination to serve, death, resignation, retirement or removal of a Trustee, or
a Trustee is otherwise unable to serve, or an increase in the number of
Trustees, a vacancy shall occur. Whenever a vacancy in the Board of Trustees
shall occur, until such vacancy is filled, the other Trustees shall have all the
powers hereunder and the certification of the other Trustees of such vacancy
shall be conclusive. In the case of an existing vacancy, the remaining Trustees
may fill such vacancy by appointing such other person as they in their
discretion shall see fit, or may leave such vacancy unfilled or may reduce the
number of Trustees to not less than two (2) Trustees. Such appointment shall be
evidenced by a written instrument signed by a majority of the Trustees in office
or by resolution of the Trustees, duly adopted, which shall be recorded in the
minutes of a meeting of the Trustees, whereupon the appointment shall take
effect.
An appointment of a Trustee may be made by the Trustees then in
office in anticipation of a vacancy to occur by reason of retirement,
resignation, or removal of a Trustee, or an increase in number of Trustees
effective at a later date, provided that said appointment shall become effective
only at the time or after the expected vacancy occurs. As soon as any Trustee
appointed pursuant to this Section 3.4 or elected by the Shareholders shall have
accepted the Trust and agreed in writing to be bound by the terms of the
Agreement, the Trust estate shall vest in the new Trustee or Trustees, together
with the continuing Trustees, without any further act or conveyance, and he
shall be deemed a Trustee hereunder.
Section 3.5. Temporary Absence of Trustee. Any Trustee may, by power of
attorney, delegate his power for a period not exceeding six months at any one
time to any other Trustee or Trustees, provided that in no case shall less than
two Trustees personally exercise the other powers hereunder except as herein
otherwise expressly provided.
Section 3.6. Effect of Death, Resignation, etc. of a Trustee. The
declination to serve, death, resignation, retirement, removal, incapacity, or
inability of the Trustees, or any one of them, shall not operate to terminate
the Trust or to revoke any existing agency created pursuant to the terms of this
Trust Agreement.
Section 3.7. Ownership of Assets of the Trust. The assets of the Trust
and of each Portfolio thereof shall be held separate and apart from any assets
now or hereafter held in any capacity other than as Trustee hereunder by the
Trustees or any successor Trustees. Legal title in all of the assets of the
Trust and the right to conduct any business shall at all times be considered as
vested in the Trustees on behalf of the Trust, except that the Trustees may
cause legal title to any Trust Property to be held by, or in the name of the
Trust, or in the name of any Person as nominee. No Shareholder shall be deemed
to have a severable ownership in any individual asset of the Trust, or belonging
to any Portfolio, or allocable to any Class thereof, or any right of partition
or possession thereof, but each Shareholder shall have, except as otherwise
provided for herein, a proportionate undivided beneficial interest in the Trust
or in assets belonging to the Portfolio (or allocable to the Class) in which the
Shareholder holds Shares. The Shares shall be personal property giving only the
rights specifically set forth in this Agreement or the Delaware Act.
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ARTICLE IV
POWERS OF THE TRUSTEES
Section 4.1. Powers. The Trustees in all instances shall act as
principals, and are and shall be free from the control of the Shareholders. The
Trustees shall have full power and authority to do any and all acts and to make
and execute any and all contracts and instruments that they may consider
necessary or appropriate in connection with the management of the Trust. Without
limiting the foregoing and subject to any applicable limitation in this
Agreement or the Bylaws of the Trust, the Trustees shall have power and
authority:
(a) To invest and reinvest cash and other property, and to hold cash
or other property uninvested, without in any event being bound
or limited by any present or future law or custom in regard to
investments by Trustees, and to sell, exchange, lend, pledge,
mortgage, hypothecate, write options on and lease any or all of
the assets of the Trust;
(b) To operate as, and to carry on the business of, an investment
company, and to exercise all the powers necessary and
appropriate to the conduct of such operations;
(c) To borrow money and in this connection issue notes or other
evidence of indebtedness; to secure borrowings by mortgaging,
pledging or otherwise subjecting as security the Trust Property;
to endorse, guarantee, or undertake the performance of an
obligation or engagement of any other Person and to lend Trust
Property;
(d) To provide for the distribution of interests of the Trust either
through a principal underwriter in the manner hereafter provided
for or by the Trust itself, or both, or otherwise pursuant to a
plan of distribution of any kind;
(e) To adopt Bylaws not inconsistent with this Trust Agreement
providing for the conduct of the business of the Trust and to
amend and repeal them to the extent that they do not reserve
such right to the Shareholders; such Bylaws shall be deemed
incorporated and included in this Trust Agreement;
(f) To elect and remove such officers and appoint and terminate such
agents as they consider appropriate;
(g) To employ one or more banks, trust companies or companies that
are members of a national securities exchange or such other
domestic or foreign entities as custodians of any assets of the
Trust subject to any conditions set forth in this Agreement or
in the Bylaws;
(h) To retain one or more transfer agents and shareholder servicing
agents;
(i) To set record dates in the manner provided herein or in the
Bylaws;
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(j) To delegate such authority as they consider desirable to any
officers of the Trust and to any investment adviser, manager,
administrator, custodian, underwriter or other agent or
independent contractor;
(k) To sell or exchange any or all of the assets of the Trust,
subject to the right of Shareholders, if any, to vote on such
transaction pursuant to Section 6.1;
(l) To vote or give assent, or exercise any rights of ownership,
with respect to stock or other securities or property; and to
execute and deliver proxies and powers of attorney to such
person or persons as the Trustees shall deem proper, granting to
such person or persons such power and discretion with relation
to securities or property as the Trustee shall deem proper;
(m) To exercise powers and rights of subscription or otherwise which
in any manner arise out of ownership of securities;
(n) To hold any security or property in a form not indicating any
trust, whether in bearer, book entry, unregistered or other
negotiable form; or either in the name of the Trust or of a
Portfolio or a custodian or a nominee or nominees, subject in
either case to proper safeguards according to the usual practice
of Delaware business trusts or investment companies;
(o) To establish separate and distinct Portfolios with separately
defined investment objectives and policies and distinct
investment purposes in accordance with the provisions of Article
II hereof and to establish Classes of such Portfolios having
relative rights, powers and duties as they may provide
consistent with applicable law;
(p) Subject to the provisions of Section 3804 of the Delaware Act,
to allocate assets, liabilities and expenses of the Trust to a
particular Portfolio or to apportion the same between or among
two or more Portfolios, provided that any liabilities or
expenses incurred by a particular Portfolio shall be payable
solely out of the assets belonging to that Portfolio as provided
for in Article II hereof;
(q) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any
security of which is held in the Trust; to consent to any
contract, lease, mortgage, purchase, or sale of property by such
corporation or concern, and to pay calls or subscriptions with
respect to any security held in the Trust;
(r) To compromise, arbitrate, or otherwise adjust claims in favor of
or against the Trust or any matter in controversy including, but
not limited to, claims for taxes;
(s) To declare and pay dividends and make distributions of income
and of capital gains and capital to Shareholders in the manner
hereinafter provided;
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(t) To establish, from time to time, a minimum investment for
Shareholders in the Trust or in one or more Portfolios or
Classes, and to require the redemption of the Shares of any
Shareholder whose investment is less than such minimum upon
giving notice to such Shareholder;
(u) To establish one or more committees, to delegate any of the
powers of the Trustees to said committees and to adopt a
committee charter providing for such responsibilities,
membership (including Trustees, officers or other agents of the
Trust therein) and any other characteristics of said committees
as the Trustees may deem proper, each of which committees may
consist of less than the whole number of Trustees then in
office, and may be empowered to act for and bind the Trustees
and the Trust, as if the acts of such committee were the acts of
all the Trustees then in office;
(v) To interpret the investment policies, practices or limitations
of any Portfolios;
(w) To establish a registered office and have a registered agent in
the State of Delaware; and
(x) In general, to carry on any other business in connection with or
incidental to any of the foregoing powers, to do everything
necessary, suitable or proper for the accomplishment of any
purpose or the attainment of any object or the furtherance of
any power hereinbefore set forth, either alone or in association
with others, and to do every other act or thing incidental or
appurtenant to or growing out of or connected with the aforesaid
business or purposes, objects or powers.
The foregoing clauses shall be construed both as objects and
powers, and the foregoing enumeration of specific powers shall not be held to
limit or restrict in any manner the general powers of the Trustees. Any action
by one or more of the Trustees in their capacity as such hereunder shall be
deemed an action on behalf of the Trust or the applicable Portfolio, and not an
action in an individual capacity.
The Trustees shall not be limited to investing in obligations
maturing before the possible termination of the Trust.
No one dealing with the Trustees shall be under any obligation to
make any inquiry concerning the authority of the Trustees, or to see to the
application of any payments made or property transferred to the Trustees or upon
their order.
Section 4.2. Issuance and Repurchase of Shares. The Trustees shall have
the power to issue, sell, repurchase, redeem, retire, cancel, acquire, hold,
resell, reissue, dispose of, and otherwise deal in Shares and, subject to the
provisions set forth in Articles II and VII hereof, to apply to any such
repurchase, redemption, retirement, cancellation or acquisition of Shares any
funds or property of the Trust, or any assets belonging to the particular
Portfolio or any assets allocable to the particular Class, with respect to which
such Shares are issued.
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Section 4.3. Action by the Trustees. The Board of Trustees or any
committee thereof shall act by majority vote of those present at a meeting duly
called (including a meeting by telephonic or other electronic means, unless the
1940 Act requires that a particular action be taken only at a meeting of the
Trustees in person) at which a quorum required by the Bylaws is present or by
unanimous written consent of the Trustees or committee, as the case may be,
without a meeting, provided that the writing or writings are filed with the
minutes of proceedings of the Board or committee. Written consents or waivers of
the Trustees may be executed in one or more counterparts. Any written consent or
waiver may be provided and delivered to the Trust by any means by which notice
may be given to a Trustee. Subject to the requirements of the 1940 Act, the
Trustees by Majority Trustee Vote may delegate to any Trustee or Trustees
authority to approve particular matters or take particular actions on behalf of
the Trust.
Section 4.4. Principal Transactions. The Trustees may, on behalf of the
Trust, buy any securities from or sell any securities to, or lend any assets of
the Trust to, any Trustee or officer of the Trust or any firm of which any such
Trustee or officer is a member acting as principal, or have any such dealings
with any investment adviser, distributor, or transfer agent for the Trust or
with any Affiliated Person of such Person; and the Trust may employ any such
Person, or firm or Company in which such Person is an Affiliated Person, as
broker, legal counsel, registrar, investment adviser, distributor,
administrator, transfer agent, dividend disbursing agent, custodian, or in any
capacity upon customary terms, subject in all cases to applicable laws, rules,
and regulations and orders of regulatory authorities.
Section 4.5. Payment of Expenses by the Trust. The Trustees are
authorized to pay or cause to be paid out of the principal or income of the
Trust or any Portfolio, or partly out of the principal and partly out of income,
and to charge or allocate to, between or among such one or more of the
Portfolios (or Classes), as they deem fair, all expenses, fees, charges, taxes
and liabilities incurred or arising in connection with the Trust or Portfolio
(or Class), or in connection with the management thereof, including, but not
limited to, the Trustees' compensation and such expenses and charges for the
services of the Trust's officers, employees, investment adviser and manager,
administrator, principal underwriter, auditors, counsel, custodian, transfer
agent, Shareholder servicing agent, and such other agents or independent
contractors and such other expenses and charges as the Trustees may deem
necessary or proper to incur.
Section 4.6. Trustee Compensation. The Trustees as such shall be
entitled to reasonable compensation from the Trust. They may fix the amount of
their compensation. Nothing herein shall in any way prevent the employment of
any Trustee for advisory, management, administrative, legal, accounting,
investment banking, underwriting, brokerage, or investment dealer or other
services and the payment for the same by the Trust.
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ARTICLE V
INVESTMENT ADVISER, PRINCIPAL UNDERWRITER AND
TRANSFER AGENT
Section 5.1. Investment Adviser. The Trustees may in their discretion,
from time to time, enter into an investment advisory or management contract or
contracts with respect to the Trust or any Portfolio whereby the other party or
parties to such contract or contracts shall undertake to furnish the Trustees
with such management, investment advisory, statistical and research facilities
and services and such other facilities and services, if any, and all upon such
terms and conditions, as the Trustees may in their discretion determine.
The Trustees may authorize the investment adviser to employ, from
time to time, one or more sub-advisers to perform such of the acts and services
of the investment adviser, and upon such terms and conditions, as may be agreed
upon among the Trustees, the investment adviser and sub-adviser. Any references
in this Agreement to the investment adviser shall be deemed to include such
sub-advisers, unless the context otherwise requires.
Section 5.2. Other Service Contracts. The Trustees may authorize the
engagement of a principal underwriter, transfer agent, administrator, custodian,
and similar service providers.
Section 5.3. Parties to Contract. Any contract of the character
described in Sections 5.1 and 5.2 may be entered into with any corporation,
firm, partnership, trust or association, although one or more of the Trustees or
officers of the Trust may be an officer, director, trustee, shareholder, or
member of such other party to the contract.
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Section 5.4. Miscellaneous. The fact that (i) any of the Shareholders,
Trustees or officers of the Trust is a shareholder, director, officer, partner,
trustee, employee, manager, adviser, principal underwriter or distributor or
agent of or for any Company or of or for any parent or affiliate of any Company,
with which an advisory or administration contract, or principal underwriter's or
distributor's contract, or transfer, shareholder servicing, custodian or other
agency contract may have been or may hereafter be made, or that any such
Company, or any parent or affiliate thereof, is a Shareholder or has an interest
in the Trust, or that (ii) any Company with which an advisory or administration
contract or principal underwriter's or distributor's contract, or transfer,
shareholder servicing, custodian, or other agency contract may have been or may
hereafter be made also has an advisory or administration contract, or principal
underwriter's or distributor's contract, or transfer, shareholder servicing,
custodian or other agency contract with one or more other companies, or has
other business or interests shall not affect the validity of any such contract
or disqualify any Shareholder, Trustee or officer of the Trust from voting upon
or executing the same or create any liability or accountability to the Trust or
its Shareholders.
ARTICLE VI
SHAREHOLDERS' VOTING POWERS AND MEETING
Section 6.1. Voting Powers. The Shareholders shall have power to vote
only to: (i) elect Trustees, provided that a meeting of Shareholders has been
called for that purpose; (ii) remove Trustees, provided that a meeting of
Shareholders has been called for that purpose; (iii) approve the termination of
the Trust or any Portfolio or Class, provided that the Trustees have called a
meeting of the Shareholders for the purpose of approving any such termination,
unless, as of the date on which the Trustees have determined to so terminate the
Trust or such Portfolio or Class, there are fewer than 100 holders of record of
the Trust or of such terminating Portfolio or Class; (iv) approve the sale of
all or substantially all the assets of the Trust or any Portfolio or Class,
unless the primary purpose of such sale is to change the Trust's domicile or
form of organization or form of business trust; (v) approve the merger or
consolidation of the Trust or any Portfolio or Class with and into another
Company or with and into any Portfolio or Class of the Trust, unless (A) the
primary purpose of such merger or consolidation is to change the Trust's
domicile or form of organization or form of business trust, or (B) after giving
effect to such merger or consolidation, based on the number of Shares
outstanding as of a date selected by the Trustees, the Shareholders of the Trust
or such Portfolio or Class will have a majority of the outstanding shares of the
surviving Company or Portfolio or Class thereof, as the case may be; (vi)
approve any amendment to this Article VI, Section 6.1; and (vii) approve such
additional matters as may be required by law or as the Trustees, in their sole
discretion, shall determine.
Until Shares are issued, the Trustees may exercise all rights of
Shareholders and may take any action required or permitted by law, this Trust
Agreement or any of the Bylaws of the Trust to be taken by Shareholders.
On any matter submitted to a vote of the Shareholders, all Shares
shall be voted together, except when required by applicable law or when the
Trustees have determined that the matter affects the interests of one or more
Portfolios (or Classes), then only the Shareholders of all such affected
Portfolios (or Classes) shall be entitled to vote thereon. Each whole Share
shall
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be entitled to one vote as to any matter on which it is entitled to vote,
and each fractional Share shall be entitled to a proportionate fractional vote.
The vote necessary to approve any such matter shall be set forth in the Bylaws.
ARTICLE VII
DISTRIBUTIONS AND REDEMPTIONS
Section 7.1. Distributions. The Trustees may from time to time declare
and pay dividends and make other distributions with respect to any Portfolio, or
Class thereof, which may be from income, capital gains or capital. The amount of
such dividends or distributions and the payment of them and whether they are in
cash or any other Trust Property shall be wholly in the discretion of the
Trustees. Dividends and other distributions may be paid pursuant to a standing
resolution adopted once or more often as the Trustees determine. All dividends
and other distributions on Shares of a particular Portfolio or Class shall be
distributed pro rata to the Shareholders of that Portfolio or Class, as the case
may be, in proportion to the number of Shares of that Portfolio or Class they
held on the record date established for such payment, provided that such
dividends and other distributions on Shares of a Class shall appropriately
reflect Class Expenses and other expenses allocated to that Class. The Trustees
may adopt and offer to Shareholders such dividend reinvestment plans, cash
distribution payment plans, or similar plans as the Trustees deem appropriate.
Section 7.2. Redemptions. Any holder of record of Shares of a particular
Portfolio, or Class thereof, shall have the right to require the Trust to redeem
his Shares, or any portion thereof, subject to such terms and conditions as are
set forth in the registration statement of the Trust in effect from time to
time. The redemption price may in any case or cases be paid wholly or partly in
kind if the Trustees determine that such payment is advisable in the interest of
the remaining Shareholders of the Portfolio or Class thereof for which the
Shares are being redeemed. Subject to the foregoing, the fair value, selection
and quantity of securities or other property so paid or delivered as all or part
of the redemption price may be determined by or under authority of the Trustees.
In no case shall the Trust be liable for any delay of any Person in transferring
securities selected for delivery as all or part of any payment in kind.
Section 7.3. Redemption of Shares by Trustees. The Trustees may, at
their option, call for the redemption of the Shares of any Person or may refuse
to transfer or issue Shares to any Person to the extent that the same is
necessary to comply with applicable law or advisable to further the purposes for
which the Trust is formed. To the extent permitted by law, the Trustees may
retain the proceeds of any redemption of Shares required by them for payments of
amounts due and owing by a Shareholder to the Trust or any Portfolio.
Section 7.4. Redemption of De Minimis Accounts. If, at any time when a
request for transfer or redemption of Shares of any Portfolio is received by the
Trust or its agent, the value of the Shares of such Portfolio in a Shareholder's
account is less than Five Hundred Dollars ($500.00), or such greater amount as
the Trustees in their discretion shall have determined in accordance with
Section 4.1(t), after giving effect to such transfer or redemption and upon
giving thirty (30) days' notice to the Shareholder, the Trust may cause the
remaining Shares of such
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Portfolio in such Shareholder's account to be redeemed, subject to such terms
and conditions as are set forth in the registration statement of the Trust in
effect from time to time.
ARTICLE VIII
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 8.1. Limitation of Liability. A Trustee or officer, when acting
in such capacity, shall not be personally liable to any person for any act,
omission or obligation of the Trust or any Trustee or officer; provided,
however, that nothing contained herein or in the Delaware Act shall protect any
Trustee or officer against any liability to the Trust or to Shareholders to
which he would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the conduct of
his office with the Trust.
Section 8.2. Indemnification of Covered Persons. Every Covered Person
shall be indemnified by the Trust to the fullest extent permitted by the
Delaware Act, the Bylaws and other applicable law.
Section 8.3. Indemnification of Shareholders. In case any Shareholder or
former Shareholder of the Trust shall be held to be personally liable solely by
reason of his being or having been a Shareholder of the Trust or any Portfolio
or Class and not because of his acts or omissions or for some other reason, the
Shareholder or former Shareholder (or his heirs, executors, administrators or
other legal representatives, or, in the case of a corporation or other entity,
its corporate or general successor) shall be entitled, out of the assets
belonging to the applicable Portfolio, to be held harmless from and indemnified
against all loss and expense arising from such liability in accordance with the
Bylaws and applicable law. The Trust, on behalf of the affected Portfolio, shall
upon request by the Shareholder, assume the defense of any such claim made
against the Shareholder for any act or obligation of that Portfolio.
ARTICLE IX
MISCELLANEOUS
Section 9.1. Trust Not a Partnership; Taxation. It is hereby expressly
declared that a trust and not a partnership is created hereby. No Trustee
hereunder shall have any power to bind personally either the Trust's officers or
any Shareholder. All persons extending credit to, contracting with or having any
claim against the Trust or the Trustees shall look only to the assets of the
appropriate Portfolio or, until the Trustees shall have established any separate
Portfolio, of the Trust for payment under such credit, contract or claim; and
neither the Shareholders, the Trustees, nor the Trust's officers nor any of the
agents of the Trustees whether past, present or future, shall be personally
liable therefor.
It is intended that the Trust, or each Portfolio if there is more
than one Portfolio, be classified for income tax purposes as an association
taxable as a corporation, and the Trustees shall do all things that they, in
their sole discretion, determine are necessary to achieve that objective,
including (if they so determine), electing such classifications on Internal
Revenue
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Form 8832. The Trustees, in their sole discretion and without the vote or
consent of the Shareholders, may amend this Agreement to ensure that this
objective is achieved.
Section 9.2. Trustee's Good Faith Action, Expert Advice, No Bond or
Surety. The exercise by the Trustees of their powers and discretion hereunder in
good faith and with reasonable care under the circumstances then prevailing
shall be binding upon everyone interested. Subject to the provisions of Article
VIII and to Section 9.1, the Trustees shall not be liable for errors of judgment
or mistakes of fact or law. The Trustees may take advice of counsel or other
experts with respect to the meaning and operation of this Agreement, and subject
to the provisions of Article VIII and Section 9.1, shall be under no liability
for any act or omission in accordance with such advice or for failing to follow
such advice. The Trustees shall not be required to give any bond as such, nor
any surety if a bond is obtained.
Section 9.3. Termination of Trust or Portfolio or Class.
(a) Unless terminated as provided herein, the Trust shall continue
without limitation of time. The Trust may be terminated at any
time by the Trustees by written notice to the Shareholders,
subject to the right of Shareholders, if any, to vote pursuant
to Section 6.1. Any Portfolio or Class may be terminated at any
time by the Trustees by written notice to the Shareholders of
that Portfolio or Class, subject to the right of Shareholders,
if any, to vote pursuant to Section 6.1.
(b) On termination of the Trust or any Portfolio pursuant to
paragraph (a) above,
(1) the Trust or that Portfolio thereafter shall carry on no
business except for the purpose of winding up its affairs,
(2) the Trustees shall (i) proceed to wind up the affairs of
the Trust or that Portfolio, and all powers of the
Trustees under this Agreement with respect thereto shall
continue until such affairs have been wound up, including
the powers to fulfill or discharge the contracts of the
Trust or that Portfolio, (ii) collect its assets or the
assets belonging thereto, (iii) sell, convey, assign,
exchange, or otherwise dispose of all or any part of those
assets to one or more persons at public or private sale
for consideration that may consist in whole or in part of
cash, securities, or other property of any kind, (iv)
discharge or pay its liabilities, and (v) do all other
acts appropriate to liquidate its business, and
(3) after paying or adequately providing for the payment of
all liabilities, and upon receipt of such releases,
indemnities, and refunding agreements as they deem
necessary for their protection, the Trustees shall
distribute the remaining assets ratably among the
Shareholders of the Trust or that Portfolio.
(c) On termination of any Class pursuant to paragraph (a) above,
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(1) the Trust thereafter shall no longer issue Shares of that
Class,
(2) the Trustees shall do all other acts appropriate to
terminate the Class, and
(3) the Trustees shall distribute ratably among the
Shareholders of that Class, in cash or in kind, an amount
equal to the Proportionate Interest of that Class in the
net assets of the Portfolio (after taking into account any
Class Expenses or other fees, expenses, or charges
allocable thereto), and in connection with any such
distribution in cash the Trustees are authorized to sell,
convey, assign, exchange or otherwise dispose of such
assets of the Portfolio of which that Class is a part as
they deem necessary.
(d) On completion of distribution of the remaining assets pursuant
to paragraph (b)(3) above, the Trust or the affected Portfolio
shall terminate and the Trustees and the Trust shall be
discharged from all further liabilities and duties hereunder
with respect thereto and the rights and interests of all parties
therein shall be cancelled and discharged. On termination of the
Trust, following completion of winding up of its business, the
Trustees shall cause a Certificate of Cancellation of the
Trust's Certificate of Trust to be filed in accordance with the
Delaware Act, which Certificate may be signed by any one
Trustee.
Section 9.4. Sale of Assets; Merger and Consolidation. Subject to right
of Shareholders, if any, to vote pursuant to Section 6.1, the Trustees may cause
(i) the Trust or one or more of its Portfolios to the extent consistent with
applicable law to sell all or substantially all of its assets to, or be merged
into or consolidated with, another Portfolio, business trust (or series thereof)
or Company (or series thereof), (ii) the Shares of the Trust or any Portfolio
(or Class) to be converted into beneficial interests in another business trust
(or series thereof) created pursuant to this Section 9.4, (iii) the Shares of
any Class to be converted into another Class of the same Portfolio, or (iv) the
Shares to be exchanged under or pursuant to any state or federal statute to the
extent permitted by law. In all respects not governed by statute or applicable
law, the Trustees shall have power to prescribe the procedure necessary or
appropriate to accomplish a sale of assets, merger or consolidation including
the power to create one or more separate business trusts to which all or any
part of the assets, liabilities, profits or losses of the Trust may be
transferred and to provide for the conversion of Shares of the Trust or any
Portfolio (or Class) into beneficial interests in such separate business trust
or trusts (or series or class thereof).
Section 9.5. Filing of Copies, References, Headings. The original or a
copy of this Agreement or any amendment hereto or any supplemental agreement
shall be kept at the office of the Trust where it may be inspected by any
Shareholder. In this Agreement or in any such amendment or supplemental
agreement, references to this Agreement, and all expressions like "herein,"
"hereof," and "hereunder," shall be deemed to refer to this Agreement as amended
or affected by any such supplemental agreement. All expressions like "his,"
"he," and "him," shall be deemed to include the feminine and neuter, as well as
masculine, genders. Headings are placed herein for convenience of reference only
and in case of any conflict, the text of this Agreement, rather than the
headings, shall control. This Agreement may be executed in any number of
counterparts each of which shall be deemed an original.
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Section 9.6. Governing Law. The Trust and this Agreement, and the
rights, obligations and remedies of the Trustees and Shareholders hereunder, are
to be governed by and construed and administered according to the Delaware Act
and the other laws of the State of Delaware; provided, however, that there shall
not be applicable to the Trust, the Trustees, the Shareholders or this Trust
Agreement (a) the provisions of Section 3540 of Title 12 of the Delaware Code or
(b) any provisions of the laws (statutory or common) of the State of Delaware
(other than the Delaware Act) pertaining to trusts which relate to or regulate
(i) the filing with any court or governmental body or agency of trustee accounts
or schedules of trustee fees and charges, (ii) affirmative requirements to post
bonds for trustees, officers, agents or employees of a trust, (iii) the
necessity for obtaining court or other governmental approval concerning the
acquisition, holding or disposition of real or personal property, (iv) fees or
other sums payable to trustees, officers, agents or employees of a trust, (v)
the allocation of receipts and expenditures to income or principal, (vi)
restrictions or limitations on the permissible nature, amount or concentration
of trust investments or requirements relating to the titling, storage or other
manner of holding of trust assets, or (vii) the establishment of fiduciary or
other standards or responsibilities or limitations on the indemnification, acts
or powers of trustees or other Persons, which are inconsistent with the
limitations or liabilities or authorities and powers of the Trustees or officers
of the Trust set forth or referenced in this Agreement.
The Trust shall be of the type commonly called a "business
trust," and without limiting the provisions hereof, the Trust may exercise all
powers which are ordinarily exercised by such a trust under Delaware law. The
Trust specifically reserves the right to exercise any of the powers or
privileges afforded to trusts or actions that may be engaged in by trusts under
the Delaware Act, and the absence of a specific reference herein to any such
power, privilege or action shall not imply that the Trust may not exercise such
power or privilege or take such actions; provided, however, that the exercise of
any such power, privilege or action shall not otherwise violate applicable law.
Section 9.7. Amendments. Except as specifically provided in Section 6.1,
the Trustees may, without any Shareholder vote, amend this Agreement by making
an amendment to this Agreement or to Schedule A, an agreement supplemental
hereto, or an amended and restated trust instrument. Any such amendment, having
been approved by a Majority Trustee Vote, shall become effective, unless
otherwise provided by such Trustees, upon being executed by a duly authorized
officer of the Trust. Any amendment submitted to Shareholders that the Trustees
determine would affect the Shareholders of fewer than all Portfolios (or fewer
than all Classes thereof) shall be authorized by a vote of only the Shareholders
of the affected Portfolio(s) (or Class(es)), and no vote shall be required of
Shareholders of any Portfolio (or Class) that is not affected. Notwithstanding
anything else herein to the contrary, any amendment to Article VIII that would
have the effect of reducing the indemnification provided thereby to Covered
Persons or to Shareholders or former Shareholders, and any repeal or amendment
of this sentence shall each require the affirmative vote of Shareholders owning
at least two-thirds of the Outstanding Shares entitled to vote thereon. A
certification signed by a duly authorized officer of the Trust setting forth an
amendment to this Agreement and reciting that it was duly adopted by the
Shareholders or by the Trustees as aforesaid, or a copy of this Agreement, as
amended, executed
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by a majority of the Trustees, or a duly authorized officer of the Trust, shall
be conclusive evidence of such amendment when lodged among the records of the
Trust.
Section 9.8. Provisions in Conflict with Law. The provisions of this
Agreement are severable, and if the Trustees shall determine, with the advice of
counsel, that any of such provisions is in conflict with applicable law the
conflicting provision shall be deemed never to have constituted a part of this
Agreement; provided, however, that such determination shall not affect any of
the remaining provisions of this Agreement or render invalid or improper any
action taken or omitted prior to such determination. If any provision of this
Agreement shall be held invalid or enforceable in any jurisdiction, such
invalidity or unenforceability shall attach only to such provision in such
jurisdiction and shall not in any manner affect such provisions in any other
jurisdiction or any other provision of this Agreement in any jurisdiction.
Section 9.9. Shareholders' Right to Inspect Shareholder List. One or
more Persons who together and for at least six months have been Shareholders of
at least five percent (5%) of the Outstanding Shares of any Class may present to
any officer or resident agent of the Trust a written request for a list of its
Shareholders. Within twenty (20) days after such request is made, the Trust
shall prepare and have available on file at its principal office a list verified
under oath by one of its officers or its transfer agent or registrar which sets
forth the name and address of each Shareholder and the number of Shares of each
Portfolio and Class which the Shareholder holds. The rights provided for herein
shall not extend to any Person who is a beneficial owner but not also a record
owner of Shares of the Trust.
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IN WITNESS WHEREOF, the undersigned, being all of the Trustees of the
Trust, have executed this instrument this 6th day of December, 1999.
/s/ CHARLES T. BAUER
-----------------------------------
Charles T. Bauer
/s/ ROBERT H. GRAHAM
-----------------------------------
Robert H. Graham
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SCHEDULE A
AIM VARIABLE INSURANCE FUNDS
PORTFOLIOS THEREOF
PORTFOLIO
AIM V.I. Aggressive Growth Fund
AIM V.I. Balanced Fund
AIM V.I. Blue Chip Fund
AIM V.I. Capital Appreciation Fund
AIM V.I. Capital Development Fund
AIM V.I. Dent Demographic Trends Fund
AIM V.I. Diversified Income Fund
AIM V.I. Global Growth and Income Fund
AIM V.I. Global Utilities Fund
AIM V.I. Government Securities Fund
AIM V.I. Growth and Income Fund
AIM V.I. Growth Fund
AIM V.I. High Yield Fund
AIM V.I. International Equity Fund
AIM V.I. Money Market Fund
AIM V.I. Telecommunications Fund
AIM V.I. Value Fund
<PAGE> 1
EXHIBIT b(3)
BYLAWS OF AIM VARIABLE INSURANCE FUNDS,
A DELAWARE BUSINESS TRUST
Adopted effective December 8, 1999.
Capitalized terms not specifically defined herein
shall have the meanings ascribed to them in the Trust's
Agreement and Declaration of Trust (the "Agreement").
ARTICLE I
OFFICES
Section 1. Registered Office. The registered office of AIM Variable
Insurance Funds (the "Trust") shall be at the offices of The Corporation Trust
Company in the County of New Castle, State of Delaware.
Section 2. Other Offices. The Trust may also have offices at such
other places both within and without the State of Delaware as the Trustees may
from time to time determine or the business of the Trust may require.
ARTICLE II
TRUSTEES
Section 1. Meetings of the Trustees. The Trustees of the Trust may
hold meetings, both regular and special, either within or without the State of
Delaware. Meetings of the Trustees may be called orally or in writing by the
President of the Trust or by any two Trustees.
Section 2. Regular Meetings. Regular meetings of the Board of
Trustees shall be held each year, at such time and place as the Board of
Trustees may determine.
Section 3. Notice of Meetings. Notice of the time, date, and place of
all meetings of the Trustees shall be given to each Trustee (i) by telephone,
telex, telegram, facsimile, electronic-mail, or other electronic mechanism sent
to his or her home or business address at least twenty-four hours in advance of
the meeting or (ii) in person at another meeting of the Trustees or (iii) by
written notice mailed or sent via overnight courier to his or her home or
business address at least seventy-two hours in advance of the meeting. Notice
need not be given to any Trustee who attends the meeting without objecting to
the lack of notice or who signs a waiver of notice either before or after the
meeting.
Section 4. Quorum. At all meetings of the Trustees, one-third of the
Trustees then in office (but in no event less than two Trustees) shall
constitute a quorum for the transaction of business and the act of a majority
of the Trustees present at any meeting at which there is a quorum shall be the
act of the Board of Trustees, except as may be otherwise specifically
<PAGE> 2
provided by applicable law or by the Agreement or these Bylaws. If a quorum
shall not be present at any meeting of the Board of Trustees, the Trustees
present thereat may adjourn the meeting from time to time, without notice other
than announcement at the meeting, until a quorum shall be present.
Section 5. Designation, Powers, and Names of Committees.
-------------------------------------------------------
(a) The Board of Trustees shall initially have the
following three committees: (1) an Audit Committee; (2) a Nominating and
Compensation Committee; and (3) an Investments Committee. Each such Committee
shall consist of two or more of the Trustees of the Trust and the Board may
designate one or more Trustees as alternate members of any Committee, who may
replace any absent or disqualified member at any meeting of such Committee;
provided, however, that under no circumstances shall a member of the Audit
Committee or the Nominating and Compensation Committee be an "interested
person," as such term is defined in the 1940 Act, of the Trust. The Board shall
designate the powers and duties of each such Committee and may terminate any
such Committee by an amendment to these Bylaws.
(b) The Board of Trustees may, by resolution passed by a
majority of the whole Board, designate one or more additional committees, each
committee to consist of two or more of the Trustees of the Trust. The Board may
designate one or more Trustees as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of such committee.
Each committee, to the extent provided in the resolution, shall have and may
exercise the powers of the Board of Trustees in the management of the business
and affairs of the Trust; provided, however, that in the absence or
disqualification of any member of such committee or committees, the member or
members thereof present at any meeting and not disqualified from voting,
whether or not such members constitute a quorum, may unanimously appoint
another member of the Board of Trustees to act at the meeting in the place of
any such absent or disqualified member. Such committee or committees shall have
such name or names as may be determined from time to time by resolution adopted
by the Board of Trustees.
Section 6. Minutes of Committee. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Trustees when
required.
ARTICLE III
OFFICERS
Section 1. Executive Officers. The initial executive officers of the
Trust shall be elected by the Board of Trustees as soon as practicable after
the organization of the Trust. The executive officers may include a Chairman of
the Board, and shall include a President, one or more Vice Presidents (the
number thereof to be determined by the Board of Trustees), a Secretary and a
Treasurer. The Chairman of the Board, if any, shall be selected from among the
Trustees. The Board of Trustees may also in its discretion appoint Assistant
Vice Presidents,
2
<PAGE> 3
Assistant Secretaries, Assistant Treasurers, and other officers, agents and
employees, who shall have such authority and perform such duties as the Board
may determine. The Board of Trustees may fill any vacancy which may occur in
any office. Any two offices, except for those of President and Vice President,
may be held by the same person, but no officer shall execute, acknowledge or
verify any instrument on behalf of the Trust in more than one capacity, if such
instrument is required by law or by these Bylaws to be executed, acknowledged
or verified by two or more officers.
Section 2. Term of Office. Unless otherwise specifically determined
by the Board of Trustees, the officers shall serve at the pleasure of the Board
of Trustees. If the Board of Trustees in its judgment finds that the best
interests of the Trust will be served, the Board of Trustees may remove any
officer of the Trust at any time with or without cause. The Trustees may
delegate this power to the President (without supervision by the Trustees) with
respect to any other officer. Such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Any officer may resign from
office at any time by delivering a written resignation to the Trustees or the
President. Unless otherwise specified therein, such resignation shall take
effect upon delivery.
Section 3. President. The President shall be the chief executive
officer of the Trust and, subject to the Board of Trustees, shall generally
manage the business and affairs of the Trust. If there is no Chairman of the
Board, or if the Chairman of the Board has been appointed but is absent, the
President shall, if present, preside at all meetings of the Shareholders and
the Board of Trustees.
Section 4. Chairman of the Board. The Chairman of the Board, if any,
shall preside at all meetings of the Shareholders and the Board of Trustees, if
the Chairman of the Board is present. The Chairman of the Board shall have such
other powers and duties as shall be determined by the Board of Trustees, and
shall undertake such other assignments as may be requested by the President.
Section 5. Chairman, Vice Presidents. The Chairman of the Board or
one or more Vice Presidents shall have and exercise such powers and duties of
the President in the absence or inability to act of the President, as may be
assigned to them, respectively, by the Board of Trustees or, to the extent not
so assigned, by the President. In the absence or inability to act of the
President, the powers and duties of the President not otherwise assigned by the
Board of Trustees or the President shall devolve upon the Chairman of the
Board, or in the Chairman's absence, the Vice Presidents in the order of their
election.
Section 6. Secretary. The Secretary shall (a) have custody of the
seal of the Trust; (b) attend meetings of the Shareholders, the Board of
Trustees, and any committees of Trustees and keep the minutes of such meetings
of Shareholders, the Board of Trustees and any committees thereof, and (c)
issue all notices of the Trust. The Secretary shall have charge of the
Shareholder records and such other books and papers as the Board may direct,
and shall perform such other duties as may be incidental to the office or which
are assigned by the Board of Trustees. The Secretary shall also keep or cause
to be kept a Shareholder book, which may
3
<PAGE> 4
be maintained by means of computer systems, containing the names,
alphabetically arranged, of all persons who are Shareholders of the Trust,
showing their places of residence, the number and series and class of any
Shares held by them, respectively, and the dates when they became the record
owners thereof.
Section 7. Treasurer. The Treasurer shall have the care and custody
of the funds and securities of the Trust and shall deposit the same in the name
of the Trust in such bank or banks or other depositories, subject to withdrawal
in such manner as these Bylaws or the Board of Trustees may determine. The
Treasurer shall, if required by the Board of Trustees, give such bond for the
faithful discharge of duties in such form as the Board of Trustees may require.
Section 8. Assistant Officers. Assistant officers, which may include
one or more Assistant Vice Presidents, Assistant Secretaries and Assistant
Treasurers, shall perform such functions and have such responsibilities as the
Board of Trustees may determine.
Section 9. Surety Bond. The Trustees may require any officer or agent
of the Trust to execute a bond (including, without limitation, any bond
required by the 1940 Act and the rules and regulations of the Securities and
Exchange Commission (the "Commission") to the Trust in such sum and with such
surety or sureties as the Trustees may determine, conditioned upon the faithful
performance of his or her duties to the Trust, including responsibility for
negligence and for the accounting of any of the Trust's property, funds, or
securities that may come into his or her hands.
Section 10. Authorized Signatories. Unless a specific officer is
otherwise designated in a resolution adopted by the Board of Trustees, the
proper officers of the Trust for executing agreements, documents and
instruments other than Internal Revenue Service forms shall be the President,
any Vice President, the Secretary or any Assistant Secretary. Unless a specific
officer is otherwise designated in a resolution adopted by the Board of
Trustees, the proper officers of the Trust for executing any and all Internal
Revenue Service forms shall be the President, any Vice President, the
Secretary, any Assistant Secretary, or the Treasurer.
ARTICLE IV
MEETINGS OF SHAREHOLDERS
Section 1. Purpose. All meetings of the Shareholders for the election
of Trustees shall be held at such place as may be fixed from time to time by
the Trustees, or at such other place either within or without the State of
Delaware as shall be designated from time to time by the Trustees and stated in
the notice indicating that a meeting has been called for such purpose. Meetings
of Shareholders may be held for any purpose determined by the Trustees and may
be held at such time and place, within or without the State of Delaware as
shall be stated in the notice of the meeting or in a duly executed waiver of
notice thereof. At all meetings of the Shareholders, every shareholder of
record entitled to vote thereat shall be entitled to vote at such meeting
either in person or by written proxy signed by the Shareholder or by his duly
4
<PAGE> 5
authorized attorney in fact. A Shareholder may duly authorize such attorney in
fact through written, electronic, telephonic, computerized, facsimile,
telecommunication, telex or oral communication or by any other form of
communication. Unless a proxy provides otherwise, such proxy is not valid more
than eleven months after its date. A proxy with respect to shares held in the
name of two or more persons shall be valid if executed by any one of them
unless at or prior to exercise of the proxy the Trust receives a specific
written notice to the contrary from any one of them. A proxy purporting to be
executed by or on behalf of a Shareholder shall be deemed valid unless
challenged at or prior to its exercise and the burden of proving invalidity
shall rest on the challenger.
Section 2. Nomination of Trustees. So long as the Trust has adopted
and maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act (a
"Rule 12b-1 Plan"), the nomination of Trustees who are not "interested
persons," as defined in the 1940 Act, of the Trust shall be made by the
Nominating and Compensation Committee. In addition, so long as the Trust
maintains a Nominating and Compensation Committee, the nomination of all other
Trustees shall also be made by the Nominating and Compensation Committee. If
the Trust no longer maintains a Rule 12b-1 Plan and no longer maintains a
Nominating and Compensation Committee, the nomination of all Trustees shall be
made by the Board of Trustees. Any Shareholder may submit names of individuals
to be considered by the Nominating and Compensation Committee or the Board of
Trustees, as applicable, provided, however, (i) that such person was a
shareholder of record at the time of submission of such names and is entitled
to vote at the meeting, and (ii) that the Nominating and Compensation Committee
or the Board of Trustees, as applicable, shall make the final determination of
persons to be nominated.
Section 3. Election of Trustees. All meetings of Shareholders for the
purpose of electing Trustees shall be held on such date and at such time as
shall be designated from time to time by the Trustees and stated in the notice
of the meeting, at which the Shareholders shall elect by a plurality vote any
number of Trustees as the notice for such meeting shall state are to be
elected, and transact such other business as may properly be brought before the
meeting in accordance with Section 1 of this Article IV.
Section 4. Notice of Meetings. Written notice of any meeting stating
the place, date, and hour of the meeting shall be given to each Shareholder
entitled to vote at such meeting not less than ten days before the date of the
meeting in accordance with Article V hereof.
Section 5. Special Meetings. Special meetings of the Shareholders,
for any purpose or purposes, unless otherwise prescribed by applicable law or
by the Agreement, may be called by any Trustee; provided, however, that the
Trustees shall promptly call a meeting of the Shareholders solely for the
purpose of removing one or more Trustees, when requested in writing to do so by
the record holders of not less than ten percent of the Outstanding Shares of
the Trust.
Section 6. Notice of Special Meeting. Written notice of a special
meeting stating the place, date, and hour of the meeting and the purpose or
purposes for which the meeting is
5
<PAGE> 6
called, shall be given not less than ten days before the date of the meeting,
to each Shareholder entitled to vote at such meeting.
Section 7. Conduct of Special Meeting. Business transacted at any
special meeting of Shareholders shall be limited to the purpose stated in the
notice.
Section 8. Quorum. The holders of one-third of the Outstanding Shares
entitled to vote thereat, present in person or represented by proxy, shall
constitute a quorum at all meetings of the Shareholders for the transaction of
business except as otherwise provided by applicable law or by the Agreement.
If, however, such quorum shall not be present or represented at any meeting of
the Shareholders, the vote of the holders of a majority of Shares cast shall
have power to adjourn the meeting from time to time, without notice other than
announcement at the meeting, until a quorum shall be present or represented. At
such adjourned meeting, at which a quorum shall be present or represented, any
business may be transacted which might have been transacted at the meeting as
originally notified.
Section 9. Organization of Meetings.
------------------------------------
(a) The meetings of the Shareholders shall be presided
over by the Chairman of the Board, or if the Chairman shall not be present or
if there is no Chairman, by the President, or if the President shall not be
present, by a Vice President, or if no Vice President is present, by a chairman
appointed for such purpose by the Board of Trustees or, if not so appointed, by
a chairman appointed for such purpose by the officers and Trustees present at
the meeting. The Secretary of the Trust, if present, shall act as Secretary of
such meetings, or if the Secretary is not present, an Assistant Secretary of
the Trust shall so act, and if no Assistant Secretary is present, then a person
designated by the Secretary of the Trust shall so act, and if the Secretary has
not designated a person, then the meeting shall elect a secretary for the
meeting.
(b) The Board of Trustees of the Trust shall be entitled
to make such rules and regulations for the conduct of meetings of Shareholders
as it shall deem necessary, appropriate or convenient. Subject to such rules
and regulations of the Board of Trustees, if any, the chairman of the meeting
shall have the right and authority to prescribe such rules, regulations and
procedures and to do all such acts as, in the judgment of such chairman, are
necessary, appropriate or convenient for the proper conduct of the meeting,
including, without limitation, establishing: an agenda or order of business for
the meeting; rules and procedures for maintaining order at the meeting and the
safety of those present; limitations on participation in such meeting to
shareholders of record of the Trust and their duly authorized and constituted
proxies, and such other persons as the chairman shall permit; restrictions on
entry to the meeting after the time fixed for the commencement thereof,
limitations on the time allotted to questions or comments by participants; and
regulation of the opening and closing of the polls for balloting on matters
which are to be voted on by ballot, unless and to the extent the Board of
Trustees or the chairman of the meeting determines that meetings of
Shareholders shall not be required to be held in accordance with the rules of
parliamentary procedure.
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<PAGE> 7
Section 10. Voting Standard. When a quorum is present at any
meeting, the vote of the holders of a majority of the Shares cast shall decide
any question brought before such meeting, unless the question is one on which,
by express provision of applicable law, the Agreement, these Bylaws, or
applicable contract, a different vote is required, in which case such express
provision shall govern and control the decision of such question.
Section 11. Voting Procedure. Each whole Share shall be entitled to
one vote, and each fractional Share shall be entitled to a proportionate
fractional vote. On any matter submitted to a vote of the Shareholders, all
Shares shall be voted together, except when required by applicable law or when
the Trustees have determined that the matter affects the interests of one or
more Portfolios (or Classes), then only the Shareholders of such Portfolios (or
Classes) shall be entitled to vote thereon.
Section 12. Action Without Meeting. Unless otherwise provided in the
Agreement or applicable law, any action required to be taken at any meeting of
the Shareholders, or any action which may be taken at any meeting of the
Shareholders, may be taken without a meeting, without prior notice and without
a vote, if a consent in writing, setting forth the action so taken, shall be
signed by the holders of Outstanding Shares having not less than the minimum
number of votes that would be necessary to authorize or take such action at a
meeting at which all Shares entitled to vote thereon were present and voted.
Prompt notice of the taking of any such action without a meeting by less than
unanimous written consent shall be given to those Shareholders who have not
consented in writing.
Section 13. Broker Non-Votes. At any meeting of Shareholders the
Trust will consider broker non-votes as present for purposes of determining
whether a quorum is present at the meeting. Broker non-votes will not count as
votes cast.
ARTICLE V
NOTICES
Section 1. Methods of Giving Notice. Whenever, under the provisions
of applicable law or of the Agreement or of these Bylaws, notice is required to
be given to any Trustee or Shareholder, it shall not, unless otherwise provided
herein, be construed to mean personal notice, but such notice may be given
orally in person, or by telephone (promptly confirmed in writing) or in
writing, by mail addressed to such Trustee at his or her last given address or
to such Shareholder at his address as it appears on the records of the Trust,
with postage thereon prepaid, and such notice shall be deemed to be given at
the time when the same shall be deposited in the United States mail. Notice to
Trustees or members of a committee may also be given by telex, telegram,
facsimile, electronic-mail or via overnight courier. If sent by telex or
facsimile, notice to a Trustee or member of a committee shall be deemed to be
given upon transmittal; if sent by telegram, notice to a Trustee or member of a
committee shall be deemed to be given when the telegram, so addressed, is
delivered to the telegraph company; if sent by electronic-mail, notice to a
Trustee or member of a committee shall be deemed to be
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<PAGE> 8
given and shall be presumed valid when the Trust's electronic-mail server
reflects the electronic-mail message as having been sent; and if sent via
overnight courier, notice to a Trustee or member of a committee shall be deemed
to be given when delivered against a receipt therefor.
Section 2. Written Waiver. Whenever any notice is required to be
given under the provisions of applicable law or of the Agreement or of these
Bylaws, a waiver thereof in writing, signed by the person or persons entitled
to said notice, whether before or after the time stated therein, shall be
deemed equivalent thereto.
ARTICLE VI
CERTIFICATES OF SHARES
Section 1. Issuance. The Trust may, in its sole discretion, issue a
certificate to any Shareholder, signed by, or in the name of the Trust by, the
President, certifying the number of Shares owned by him, her or it in a Class
or Portfolio of the Trust. No Shareholder shall have the right to demand or
require that a certificate be issued to him, her or it.
Section 2. Countersignature. Where a certificate is countersigned (1)
by a transfer agent other than the Trust or its employee, or (2) by a registrar
other than the Trust or its employee, the signature of the President may be a
facsimile.
Section 3. Lost Certificates. The Board of Trustees may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Trust alleged to have been lost, stolen
or destroyed, upon the making of an affidavit of the fact by the person
claiming the certificate to be lost, stolen or destroyed. When authorizing such
issue of a new certificate or certificates, the Board of Trustees may, in its
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen or destroyed certificate or certificates, or his
legal representative, to advertise the same in such manner as it shall require
and/or to give the Trust a bond in such sum as it may direct as indemnity
against any claim that may be made against the Trust with respect to the
certificate alleged to have been lost, stolen or destroyed.
Section 4. Transfer of Shares. The Trustees shall make such rules as
they consider appropriate for the transfer of Shares and similar matters. To
the extent certificates are issued in accordance with Section 1 of this Article
VI, upon surrender to the Trust or the transfer agent of the Trust of such
certificate for Shares duly endorsed or accompanied by proper evidence of
succession, assignment or authority to transfer, it shall be the duty of the
Trust to issue a new certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
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<PAGE> 9
Section 5. Fixing Record Date. In order that the Trustees may
determine the Shareholders entitled to notice of or to vote at any meeting of
Shareholders or any adjournment thereof, or to express consent to action in
writing without a meeting, or entitled to receive payment of any dividend or
other distribution of allotment of any rights, or entitled to exercise any
rights in respect of any change, conversion or exchange of beneficial interests
or for the purpose of any other lawful action, the Board of Trustees may fix a
record date, which record date shall not precede the date upon which the
resolution fixing the record date is adopted by the Board of Trustees, and
which record date shall not be more than ninety nor less than ten days before
the date of such meeting, nor more than ten days after the date upon which the
resolution fixing the record date is adopted by the Board of Trustees for
action by Shareholder consent in writing without a meeting, nor more than
ninety days prior to any other action. A determination of shareholders of
record entitled to notice of or to vote at a meeting of Shareholders shall
apply to any adjournment of the meeting; provided, however, that the Board of
Trustees may fix a new record date for the adjourned meeting.
Section 6. Registered Shareholders. The Trust shall be entitled to
recognize the exclusive right of a person registered on its books as the owner
of Shares to receive dividends, and to vote as such owner, and shall not be
bound to recognize any equitable or other claim of interest in such Share or
Shares on the part of any other person, whether or not it shall have express or
other notice hereof.
ARTICLE VII
GENERAL PROVISIONS
Section 1. Seal. The business seal shall have inscribed thereon the
name of the business trust, the year of its organization and the word "Business
Seal, Delaware." The seal may be used by causing it or a facsimile thereof to
be impressed or affixed or otherwise reproduced. Any officer or Trustee of the
Trust shall have authority to affix the seal of the Trust to any document
requiring the same.
Section 2. Severability. The provisions of these Bylaws are
severable. If any provision hereof shall be held invalid or unenforceable in
any jurisdiction, such invalidity or unenforceability shall attach only to such
provision only in such jurisdiction and shall not affect any other provision of
these Bylaws.
Section 3. Headings. Headings are placed in these Bylaws for
convenience of reference only and in case of any conflict, the text of these
Bylaws rather than the headings shall control.
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<PAGE> 10
ARTICLE VIII
INDEMNIFICATION
Section 1. Indemnification. For the purpose of this Section 1,
"Trust" includes any domestic or foreign predecessor entity of this Trust in a
merger, consolidation, or other transaction in which the predecessor's
existence ceased upon consummation of the transaction; "proceeding" means any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative, or investigative; and "expenses" includes without
limitation attorney's fees and any expenses of establishing a right to
indemnification under this Section 1.
(a) The Trust shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding (other than an
action by or in the right of the Trust) by reason of the fact that such person
is or was a Covered Person, against expenses, judgments, fines and amounts paid
in settlements actually and reasonably incurred by such person in connection
with such proceeding, if it is determined that person acted in good faith and
reasonably believed: (a) in the case of conduct in his official capacity as a
Covered Person, that his conduct was in the Trust's best interests and (b) in
all other cases, that his conduct was at least not opposed to the Trust's best
interests and (c) in the case of a criminal proceeding, that he had no
reasonable cause to believe that his conduct was unlawful. The termination of
any proceeding by judgment, order or settlement shall not, of itself, create a
presumption that the person did not meet the requisite standard of conduct set
forth in this Section 1. The termination of any proceeding by conviction, or a
plea of nolo contendere or its equivalent, or an entry of an order of probation
prior to judgment, creates a rebuttable presumption that the person did not
meet the requisite standard of conduct set forth in this Section 1.
(b) The Trust shall indemnify any person who was or is a
party or is threatened to be made a party to any proceeding by or in the right
of the Trust to procure a judgment in its favor by reason of the fact that
person is or was a Covered Person, against expenses actually and reasonably
incurred by that person in connection with the defense or settlement of such
action or suit if that person acted in good faith, in a manner that person
believed to be in the best interests of the Trust and with such care, including
reasonable inquiry, as an ordinarily prudent person in a like position would
use under similar circumstances.
(c) Notwithstanding any provision to the contrary
contained herein, there shall be no right to indemnification for any liability
arising by reason of willful misfeasance, bad faith, gross negligence, or the
reckless disregard of the duties involved in the conduct of the Covered
Person's office with the Trust.
Section 2. Advance Payments of Indemnifiable Expenses. To the maximum
extent permitted by law, the Trust or applicable Portfolio may advance to a
Covered Person, in connection with the preparation and presentation of a
defense to any claim, action, suit, or proceeding, expenses for which the
Covered Person would ultimately be entitled to indemnification; provided that
the Trust or applicable Portfolio has received an undertaking by
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<PAGE> 11
or on behalf of such Covered Person that such amount will be paid over by him
to the Trust or applicable Portfolio if it is ultimately determined that he is
not entitled to indemnification for such expenses, and further provided that
(i) such Covered Person shall have provided appropriate security for such
undertaking, (ii) the Trust is insured against losses arising out of any such
advance payments, or (iii) either a majority of the Trustees who are not
interested persons (as defined in the 1940 Act) of the Trust nor parties to the
matter, or independent legal counsel in a written opinion shall have
determined, based upon a review of readily available facts (as opposed to a
full trial-type inquiry) that there is reason to believe that such Covered
Person will not be disqualified from indemnification for such expenses.
ARTICLE IX
AMENDMENTS
Section 1. Amendments. These Bylaws may be altered or repealed at any
regular or special meeting of the Board of Trustees without prior notice. These
Bylaws may also be altered or repealed at any special meeting of the
Shareholders, but only if the Board of Trustees resolves to put a proposed
alteration or repealer to the vote of the Shareholders and notice of such
alteration or repealer is contained in a notice of the special meeting being
held for such purpose.
11
<PAGE> 1
EXHIBIT h(41)(b)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated July 27, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, Allmerica Financial Life Insurance
and Annuity Company, a Delaware life insurance company and Allmerica
Investments, Inc., is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------------- ---------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
- ------------------------------------- -------------------------------------- ---------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Fulcrum Account of Allmerica 3025-96
AIM V.I. Value Fund Financial Life Insurance and
Annuity Company
-------------------------------------- ---------------------------------
Fulcrum Variable Life Account of 1030-96
Allmerica Financial Life Insurance
and Annuity Company
-------------------------------------- ---------------------------------
FUVUL Separate Account of 1036-99
Allmerica Financial Life
Insurance and Annuity Company
-------------------------------------- ---------------------------------
Separate Account VA-P of Pioneer Vision; Pioneer C-Vision;
Allmerica Financial Life Insurance and Pioneer Xtra Vision
and Annuity Company
- ------------------------------------- -------------------------------------- ---------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: February 11, 2000
-----------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
---------------------------- ------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
---------------------------- ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE> 2
ALLMERICA FINANCIAL LIFE INSURANCE
AND ANNUITY COMPANY
Attest: /s/ SHELIA ST. HILAIRE By: /s/ RICHARD RILEY
---------------------------- ------------------------------
Name: Shelia St. Hilaire Name: Richard Riley
---------------------------- ------------------------------
Title: Assistant Vice President and Title: President
Counsel ------------------------------
----------------------------
(SEAL)
ALLMERICA INVESTMENTS, INC.
Attest: /s/ SHELIA ST. HILAIRE By: /s/ STEPHEN PARKER
---------------------------- ------------------------------
Name: Shelia St. Hilaire Name: Stephen Parker
---------------------------- ------------------------------
Title: Assistant Vice President and Title: President
Counsel ------------------------------
----------------------------
(SEAL)
2 of 2
<PAGE> 1
EXHIBIT h(42)(b)
AMENDMENT NO. 1
PARTICIPATION AGREEMENT
The Participation Agreement (the "Agreement"), dated July 27, 1998, by and
among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M
Distributors, Inc., a Delaware corporation, First Allmerica Financial Life
Insurance Company, a Delaware life insurance company and Allmerica Investments,
Inc., is hereby amended as follows:
Schedule A of the Agreement is hereby deleted in its entirety and
replaced with the following:
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------- -------------------------------------- ---------------------------------
FUNDS AVAILABLE UNDER SEPARATE ACCOUNTS POLICIES FUNDED BY THE
THE POLICIES UTILIZING THE FUNDS SEPARATE ACCOUNTS
- ------------------------------------- -------------------------------------- ---------------------------------
<S> <C> <C>
AIM V.I. Capital Appreciation Fund Fulcrum Account of First Allmerica A3025-96GRC
AIM V.I. Value Fund Financial Life Insurance Company
-------------------------------------- ---------------------------------
FUVUL Separate Account of First 1036.NY-99GRC
Allmerica Financial Life
Insurance Company
-------------------------------------- ---------------------------------
Separate Account VA-P of First Pioneer Vision; and Pioneer
Allmerica Financial Life Insurance C-Vision
and Annuity Company
- ------------------------------------- -------------------------------------- ---------------------------------
</TABLE>
All other terms and provisions of the Agreement not amended herein shall
remain in full force and effect.
Effective Date: February 11, 2000
-----------------
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
---------------------------- ------------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
(SEAL)
A I M DISTRIBUTORS, INC.
Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO
---------------------------- ------------------------------
Name: Nancy L. Martin Name: Michael J. Cemo
Title: Assistant Secretary Title: President
(SEAL)
1 of 2
<PAGE> 2
FIRST ALLMERICA FINANCIAL LIFE
INSURANCE COMPANY
Attest: /s/ SHELIA ST. HILAIRE By: /s/ RICHARD RILEY
---------------------------- ------------------------------
Name: Shelia St. Hilaire Name: Richard Riley
---------------------------- ------------------------------
Title: Assistant Vice President and Title: President
Counsel ------------------------------
----------------------------
(SEAL)
ALLMERICA INVESTMENTS, INC.
Attest: /s/ SHELIA ST. HILAIRE By: /s/ STEPHEN PARKER
---------------------------- ------------------------------
Name: Shelia St. Hilaire Name: Stephen Parker
---------------------------- ------------------------------
Title: Assistant Vice President and Title: President
Counsel ------------------------------
----------------------------
(SEAL)
2 of 2
<PAGE> 1
EXHIBIT h(61)
PARTICIPATION AGREEMENT
BY AND AMONG
AIM VARIABLE INSURANCE FUNDS, INC.,
AND
NORTHBROOK LIFE INSURANCE COMPANY,
ON BEHALF OF ITSELF AND
ITS SEPARATE ACCOUNTS,
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Description Page
- ----------- ----
<S> <C>
Section 1. Available Funds..................................................................2
1.1 Availability..................................................................2
1.2 Addition, Deletion or Modification of Funds...................................2
1.3 No Sales to the General Public................................................2
Section 2. Processing Transactions..........................................................2
2.1 Timely Pricing and Orders.....................................................2
2.2 Timely Payments...............................................................3
2.3 Applicable Price..............................................................3
2.4 Dividends and Distributions...................................................4
2.5 Book Entry....................................................................4
Section 3. Costs and Expenses...............................................................4
3.1 General.......................................................................4
3.2 Parties To Cooperate..........................................................4
Section 4. Legal Compliance.................................................................5
4.1 Tax Laws......................................................................5
4.2 Insurance and Certain Other Laws..............................................7
4.3 Securities Laws...............................................................8
4.4 Notice of Certain Proceedings and Other Circumstances.........................9
4.5 LIFE COMPANY To Provide Documents; Information About AVIF.....................9
4.6 AVIF To Provide Documents; Information About LIFE COMPANY....................10
Section 5. Mixed and Shared Funding........................................................12
5.1 General......................................................................12
5.2 Disinterested Directors......................................................12
5.3 Monitoring for Material Irreconcilable Conflicts.............................12
5.4 Conflict Remedies............................................................13
5.5 Notice to LIFE COMPANY.......................................................14
5.6 Information Requested by Board of Directors..................................14
5.7 Compliance with SEC Rules....................................................15
5.8 Other Requirements...........................................................15
Section 6. Termination.....................................................................15
6.1 Events of Termination........................................................15
6.2 Notice Requirement for Termination...........................................16
6.3 Funds To Remain Available....................................................17
6.4 Survival of Warranties and Indemnifications..................................17
6.5 Continuance of Agreement for Certain Purposes................................17
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C>
Section 7. Parties To Cooperate Respecting Termination.....................................17
Section 8. Assignment......................................................................17
Section 9. Notices.........................................................................18
Section 10. Voting Procedures..............................................................18
Section 11. Foreign Tax Credits............................................................19
Section 12. Indemnification................................................................19
12.1 Of AVIF by LIFE COMPANY......................................................19
12.2 Of LIFE COMPANY by AVIF......................................................21
12.3 Effect of Notice.............................................................24
12.4 Successors...................................................................24
Section 13. Applicable Law.................................................................24
Section 14. Execution in Counterparts......................................................24
Section 15. Severability...................................................................24
Section 16. Rights Cumulative..............................................................24
Section 17. Headings.......................................................................25
Section 18. Confidentiality................................................................25
Section 19. Trademarks and Fund Names......................................................26
Section 20. Parties to Cooperate...........................................................26
</TABLE>
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<PAGE> 4
PARTICIPATION AGREEMENT
THIS AGREEMENT, made and entered into as of the 28th day of January,
2000 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland
corporation ("AVIF"), and Northbrook Life Insurance Company, an Arizona life
insurance company ("LIFE COMPANY"), on behalf of itself and each of its
segregated asset accounts listed in Schedule A hereto, as the parties hereto may
amend from time to time (each, an "Account," and collectively, the "Accounts").
WITNESSETH THAT:
WHEREAS, AVIF is registered with the Securities and Exchange Commission
("SEC") as an open-end management investment company under the Investment
Company Act of 1940, as amended (the "1940 Act"); and
WHEREAS, AVIF currently consists of seventeen separate series
("Series"), shares ("Shares") of each of which are registered under the
Securities Act of 1933, as amended (the "1933 Act") and are currently sold to
one or more separate accounts of life insurance companies to fund benefits under
variable annuity contracts and variable life insurance contracts; and
WHEREAS, AVIF will make Shares of each Series listed on Schedule A
hereto as the Parties hereto may amend from time to time (each a "Fund";
reference herein to "AVIF" includes reference to each Fund, to the extent the
context requires) available for purchase by the Accounts; and
WHEREAS, LIFE COMPANY will be the issuer of certain variable annuity
contracts and variable life insurance contracts ("Contracts") and/or policies
("Policies") as set forth on Schedule A hereto, as the Parties hereto may amend
from time to time, which Contracts and Policies (hereinafter collectively, the
"Policies"), if required by applicable law, will be registered under the 1933
Act; and
WHEREAS, LIFE COMPANY will fund the Policies through the Accounts, each
of which may be divided into two or more subaccounts ("Subaccounts"; reference
herein to an "Account" includes reference to each Subaccount thereof to the
extent the context requires); and
WHEREAS, LIFE COMPANY will serve as the depositor of the Accounts, each
of which is registered as a unit investment trust investment company under the
1940 Act (or exempt therefrom), and the security interests deemed to be issued
by the Accounts under the Policies will be registered as securities under the
1933 Act (or exempt therefrom); and
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<PAGE> 5
WHEREAS, to the extent permitted by applicable insurance laws and
regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds
on behalf of the Accounts to fund the Contracts; and
NOW, THEREFORE, in consideration of the mutual benefits and promises
contained herein, the Parties hereto agree as follows:
SECTION 1. AVAILABLE FUNDS
1.1 AVAILABILITY.
AVIF will make Shares of each Fund available to LIFE COMPANY for
purchase and redemption at net asset value and with no sales charges, subject to
the terms and conditions of this Agreement. The Board of Directors of AVIF may
refuse to sell Shares of any Fund to any person, or suspend or terminate the
offering of Shares of any Fund if such action is required by law or by
regulatory authorities having jurisdiction or if, in the sole discretion of the
Directors acting in good faith and in light of their fiduciary duties under
federal and any applicable state laws, such action is deemed in the best
interests of the shareholders of such Fund.
1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS.
LIFE COMPANY hereto may agree, from time to time, to add other Funds to
provide additional funding media for the Policies, or to delete, combine, or
modify existing Funds, by amending Schedule A hereto. Upon such amendment to
Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall
include a reference to any such additional Fund. Schedule A, as amended from
time to time, is incorporated herein by reference and is a part hereof.
1.3 NO SALES TO THE GENERAL PUBLIC.
AVIF represents and warrants that no Shares of any Fund have been or
will be sold to the general public.
SECTION 2. PROCESSING TRANSACTIONS
2.1 TIMELY PRICING AND ORDERS.
(a) AVIF or its designated agent will use its best efforts to provide
LIFE COMPANY with the net asset value per Share for each Fund by 6:00 p.m.
Central Time on each Business Day. As used herein, "Business Day" shall mean any
day on which (i) the New York Stock Exchange is open for regular trading, (ii)
AVIF calculates the Fund's net asset value and (iii) LIFE COMPANY is open for
business.
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<PAGE> 6
(b) LIFE COMPANY will use the data provided by AVIF each Business Day
pursuant to paragraph (a) immediately above to calculate Account unit values and
to process transactions that receive that same Business Day's Account unit
values. LIFE COMPANY will perform such Account processing the same Business Day,
and will place corresponding orders to purchase or redeem Shares with AVIF by
9:00 a.m. Central Time the following Business Day; provided, however, that AVIF
shall provide additional time to LIFE COMPANY in the event that AVIF is unable
to meet the 6:00 p.m. time stated in paragraph (a) immediately above. Such
additional time shall be equal to the additional time that AVIF takes to make
the net asset values available to LIFE COMPANY.
(c) Each order to purchase or redeem Shares will separately describe the
amount of Shares of each Fund to be purchased, redeemed or exchanged and will
not be netted; provided however, with respect to payment of the purchase price
by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall
net purchase and redemption orders with respect to each Fund and shall transmit
one net payment per Fund in accordance with Section 2.2, below. Each order to
purchase or redeem Shares shall also specify whether the order results from
purchase payments, surrenders, partial withdrawals of charges or requests for
other transactions under Policies (collectively, "Policy transactions").
(d) If AVIF provides materially incorrect Share net asset value
information (as determined under SEC guidelines), LIFE COMPANY shall be entitled
to an adjustment to the number of Shares purchased or redeemed to reflect the
correct net asset value per Share. Any material error in the calculation or
reporting of net asset value per Share, dividend or capital gain information
shall be reported promptly upon discovery to LIFE COMPANY. Materiality and
reprocessing cost reimbursement shall be determined in accordance with standards
established by the parties as provided in Schedule B, attached hereto and herein
incorporated.
2.2 TIMELY PAYMENTS.
LIFE COMPANY will wire payment for net purchases to a custodial account
designated by AVIF by 1:00 p.m. Central Time on the same day as the order for
Shares is placed, to the extent practicable. AVIF will wire payment for net
redemptions to an account designated by LIFE COMPANY by 1:00 p.m. Central Time
on the same day as the Order is placed, to the extent practicable, but in any
event within five (5) calendar days after the date the order is placed in order
to enable LIFE COMPANY to pay redemption proceeds within the time specified in
Section 22(e) of the 1940 Act or such shorter period of time as may be required
by law.
2.3 APPLICABLE PRICE.
(a) Share purchase and redemption orders that result from Policy
transactions and that LIFE COMPANY receives prior to the close of regular
trading on the New York Stock Exchange on a Business Day will be executed at the
net asset values of the appropriate Funds next computed after receipt by AVIF or
its designated agent of the orders. For purposes of this Section 2.3(a), LIFE
COMPANY shall be the designated agent of AVIF for receipt of orders relating to
Policy transactions on each Business Day and receipt by such designated agent
shall constitute receipt by
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<PAGE> 7
AVIF; provided, that AVIF receives notice of such orders by 9:00 a.m. Central
Time on the next following Business Day or such later time as computed in
accordance with Section 2.1(b) hereof.
(b) All other Share purchases and redemptions by LIFE COMPANY will be
effected at the net asset values of the appropriate Funds next computed after
receipt by AVIF or its designated agent of the order therefor, and such orders
will be irrevocable.
2.4 DIVIDENDS AND DISTRIBUTIONS.
AVIF will furnish notice promptly to LIFE COMPANY any income dividends
or capital gain distributions payable on the Shares of any Fund. LIFE COMPANY
hereby elects to reinvest all dividends and capital gains distributions in
additional Shares of the corresponding Fund at the ex-dividend date net asset
values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by
the Parties that the ex-dividend date and the payment date with respect to any
dividend or distribution will be the same Business Day. LIFE COMPANY reserves
the right to revoke this election and to receive all such income dividends and
capital gain distributions in cash.
2.5 BOOK ENTRY.
Issuance and transfer of AVIF Shares will be by book entry only. Stock
certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will
be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account.
SECTION 3. COSTS AND EXPENSES
3.1 GENERAL.
Except as otherwise specifically provided in Schedule C, attached hereto
and made a part hereof, each Party will bear, or arrange for others to bear, all
expenses incident to its performance under this Agreement.
3.2 PARTIES TO COOPERATE.
Each Party agrees to cooperate with the others, as applicable, in
arranging to print, mail and/or deliver, in a timely manner, combined or
coordinated prospectuses or other materials of AVIF and the Accounts.
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<PAGE> 8
SECTION 4. LEGAL COMPLIANCE
4.1 TAX LAWS.
(a) AVIF represents and warrants that each Fund is currently qualified
and will continue to qualify as a regulated investment company ("RIC") under
Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"). AVIF
will notify LIFE COMPANY immediately upon having a reasonable basis for
believing that a Fund has ceased to so qualify or that it might not so qualify
in the future.
(b) AVIF represents that it will comply and maintain each Fund's
compliance with the diversification requirements set forth in Section 817(h) of
the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will
notify LIFE COMPANY immediately upon having a reasonable basis for believing
that a Fund has ceased to so comply or that a Fund might not so comply in the
future.
(c) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS")
asserts in writing in connection with any governmental audit or review of LIFE
COMPANY or, to LIFE COMPANY's knowledge, of any Policy owner, annuitant or
participant under the Policies (collectively, "Participants"), that any Fund has
failed to comply with the diversification requirements of Section 817(h) of the
Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise
to any claim against AVIF or its affiliates as a result of such a failure or
alleged failure to so comply with Section 817(h) (hereinafter respectively
referred to in this paragraph (c) as "failure" or "alleged failure"):
(i) LIFE COMPANY shall promptly notify AVIF of such assertion
or potential claim (subject to the Confidentiality
provisions of Section 18 as to any Participant);
(ii) LIFE COMPANY shall consult with AVIF as to how to minimize
any liability that may arise as a result of such failure
or alleged failure;
(iii) LIFE COMPANY shall use its best efforts to minimize any
liability of AVIF or its affiliates resulting from such
failure, including, without limitation, demonstrating,
pursuant to Treasury Regulations Section 1.817-5(a)(2), to
the Commissioner of the IRS that such failure was
inadvertent, provided that LIFE COMPANY shall not be
required to make any such demonstration of inadvertence
unless AVIF represents or provides an opinion of counsel,
which representation or opinion shall be reasonably
satisfactory to LIFE COMPANY, to the effect that a
reasonable basis exists for making such demonstration;
(iv) LIFE COMPANY shall permit AVIF, its affiliates and their
legal and accounting advisors to participate in any
conferences, settlement discussions or other
administrative or judicial proceeding or contests
(including judicial
5
<PAGE> 9
appeals thereof) with the IRS, any Participant or any
other claimant regarding any claims that could give rise
to liability to AVIF or its affiliates as a result of
such a failure or alleged failure; provided, however,
that LIFE COMPANY will retain control of the conduct of
such conferences, discussions, proceedings, contests or
appeals thereof;
(v) any written materials to be submitted by LIFE COMPANY to
the IRS, any Participant or any other claimant in
connection with any of the foregoing proceedings or
contests (including, without limitation, any such
materials to be submitted to the IRS pursuant to Treasury
Regulations Section 1.817-5(a)(2)), (a) shall be provided
by LIFE COMPANY to AVIF (together with any supporting
information or analysis); subject to the confidentiality
provisions of Section 18, at least ten (10) business days
or such shorter period to which the Parties hereto may
from time to time agree, prior to the day on which such
proposed materials are to be submitted and (b) shall not
be submitted by LIFE COMPANY to any such person without
the express written consent of AVIF which shall not be
unreasonably withheld;
(vi) LIFE COMPANY shall provide AVIF or its affiliates and
their accounting and legal advisors with such cooperation
as AVIF shall reasonably request (including, without
limitation, by providing AVIF and its accounting and legal
advisors with copies of any relevant books and records (or
portions thereof) of LIFE COMPANY that may be reasonably
requested by or on behalf of AVIF and that LIFE COMPANY is
permitted to provide in accordance with applicable law) in
order to facilitate review by AVIF or its advisors of any
written submissions provided to it pursuant to the
preceding clause or its assessment of the validity or
amount of any claim against its arising from such a
failure or alleged failure;
(vii) LIFE COMPANY shall not with respect to any claim of the
IRS or any Participant that would give rise to a claim
against AVIF or its affiliates (a) compromise or settle
any claim, (b) accept any adjustment on audit, or (c)
forego any allowable administrative or judicial appeals,
without the express written consent of AVIF or its
affiliates, which shall not be unreasonably withheld,
provided that LIFE COMPANY shall not be required, after
exhausting all administrative remedies, to appeal any
adverse IRS or judicial decision unless AVIF or its
affiliates shall have provided an opinion of independent
counsel approved by LIFE COMPANY, which approval shall not
be unreasonably withheld, to the effect that a reasonable
basis exists for taking such appeal (or, in the case of an
appeal to the United States Supreme Court, that LIFE
COMPANY should be more likely than not to prevail on such
appeal) and provided further that the costs of any such
appeal shall be borne equally by the Parties hereto; and
6
<PAGE> 10
(viii) AVIF and its affiliates shall have no liability as a
result of such failure or alleged failure if LIFE COMPANY
fails to comply with any of the foregoing clauses (i)
through (vii), and such failure could be shown to have
materially contributed to the liability.
Should AVIF or any of its affiliates refuse to give its written consent
to any compromise or settlement of any claim or liability hereunder, LIFE
COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the
name of LIFE COMPANY in, and to control the conduct of, such conferences,
discussions, proceedings, contests or appeals and all administrative or judicial
appeals thereof, and in that event AVIF or its affiliates shall bear the fees
and expenses associated with the conduct of the proceedings that it is so
authorized to control; provided, that in no event shall LIFE COMPANY have any
liability resulting from AVIF's refusal to accept the proposed settlement or
compromise with respect to any failure caused by AVIF. As used in this
Agreement, the term "affiliates" shall have the same meaning as "affiliated
person" as defined in Section 2(a)(3) of the 1940 Act.
(d) LIFE COMPANY represents and warrants that the Policies currently are
and at all times will be treated as annuity, endowment or life insurance
contracts under applicable provisions of the Code. LIFE COMPANY will notify AVIF
immediately upon having a reasonable basis for believing that any of the
Policies have ceased to be so treated or that they might not be so treated in
the future, provided that such notice shall be kept confidential during the
period of LIFE COMPANY's investigation of any such circumstances to the extent
permitted by applicable law.
(e) LIFE COMPANY represents and warrants that each Account is and at all
times will be a "segregated asset account" and that interests in each Account
are offered exclusively through the purchase of or transfer into a "variable
contract," within the meaning of such terms under Section 817 of the Code and
the regulations thereunder. LIFE COMPANY will notify AVIF immediately upon
having a reasonable basis for believing that such requirements have ceased to be
met or that they might not be met in the future.
4.2 INSURANCE AND CERTAIN OTHER LAWS.
(a) AVIF will use its best effort to comply with any applicable state
insurance laws or regulations, to the extent specifically requested in writing
by LIFE COMPANY.
(b) LIFE COMPANY represents and warrants that (i) it is an insurance
company duly organized, validly existing and in good standing under the laws of
the State of Arizona and has full corporate power, authority and legal right to
execute, deliver and perform its duties and comply with its obligations under
this Agreement, (ii) it has legally and validly established and maintains each
Account as a segregated asset account under Section 245.21 of the Illinois
Insurance Code and the regulations thereunder, and (iii) the Policies comply in
all material respects with all other applicable federal and state laws and
regulations.
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<PAGE> 11
(c) AVIF represents and warrants that it is a corporation duly
organized, validly existing, and in good standing under the laws of the State of
Maryland and has full power, authority, and legal right to execute, deliver,
and perform its duties and comply with its obligations under this Agreement.
4.3 SECURITIES LAWS.
(a) LIFE COMPANY represents and warrants that (i) interests in each
Account pursuant to the Policies will be registered under the 1933 Act to the
extent required by the 1933 Act, (ii) the Policies will be duly authorized for
issuance and sold in compliance with all applicable federal and state laws,
including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and
Arizona law, (iii) each Account is and will remain registered under the 1940
Act, to the extent required by the 1940 Act, (iv) each Account does and will
comply in all material respects with the requirements of the 1940 Act and the
rules thereunder, to the extent required, (v) each Account's 1933 Act
registration statement relating to the Policies, together with any amendments
thereto, will at all times comply in all material respects with the requirements
of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the
registration statement for its Contracts under the 1933 Act and for its Policies
under the 1940 Act from time to time as required in order to effect the
continuous offering of its Policies or as may otherwise be required by
applicable law, and (vii) each Account Prospectus will at all times comply in
all material respects with the requirements of the 1933 Act and the rules
thereunder.
(b) AVIF represents and warrants that (i) Shares sold pursuant to this
Agreement will be registered under the 1933 Act to the extent required by the
1933 Act and duly authorized for issuance and sold in compliance with Maryland
law, (ii) AVIF is and will remain registered under the 1940 Act to the extent
required by the 1940 Act, (iii) AVIF will amend the registration statement for
its Shares under the 1933 Act and itself under the 1940 Act from time to time as
required in order to effect the continuous offering of its Shares, (iv) AVIF
does and will comply in all material respects with the requirements of the 1940
Act and the rules thereunder, (v) AVIF's 1933 Act registration statement,
together with any amendments thereto, will at all times comply in all material
respects with the requirements of the 1933 Act and rules thereunder, and (vi)
AVIF's Prospectus will at all times comply in all material respects with the
requirements of the 1933 Act and the rules thereunder.
(c) AVIF will register and qualify its Shares for sale in accordance
with the laws of any state or other jurisdiction if and to the extent reasonably
deemed advisable by AVIF.
(d) AVIF currently does not intend to make any payments to finance
distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise,
although it reserves the right to make such payments in the future. To the
extent that it decides to finance distribution expenses pursuant to Rule 12b-1,
AVIF undertakes to have its Board of Directors, a majority of whom are not
"interested" persons of the Fund, formulate and approve any plan under Rule
12b-1 to finance distribution expenses.
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<PAGE> 12
4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES.
(a) AVIF will immediately notify LIFE COMPANY of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to AVIF's registration statement under the 1933 Act
or AVIF Prospectus, (ii) any request by the SEC for any amendment to such
registration statement or AVIF Prospectus that may affect the offering of Shares
of AVIF, (iii) the initiation of any proceedings for that purpose or for any
other purpose relating to the registration or offering of AVIF's Shares, or (iv)
any other action or circumstances that may prevent the lawful offer or sale of
Shares of any Fund in any state or jurisdiction, including, without limitation,
any circumstances in which (a) such Shares are not registered and, in all
material respects, issued and sold in accordance with applicable state and
federal law, or (b) such law precludes the use of such Shares as an underlying
investment medium of the Policies issued or to be issued by LIFE COMPANY. AVIF
will make every reasonable effort to prevent the issuance, with respect to any
Fund, of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
(b) LIFE COMPANY will immediately notify AVIF of (i) the issuance by any
court or regulatory body of any stop order, cease and desist order, or other
similar order with respect to each Account's registration statement under the
1933 Act relating to the Policies or each Account Prospectus, (ii) any request
by the SEC for any amendment to such registration statement or Account
Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation
of any proceedings for that purpose or for any other purpose relating to the
registration or offering of each Account's interests pursuant to the Policies,
or (iv) any other action or circumstances that may prevent the lawful offer or
sale of said interests in any state or jurisdiction, including, without
limitation, any circumstances in which said interests are not registered and, in
all material respects, issued and sold in accordance with applicable state and
federal law. LIFE COMPANY will make every reasonable effort to prevent the
issuance of any such stop order, cease and desist order or similar order and, if
any such order is issued, to obtain the lifting thereof at the earliest possible
time.
4.5 LIFE COMPANY TO PROVIDE DOCUMENTS; INFORMATION ABOUT AVIF.
(a) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of all SEC registration statements, Account Prospectuses,
reports, any preliminary and final voting instruction solicitation material,
applications for exemptions, requests for no-action letters, and all amendments
to any of the above, that relate to each Account or the Policies,
contemporaneously with the filing of such document with the SEC or other
regulatory authorities.
(b) LIFE COMPANY will provide to AVIF or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material not prepared by AVIF or its affiliates, in which AVIF or any of its
affiliates is named, at least ten (10) Business Days prior to its use or such
shorter period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if AVIF or its designated agent objects to such use
within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. AVIF hereby
designates its investment advisor as the entity to receive such sales
9
<PAGE> 13
literature, until such time as AVIF appoints another designated agent by giving
notice to LIFE COMPANY in the manner required by Section 9 hereof.
(c) Neither LIFE COMPANY nor any of its affiliates, will give any
information or make any representations or statements on behalf of or concerning
AVIF or its affiliates in connection with the sale of the Policies other than
(i) the information or representations contained in the registration statement,
including the AVIF Prospectus contained therein, relating to Shares, as such
registration statement and AVIF Prospectus may be amended from time to time; or
(ii) in reports or proxy materials for AVIF; or (iii) in published reports for
AVIF that are in the public domain and approved by AVIF for distribution; or
(iv) in sales literature or other promotional material approved by AVIF, except
with the express written permission of AVIF.
(d) LIFE COMPANY shall adopt and implement procedures reasonably
designed to ensure that information concerning AVIF and its affiliates that is
intended for use only by brokers or agents selling the Policies (i.e.,
information that is not intended for distribution to Participants or offeree)
("broker only materials") is so used, and neither AVIF nor any of its affiliates
shall be liable for any losses, damages or expenses relating to the improper use
of such broker only materials.
(e) For the purposes of this Section 4.5, the phrase "sales literature
or other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
4.6 AVIF TO PROVIDE DOCUMENTS; INFORMATION ABOUT LIFE COMPANY .
(a) AVIF will provide to LIFE COMPANY at least one (1) complete copy of
all SEC registration statements, AVIF Prospectuses, reports, any preliminary and
final proxy material, applications for exemptions, requests for no-action
letters, and all amendments to any of the above, that relate to AVIF or the
Shares of a Fund, contemporaneously with the filing of such document with the
SEC or other regulatory authorities.
(b) AVIF will provide to LIFE COMPANY a camera ready copy of all AVIF
prospectuses and a printed copy, to be reproduced by LIFE COMPANY, of AVIF
statements of additional information, additionally AVIF will provide printed
copies of proxy materials, periodic reports to shareholders and other materials
required by law to be sent to Participants who have allocated any Policy value
to a Fund.
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<PAGE> 14
AVIF will provide such copies to LIFE COMPANY in a timely manner so
as to enable LIFE COMPANY, as the case may be, to print and distribute such
materials within the time required by law to be furnished to Participants.
(c) AVIF will provide to LIFE COMPANY or its designated agent at least
one (1) complete copy of each piece of sales literature or other promotional
material in which LIFE COMPANY, or any of its affiliates is named, or that
refers to the Policies, at least ten (10) Business Days prior to its use or such
shorter period as the Parties hereto may, from time to time, agree upon. No such
material shall be used if LIFE COMPANY or its designated agent objects to such
use within ten (10) Business Days after receipt of such material or such shorter
period as the Parties hereto may, from time to time, agree upon. LIFE COMPANY
shall receive all such sales literature until such time as it appoints a
designated agent by giving notice to AVIF in the manner required by Section 9
hereof.
(d) Neither AVIF nor any of its affiliates will give any information or
make any representations or statements on behalf of or concerning LIFE COMPANY,
each Account, or the Policies other than (i) the information or representations
contained in the registration statement, including each Account Prospectus
contained therein, relating to the Policies, as such registration statement and
Account Prospectus may be amended from time to time; or (ii) in published
reports for the Account or the Policies that are in the public domain and
approved by LIFE COMPANY for distribution; or (iii) in sales literature or other
promotional material approved by LIFE COMPANY or its affiliates, except with the
express written permission of LIFE COMPANY.
(e) AVIF shall cause its principal underwriter to adopt and implement
procedures reasonably designed to ensure that information concerning LIFE
COMPANY, and its affiliates that is intended for use only by brokers or agents
selling the Policies (i.e., information that is not intended for distribution to
Participants or offerees) ("broker only materials") is so used, and neither LIFE
COMPANY nor any of its affiliates shall be liable for any losses, damages or
expenses relating to the improper use of such broker only materials.
(f) For purposes of this Section 4.6, the phrase "sales literature or
other promotional material" includes, but is not limited to, advertisements
(such as material published, or designed for use in, a newspaper, magazine, or
other periodical, radio, television, telephone or tape recording, videotape
display, signs or billboards, motion pictures, or other public media, (e.g.,
on-line networks such as the Internet or other electronic messages), sales
literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts of
any other advertisement, sales literature, or published article), educational or
training materials or other communications distributed or made generally
available to some or all agents or employees, registration statements,
prospectuses, statements of additional information, shareholder reports, and
proxy materials and any other material constituting sales literature or
advertising under the NASD rules, the 1933 Act or the 1940 Act.
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SECTION 5. MIXED AND SHARED FUNDING
5.1 GENERAL.
The SEC has granted an order to AVIF exempting it from certain
provisions of the 1940 Act and rules thereunder so that AVIF may be available
for investment by certain other entities, including, without limitation,
separate accounts funding variable annuity contracts or variable life insurance
contracts, separate accounts of insurance companies unaffiliated with LIFE
COMPANY, and trustees of qualified pension and retirement plans (collectively,
"Mixed and Shared Funding"). The Parties recognize that the SEC has imposed
terms and conditions for such orders that are substantially identical to many of
the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply
pursuant to such an exemptive order granted to AVIF. AVIF hereby notifies LIFE
COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may
be appropriate to include in the prospectus pursuant to which a Policy is
offered disclosure regarding the potential risks of Mixed and Shared Funding.
5.2 DISINTERESTED DIRECTORS.
AVIF agrees that its Board of Directors shall at all times consist of
directors a majority of whom (the "Disinterested Directors") are not interested
persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the
Rules thereunder and as modified by any applicable orders of the SEC, except
that if this condition is not met by reason of the death, disqualification, or
bona fide resignation of any director, then the operation of this condition
shall be suspended (a) for a period of forty-five (45) days if the vacancy or
vacancies may be filled by the Board;(b) for a period of sixty (60) days if a
vote of shareholders is required to fill the vacancy or vacancies; or (c) for
such longer period as the SEC may prescribe by order upon application.
5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS.
AVIF agrees that its Board of Directors will monitor for the existence
of any material irreconcilable conflict between the interests of the
Participants in all separate accounts of life insurance companies utilizing AVIF
("Participating Insurance Companies"), including each Account, and participants
in all qualified retirement and pension plans investing in AVIF ("Participating
Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the
existence of or any potential for any such material irreconcilable conflict of
which it is aware. The concept of a "material irreconcilable conflict" is not
defined by the 1940 Act or the rules thereunder, but the Parties recognize that
such a conflict may arise for a variety of reasons, including, without
limitation:
(a) an action by any state insurance or other regulatory authority;
(b) a change in applicable federal or state insurance, tax or securities
laws or regulations, or a public ruling, private letter ruling, no-action or
interpretative letter, or any similar action by insurance, tax or securities
regulatory authorities;
(c) an administrative or judicial decision in any relevant proceeding;
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<PAGE> 16
(d) the manner in which the investments of any Fund are being managed;
(e) a difference in voting instructions given by variable annuity
contract and variable life insurance contract Participants or by Participants of
different Participating Insurance Companies;
(f) a decision by a Participating Insurance Company to disregard the
voting instructions of Participants; or
(g) a decision by a Participating Plan to disregard the voting
instructions of Plan participants.
Consistent with the SEC's requirements in connection with exemptive
orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist
the Board of Directors in carrying out its responsibilities by providing the
Board of Directors with all information reasonably necessary for the Board of
Directors to consider any issue raised, including information as to a decision
by LIFE COMPANY to disregard voting instructions of Participants. LIFE COMPANY's
responsibilities in connection with the foregoing shall be carried out with a
view only to the interests of Participants.
5.4 CONFLICT REMEDIES.
(a) It is agreed that if it is determined by a majority of the members
of the Board of Directors or a majority of the Disinterested Directors that a
material irreconcilable conflict exists, LIFE COMPANY will, if it is a
Participating Insurance Company for which a material irreconcilable conflict is
relevant, at its own expense and to the extent reasonably practicable (as
determined by a majority of the Disinterested Directors), take whatever steps
are necessary to remedy or eliminate the material irreconcilable conflict, which
steps may include, but are not limited to:
(i) withdrawing the assets allocable to some or all of the
Accounts from AVIF or any Fund and reinvesting such assets
in a different investment medium, including another Fund
of AVIF, or submitting the question whether such
segregation should be implemented to a vote of all
affected Participants and, as appropriate, segregating the
assets of any particular group (e.g., annuity
Participants, life insurance Participants or all
Participants) that votes in favor of such segregation, or
offering to the affected Participants the option of making
such a change; and
(ii) establishing a new registered investment company of the
type defined as a "management company" in Section 4(3) of
the 1940 Act or a new separate account that is operated as
a management company.
(b) If the material irreconcilable conflict arises because of LIFE
COMPANY's decision to disregard Participant voting instructions and that
decision represents a minority position or would preclude a majority vote, LIFE
COMPANY may be required, at AVIF's election, to withdraw each Account's
investment in AVIF or any Fund. No charge or penalty will be imposed as a result
of such
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<PAGE> 17
withdrawal. Any such withdrawal must take place within six (6) months after
AVIF gives notice to LIFE COMPANY that this provision is being implemented, and
until such withdrawal AVIF shall continue to accept and implement orders by LIFE
COMPANY for the purchase and redemption of Shares of AVIF.
(c) If a material irreconcilable conflict arises because a particular
state insurance regulator's decision applicable to LIFE COMPANY conflicts with
the majority of other state regulators, then LIFE COMPANY will withdraw each
Account's investment in AVIF within six (6) months after AVIF's Board of
Directors informs LIFE COMPANY that it has determined that such decision has
created a material irreconcilable conflict (after consideration of all
Participants), and until such withdrawal AVIF shall continue to accept and
implement orders by LIFE COMPANY for the purchase and redemption of Shares of
AVIF. No charge or penalty will be imposed as a result of such withdrawal.
(d) LIFE COMPANY agrees that any remedial action taken by it in
resolving any material irreconcilable conflict will be carried out at its
expense and with a view only to the interests of Participants.
(e) For purposes hereof, a majority of the Disinterested Directors will
determine whether or not any proposed action adequately remedies any material
irreconcilable conflict. In no event, however, will AVIF or any of its
affiliates be required to establish a new funding medium for any Policies. LIFE
COMPANY will not be required by the terms hereof to establish a new funding
medium for any Policies if an offer to do so has been declined by vote of a
majority of Participants materially adversely affected by the material
irreconcilable conflict.
5.5 NOTICE TO LIFE COMPANY.
AVIF will promptly make known in writing to LIFE COMPANY the Board of
Directors' determination of the existence of a material irreconcilable conflict,
a description of the facts that give rise to such conflict and the implications
of such conflict.
5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS.
LIFE COMPANY and AVIF (or its investment adviser) will at least annually
submit to the Board of Directors of AVIF such reports, materials or data as the
Board of Directors may reasonably request so that the Board of Directors may
fully carry out the obligations imposed upon it by the provisions hereof or any
exemptive order granted by the SEC to permit Mixed and Shared Funding, and said
reports, materials and data will be submitted at any reasonable time deemed
appropriate by the Board of Directors. All reports received by the Board of
Directors of potential or existing conflicts, and all Board of Directors actions
with regard to determining the existence of a conflict, notifying Participating
Insurance Companies and Participating Plans of a conflict, and determining
whether any proposed action adequately remedies a conflict, will be properly
recorded in the minutes of the Board of Directors or other appropriate records,
and such minutes or other records will be made available to the SEC upon
request.
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5.7 COMPLIANCE WITH SEC RULES.
If, at any time during which AVIF is serving as an investment medium for
variable life insurance Policies, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2
are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to
Mixed and Shared Funding, AVIF agrees that it will comply with the terms and
conditions thereof and that the terms of this Section 5 shall be deemed modified
if and only to the extent required in order also to comply with the terms and
conditions of such exemptive relief that is afforded by any of said rules that
are applicable.
5.8 OTHER REQUIREMENTS.
AVIF will require that each Participating Insurance Company and
Participating Plan enter into an agreement with AVIF that contains in substance
the same provisions as are set forth in Sections 4.1(b), 4.1(d), 4.3(a), 4.4(b),
4.5(a), 5, and 10 of this Agreement.
SECTION 6. TERMINATION
6.1 EVENTS OF TERMINATION.
Subject to Section 6.4 below, this Agreement will terminate as to a
Fund:
(a) at the option of AVIF or LIFE COMPANY upon the approval by (i) a
majority of the Disinterested Directors or (ii) a majority vote of the Shares of
the affected Fund that are held in the corresponding Subaccount of an Account
(pursuant to the procedures set forth in Section 10 of this Agreement for voting
Shares in accordance with Participant instructions); or
(b) at the option of AVIF upon institution of formal proceedings against
LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance
regulator or any other regulatory body regarding LIFE COMPANY's obligations
under this Agreement or related to the sale of the Policies, the operation of
each Account, or the purchase of Shares, if, in each case, AVIF reasonably
determines that such proceedings, or the facts on which such proceedings would
be based, have a material likelihood of imposing material adverse consequences
on the Fund with respect to which the Agreement is to be terminated; or
(c) at the option of LIFE COMPANY upon institution of formal proceedings
against AVIF, its principal underwriter, or its investment adviser by the NASD,
the SEC, or any state insurance regulator or any other regulatory body regarding
AVIF's obligations under this Agreement or related to the operation or
management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE
COMPANY reasonably determines that such proceedings, or the facts on which such
proceedings would be based, have a material likelihood of imposing material
adverse consequences on LIFE COMPANY, or the Subaccount corresponding to the
Fund with respect to which the Agreement is to be terminated; or
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<PAGE> 19
(d) at the option of any Party in the event that (i) the Fund's Shares
are not registered and, in all material respects, issued and sold in accordance
with any applicable federal or state law, or (ii) such law precludes the use of
such Shares as an underlying investment medium of the Policies issued or to be
issued by LIFE COMPANY; or
(e) upon termination of the corresponding Subaccount's investment in the
Fund pursuant to Section 5 hereof; or
(f) at the option of LIFE COMPANY if the Fund ceases to qualify as a RIC
under Subchapter M of the Code or under successor or similar provisions, or if
LIFE COMPANY reasonably believes that the Fund may fail to so qualify; or
(g) at the option of LIFE COMPANY if the Fund fails to comply with
Section 817(h) of the Code or with successor or similar provisions (other than
by reason of failure of the Policies issued by LIFE COMPANY to qualify as
annuity or life insurance contracts under the Code, or the failure of any
account or Policy to meet the definition of "segregated asset account" or
"variable contract"; respectively, within the meaning of the Code) or if LIFE
COMPANY reasonably believes that the Fund may fail to so comply; or
(h) at the option of AVIF if the Policies issued by LIFE COMPANY cease
to qualify as annuity contracts or life insurance contracts under the Code
(other than by reason of the Fund's noncompliance with Section 817(h) or
Subchapter M of the Code) or if interests in an Account under the Policies are
not registered, where required, and, in all material respects, are not issued or
sold in accordance with any applicable federal or state law; or
(i) upon another Party's material breach of any provision of this
Agreement.
6.2 NOTICE REQUIREMENT FOR TERMINATION.
No termination of this Agreement will be effective unless and until the
Party terminating this Agreement gives prior written notice to the other Party
to this Agreement of its intent to terminate, and such notice shall set forth
the basis for such termination. Furthermore:
(a) in the event that any termination is based upon the provisions of
Sections 6.1(a) or 6.1(e) hereof, such prior written notice shall be given at
least six (6) months in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto;
(b) in the event that any termination is based upon the provisions of
Sections 6.1(b) or 6.1(c) hereof, such prior written notice shall be given at
least ninety (90) days in advance of the effective date of termination unless a
shorter time is agreed to by the Parties hereto; and
(c) in the event that any termination is based upon the provisions of
Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof, such prior written
notice shall be given as soon as possible within twenty-four (24) hours after
the terminating Party learns of the event causing termination to be required.
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6.3 FUNDS TO REMAIN AVAILABLE.
Except (a) as necessary to implement Participation-initiated
transactions, (b) as required by state insurance laws or regulations, (c) as
required pursuant to Section 5 of this Agreement, or (d) with respect to any
Fund as to which this Agreement has terminated pursuant to Section 6.1 hereof,
LIFE COMPANY shall not (i) redeem AVIF Shares attributable to the Policies (as
opposed to AVIF Shares attributable to LIFE COMPANY's assets held in each
Account), or (ii) prevent Participants from allocating payments to or
transferring amounts from a Fund that was otherwise available under the
Policies, until six (6) months after LIFE COMPANY shall have notified AVIF of
its intention to do so and until 36 full calendar months shall have expired from
the date on which an Account first invested in any Fund.
6.4 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS.
All warranties and indemnifications will survive the termination of this
Agreement.
6.5 CONTINUANCE OF AGREEMENT FOR CERTAIN PURPOSES.
If any Party terminates this Agreement with respect to any Fund pursuant
to Sections 6.1(b), 6.1(c), 6.1(d), 6.1(f), 6.1(g), 6.1(h) or 6.1(i) hereof,
this Agreement shall nevertheless continue in effect as to any Shares of that
Fund that are outstanding as of the date of such termination (the "Initial
Termination Date"). This continuation shall extend to the earlier of the date as
of which an Account owns no Shares of the affected Fund or a date (the "Final
Termination Date") six (6) months following the Initial Termination Date, except
that LIFE COMPANY may, by written notice shorten said six (6) month period in
the case of a termination pursuant to Sections 6.1(d), 6.1(f), 6.1(g), 6.1(h) or
6.1(i).
SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION
The Parties hereto agree to cooperate and give reasonable assistance to
one another in taking all necessary and appropriate steps for the purpose of
ensuring that an Account owns no Shares of a Fund after the Final Termination
Date with respect thereto, or, in the case of a termination pursuant to Section
6.1(a), the termination date specified in the notice of termination. Such steps
may include combining the affected Account with another Account, substituting
other mutual fund shares for those of the affected Fund, or otherwise
terminating participation by the Policies in such Fund.
SECTION 8. ASSIGNMENT
This Agreement may not be assigned by any Party, except with the written
consent of each other Party.
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SECTION 9. NOTICES
Notices and communications required or permitted will be given by means
mutually acceptable to the Parties concerned. Each other notice or communication
required or permitted by this Agreement will be given to the following persons
at the following addresses and facsimile numbers, or such other persons,
addresses or facsimile numbers as the Party receiving such notices or
communications may subsequently direct in writing:
AIM VARIABLE INSURANCE FUNDS, INC.
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Facsimile: (713) 993-9185
Attn: Nancy L. Martin, Esq.
NORTHBROOK LIFE INSURANCE COMPANY
3100 Sanders Road, Suite J5D
Northbrook, IL 60062
Facsimile: (847) 402-4371
Attn: Michael J. Vellota, Esq.
SECTION 10. VOTING PROCEDURES
Subject to the cost allocation procedures set forth in Section 3 hereof,
LIFE COMPANY will distribute all proxy material furnished by AVIF to
Participants to whom pass-through voting privileges are required to be extended
and will solicit voting instructions from Participants. LIFE COMPANY will vote
Shares in accordance with timely instructions received from Participants. LIFE
COMPANY will vote Shares that are (a) not attributable to Participants to whom
pass-through voting privileges are extended, or (b) attributable to
Participants, but for which no timely instructions have been received, in the
same proportion as Shares for which said instructions have been received from
Participants, so long as and to the extent that the SEC continues to interpret
the 1940 Act to require pass through voting privileges for Participants. Neither
LIFE COMPANY nor any of its affiliates will in any way recommend action in
connection with or oppose or interfere with the solicitation of proxies for the
Shares held for such Participants except with respect to matters as to which
LIFE COMPANY has the right, under Rule 6e-2 or 6e-3(T) under the 1940 Act, to
vote the Shares without regard to voting instructions from Participants. LIFE
COMPANY reserves the right to vote shares held in any Account in its own right,
to the extent permitted by law. LIFE COMPANY shall be responsible for assuring
that each of its Accounts holding Shares calculates voting privileges in a
manner consistent with that of other Participating Insurance Companies or in the
manner required by the Mixed and Shared Funding exemptive order obtained by
AVIF. AVIF will notify LIFE COMPANY of any changes of interpretations or
amendments to Mixed and Shared
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Funding exemptive order it has obtained. AVIF will comply with all provisions
of the 1940 Act requiring voting by shareholders, and in particular, AVIF either
will provide for annual meetings (except insofar as the SEC may interpret
Section 16 of the 1940 Act not to require such meetings) or will comply with
Section 16(c) of the 1940 Act (although AVIF is not one of the trusts described
in Section 16(c) of that Act) as well as with Sections 16(a) and, if and when
applicable, 16(b). Further, AVIF will act in accordance with the SEC's
interpretation of the requirements of Section 16(a) with respect to periodic
elections of directors and with whatever rules the SEC may promulgate with
respect thereto.
SECTION 11. FOREIGN TAX CREDITS
AVIF agrees to consult in advance with LIFE COMPANY concerning any
decision to elect or not to elect pursuant to Section 853 of the Code to pass
through the benefit of any foreign tax credits to its shareholders.
SECTION 12. INDEMNIFICATION
12.1 OF AVIF BY LIFE COMPANY.
(a) Except to the extent provided in Sections 12.1(b) and 12.1(c),
below, LIFE COMPANY agrees to indemnify and hold harmless AVIF, its affiliates,
and each person, if any, who controls AVIF, or its affiliates within the meaning
of Section 15 of the 1933 Act and each of their respective directors and
officers, (collectively, the "Indemnified Parties" for purposes of this Section
12.1) against any and all losses, claims, damages, liabilities (including
amounts paid in settlement with the written consent of LIFE COMPANY) or actions
in respect thereof (including, to the extent reasonable, legal and other
expenses), to which the Indemnified Parties may become subject under any
statute, regulation, at common law or otherwise; provided, the Account owns
shares of the Fund and insofar as such losses, claims, damages, liabilities or
actions are related to the sale or acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, the Policies, or sales literature or
advertising for the Policies (or any amendment or
supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to LIFE COMPANY by or on behalf of
AVIF, for use in any Account's 1933 Act registration
statement, any Account Prospectus, the Policies, or sales
literature or advertising or otherwise for use in
connection with the sale of
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Policies or Shares (or any amendment or supplement to
any of the foregoing); or
(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in AVIF's 1933 Act registration statement, AVIF
Prospectus, sales literature or advertising of AVIF, or
any amendment or supplement to any of the foregoing, not
supplied for use therein by or on behalf of LIFE COMPANY,
or its affiliates and on which such persons have
reasonably relied) or the negligent, illegal or fraudulent
conduct of LIFE COMPANY, or its affiliates or persons
under their control (including, without limitation, their
employees and "persons associated with a member," as that
term is defined in paragraph (q) of Article I of the
NASD's By-Laws), in connection with the sale or
distribution of the Policies or Shares; or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus,
sales literature or advertising of AVIF, or any amendment
or supplement to any of the foregoing, or the omission or
alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements
therein not misleading if such a statement or omission was
made in reliance upon and in conformity with information
furnished to AVIF, or its affiliates by or on behalf of
LIFE COMPANY, or its affiliates for use in AVIF's 1933 Act
registration statement, AVIF Prospectus, sales literature
or advertising of AVIF, or any amendment or supplement to
any of the foregoing; or
(iv) arise as a result of any failure by LIFE COMPANY to
perform the obligations, provide the services and furnish
the materials required of them under the terms of this
Agreement, or any material breach of any representation
and/or warranty made by LIFE COMPANY in this Agreement or
arise out of or result from any other material breach of
this Agreement by LIFE COMPANY; or
(v) arise as a result of failure by the Policies issued by
LIFE COMPANY to qualify as life insurance, endowment or
annuity contracts under the Code, otherwise than by reason
of any Fund's failure to comply with Subchapter M or
Section 817(h) of the Code.
(b) Neither LIFE COMPANY shall be liable under this Section 12.1 with
respect to any losses, claims, damages, liabilities or actions to which an
Indemnified Party would otherwise be subject by reason of willful misfeasance,
bad faith, or gross negligence in the performance by that Indemnified Party of
its duties or by reason of that Indemnified Party's reckless disregard of
obligations or duties (i) under this Agreement, or (ii) to AVIF.
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(c) LIFE COMPANY shall not be liable under this Section 12.1 with
respect to any action against an Indemnified Party unless AVIF shall have
notified LIFE COMPANY in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the action shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify LIFE COMPANY of any such action shall not relieve LIFE COMPANY from
any liability which they may have to the Indemnified Party against whom such
action is brought otherwise than on account of this Section 12.1. Except as
otherwise provided herein, in case any such action is brought against an
Indemnified Party, LIFE COMPANY shall be entitled to participate, at its own
expense, in the defense of such action and also shall be entitled to assume the
defense thereof, with counsel approved by the Indemnified Party named in the
action, which approval shall not be unreasonably withheld. After notice from
LIFE COMPANY to such Indemnified Party of LIFE COMPANY's election to assume the
defense thereof, the Indemnified Party will cooperate fully with LIFE COMPANY
and shall bear the fees and expenses of any additional counsel retained by it,
and LIFE COMPANY shall not be liable to such Indemnified Party under this
Agreement for any legal or other expenses subsequently incurred by such
Indemnified Party independently in connection with the defense thereof, other
than reasonable costs of investigation.
12.2 OF LIFE COMPANY BY AVIF .
(a) Except to the extent provided in Sections 12.2(c), 12.2(d) and 12.2(e),
below, AVIF agrees to indemnify and hold harmless LIFE COMPANY, its affiliates,
and each person, if any, who controls LIFE COMPANY, or its affiliates within the
meaning of Section 15 of the 1933 Act and each of its directors and officers,
(collectively, the "Indemnified Parties" for purposes of this Section 12.2)
against any and all losses, claims, damages, liabilities (including amounts paid
in settlement with the written consent of AVIF) or actions in respect thereof
(including, to the extent reasonable, legal and other expenses), to which the
Indemnified Parties may become subject under any statute, regulation, at common
law, or otherwise; provided, the Account owns shares of the Fund and insofar as
such losses, claims, damages, liabilities or actions are related to the sale or
acquisition of AVIF's Shares and:
(i) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
AVIF's 1933 Act registration statement, AVIF Prospectus or
sales literature or advertising of AVIF (or any amendment
or supplement to any of the foregoing), or arise out of or
are based upon the omission or the alleged omission to
state therein a material fact required to be stated
therein or necessary to make the statements therein not
misleading; provided, that this agreement to indemnify
shall not apply as to any Indemnified Party if such
statement or omission or such alleged statement or
omission was made in reliance upon and in conformity with
information furnished to AVIF or its affiliates by or on
behalf of LIFE COMPANY or its affiliates for use in AVIF's
1933 Act registration statement, AVIF Prospectus, or in
sales literature or advertising or otherwise for use in
connection with the sale of Contracts or Shares (or any
amendment or supplement to any of the foregoing); or
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(ii) arise out of or as a result of any other statements or
representations (other than statements or representations
contained in any Account's 1933 Act registration
statement, any Account Prospectus, sales literature or
advertising for the Policies, or any amendment or
supplement to any of the foregoing, not supplied for use
therein by or on behalf of AVIF or its affiliates and on
which such persons have reasonably relied) or the
negligent, illegal or fraudulent conduct of AVIF or its
affiliates or persons under its control (including,
without limitation, their employees and "persons
associated with a member" as that term is defined in
Section (q) of Article I of the NASD By-Laws), in
connection with the sale or distribution of AVIF Shares;
or
(iii) arise out of or are based upon any untrue statement or
alleged untrue statement of any material fact contained in
any Account's 1933 Act registration statement, any Account
Prospectus, sales literature or advertising covering the
Policies, or any amendment or supplement to any of the
foregoing, or the omission or alleged omission to state
therein a material fact required to be stated therein or
necessary to make the statements therein not misleading,
if such statement or omission was made in reliance upon
and in conformity with information furnished to LIFE
COMPANY or its affiliates by or on behalf of AVIF for use
in any Account's 1933 Act registration statement, any
Account Prospectus, sales literature or advertising
covering the Policies, or any amendment or supplement to
any of the foregoing; or
(iv) arise as a result of any failure by AVIF to perform the
obligations, provide the services (including but not
limited to, the provisions of correct net asset value) and
furnish the materials required of it under the terms of
this Agreement, or any material breach of any
representation and/or warranty made by AVIF in this
Agreement or arise out of or result from any other
material breach of this Agreement by AVIF.
(b) Except to the extent provided in Sections 12.2(c), 12.2(d) and
12.2(e) hereof, AVIF agrees to indemnify and hold harmless the Indemnified
Parties from and against any and all losses, claims, damages, liabilities
(including amounts paid in settlement thereof with, the written consent of AVIF)
or actions in respect thereof (including, to the extent reasonable, legal and
other expenses) to which the Indemnified Parties may become subject directly or
indirectly under any statute, at common law or otherwise, insofar as such
losses, claims, damages, liabilities or actions directly or indirectly result
from or arise out of the failure of any Fund to operate as a regulated
investment company in compliance with (i) Subchapter M of the Code and
regulations thereunder, or (ii) Section 817(h) of the Code and regulations
thereunder, including, without limitation, any income taxes and related
penalties, rescission charges, liability under state law to Participants
asserting liability against LIFE COMPANY pursuant to the Policies, the costs of
any ruling and closing agreement or other settlement with the IRS, and the cost
of any substitution by LIFE COMPANY of Shares of another investment company or
portfolio for those of any adversely affected Fund as a funding medium for
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each Account that LIFE COMPANY reasonably deems necessary or appropriate as a
result of the noncompliance.
(c) AVIF shall not be liable under this Section 12.2 with respect to any
losses, claims, damages, liabilities or actions to which an Indemnified Party
would otherwise be subject by reason of willful misfeasance, bad faith, or gross
negligence in the performance by that Indemnified Party of its duties or by
reason of such Indemnified Party's reckless disregard of its obligations and
duties (i) under this Agreement, or (ii) to LIFE COMPANY, each Account or
Participants.
(d) AVIF shall be liable under this Section 12.2 with respect to any action
against an Indemnified Party unless the Indemnified Party shall have notified
AVIF in writing within a reasonable time after the summons or other first legal
process giving information of the nature of the action shall have been served
upon such Indemnified Party (or after such Indemnified Party shall have received
notice of such service on any designated agent), but failure to notify AVIF of
any such action shall not relieve AVIF from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this Section 12.2. Except as otherwise provided herein, in case any
such action is brought against an Indemnified Party, AVIF will be entitled to
participate, at its own expense, in the defense of such action and also shall be
entitled to assume the defense thereof (which shall include, without limitation,
the conduct of any ruling request and closing agreement or other settlement
proceeding with the IRS), with counsel approved by the Indemnified Party named
in the action, which approval shall not be unreasonably withheld. After notice
from AVIF to such Indemnified Party of AVIF's election to assume the defense
thereof, the Indemnified Party will cooperate fully with AVIF and shall bear the
fees and expenses of any additional counsel retained by it, and AVIF will not be
liable to such Indemnified Party under this Agreement for any legal or other
expenses subsequently incurred by such Indemnified Party independently in
connection with the defense thereof, other than reasonable costs of
investigation.
(e) In no event shall AVIF be liable under the indemnification
provisions contained in this Agreement to any individual or entity, including,
without limitation, LIFE COMPANY, or any other Participating Insurance Company
or any Participant, with respect to any losses, claims, damages, liabilities or
expenses that arise out of or result from (i) a breach of any representation,
warranty, and/or covenant made by LIFE COMPANY hereunder or by any Participating
Insurance Company under an agreement containing substantially similar
representations, warranties and covenants; (ii) the failure by LIFE COMPANY or
any Participating Insurance Company to maintain its segregated asset account
(which invests in any Fund) as a legally and validly established segregated
asset account under applicable state law and as a duly registered unit
investment trust under the provisions of the 1940 Act (unless exempt therefrom);
or (iii) the failure by LIFE COMPANY or any Participating Insurance Company to
maintain its variable annuity and/or variable life insurance contracts (with
respect to which any Fund serves as an underlying funding vehicle) as life
insurance, endowment or annuity contracts under applicable provisions of the
Code; provided however, that the limitation of liability contained in this
paragraph (e) shall not apply if the breach or failures described in
subparagraphs (i), (ii) and (iii), above, by LIFE COMPANY or any Participating
Insurance Company resulted from failure of AVIF to comply with the requirements
of Subchapter M or Section 817(h) of the Code.
23
<PAGE> 27
12.3 EFFECT OF NOTICE.
Any notice given by the indemnifying Party to an Indemnified Party
referred to in Sections 12.1(c) or 12.2(d) above of participation in or control
of any action by the indemnifying Party will in no event be deemed to be an
admission by the indemnifying Party of liability, culpability or responsibility,
and the indemnifying Party will remain free to contest liability with respect to
the claim among the Parties or otherwise.
12.4 SUCCESSORS.
A successor by law of any Party shall be entitled to the benefits of the
indemnification contained in this Section 12.
SECTION 13. APPLICABLE LAW
This Agreement will be construed and the provisions hereof interpreted
under and in accordance with Maryland law, without regard for that state's
principles of conflict of laws.
SECTION 14. EXECUTION IN COUNTERPARTS
This Agreement may be executed simultaneously in two or more
counterparts, each of which taken together will constitute one and the same
instrument.
SECTION 15. SEVERABILITY
If any provision of this Agreement is held or made invalid by a court
decision, statute, rule or otherwise, the remainder of this Agreement will not
be affected thereby.
SECTION 16. RIGHTS CUMULATIVE
The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, that the Parties are entitled to under federal and state
laws.
SECTION 17. HEADINGS
The Table of Contents and headings used in this Agreement are for
purposes of reference only and shall not limit or define the meaning of the
provisions of this Agreement.
24
<PAGE> 28
SECTION 18. CONFIDENTIALITY
AVIF acknowledges that the identities of the customers of LIFE COMPANY
or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for
purposes of this Section 18), information maintained regarding those customers,
and all computer programs and procedures or other information developed by the
LIFE COMPANY Protected Parties or any of their employees or agents in connection
with LIFE COMPANY's performance of its duties under this Agreement are the
valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it
comes into possession of any list or compilation of the identities of or other
information about the LIFE COMPANY Protected Parties' customers, or any other
information or property of the LIFE COMPANY Protected Parties, other than such
information as may be independently developed or compiled by AVIF from
information supplied to it by the LIFE COMPANY Protected Parties' customers who
also maintain accounts directly with AVIF, AVIF will hold such information or
property in confidence and refrain from using, disclosing or distributing any of
such information or other property except: (a) with LIFE COMPANY's prior written
consent; or (b) as required by law or judicial process. LIFE COMPANY
acknowledges that the identities of the customers of AVIF or any of its
affiliates (collectively, the "AVIF Protected Parties" for purposes of this
Section 18), information maintained regarding those customers, and all computer
programs and procedures or other information developed by the AVIF Protected
Parties or any of their employees or agents in connection with AVIF's
performance of its duties under this Agreement are the valuable property of the
AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of
any list or compilation of the identities of or other information about the AVIF
Protected Parties' customers or any other information or property of the AVIF
Protected Parties, other than such information as may be independently developed
or compiled by LIFE COMPANY from information supplied to it by the AVIF
Protected Parties' customers who also maintain accounts directly with LIFE
COMPANY, LIFE COMPANY will hold such information or property in confidence and
refrain from using, disclosing or distributing any of such information or other
property except: (a) with AVIF's prior written consent; or (b) as required by
law or judicial process. Each party acknowledges that any breach of the
agreements in this Section 18 would result in immediate and irreparable harm to
the other parties for which there would be no adequate remedy at law and agree
that in the event of such a breach, the other parties will be entitled to
equitable relief by way of temporary and permanent injunctions, as well as such
other relief as any court of competent jurisdiction deems appropriate.
SECTION 19. TRADEMARKS AND FUND NAMES
(a) Except as may otherwise be provided in a License Agreement among A I
M Management Group, Inc. and LIFE COMPANY, neither LIFE COMPANY or any of its
affiliates, shall use any trademark, trade name, service mark or logo of AVIF or
any of its affiliates, or any variation of any such trademark, trade name,
service mark or logo, without AVIF's prior written consent, the granting of
which shall be at AVIF's sole option.
25
<PAGE> 29
(b) Except as otherwise expressly provided in this Agreement, neither
AVIF, its investment adviser, its principal underwriter, or any affiliates
thereof shall use any trademark, trade name, service mark or logo of LIFE
COMPANY or any of its, or any variation of any such trademark, trade name,
service mark or logo, without LIFE COMPANY's prior written consent, the
granting of which shall be at LIFE COMPANY's sole option.
SECTION 20. PARTIES TO COOPERATE
Each party to this Agreement will cooperate with each other party and
all appropriate governmental authorities (including, without limitation, the
SEC, the NASD and state insurance regulators) and will permit each other and
such authorities reasonable access to its books and records (including copies
thereof) in connection with any investigation or inquiry relating to this
Agreement or the transactions contemplated hereby.
SECTION 21. AMENDMENTS
No provision of this Agreement may be amended or modified in any manner
except by a written agreement executed by all parties hereto.
--------------------------------------
26
<PAGE> 30
IN WITNESS WHEREOF, the Parties have caused this Agreement to be
executed in their names and on their behalf by and through their duly authorized
officers signing below.
AIM VARIABLE INSURANCE FUNDS, INC.
Attest: /s/ Nancy L. Martin By: /s/ Robert H. Graham
---------------------- -----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title Assistant Secretary Title: President
NORTHBROOK LIFE INSURANCE COMPANY,
on behalf of itself and its separate
accounts
Attest: /s/ Jason A. Bickler By: /s/ John Hunter
----------------------- -----------------------
Name: Jason A. Bickler By: John Hunter
Title: Actuary & Director Title: Vice President
27
<PAGE> 31
SCHEDULE A
FUNDS AVAILABLE UNDER THE POLICIES
o AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. Capital Appreciation Fund
AIM V.I. Growth Fund
AIM V.I. Value Fund
SEPARATE ACCOUNTS UTILIZING THE FUNDS
o Northbrook Variable Annuity Account II
Established May 18, 1990
POLICIES FUNDED BY THE SEPARATE ACCOUNTS
o NLU906 Countrywide Contract
Master Group Policy NLU904
Certificate From NLU905
28
<PAGE> 32
SCHEDULE B
AIM'S PRICING ERROR POLICIES
Determination of Materiality
In the event that AIM discovers an error in the calculation of the Fund's net
asset value, the following policies will apply:
If the amount of the error is less than $.01 per share, it is considered
immaterial and no adjustments are made.
If the amount of the error is $.01 per share or more, then the following
thresholds are applied:
a. If the amount of the difference in the erroneous net asset value
and the correct net asset value is less than .5% of the correct
net asset value, AIM will reimburse the affected Fund to the
extent of any loss resulting from the error. No other adjustments
shall be made.
b. If the amount of the difference in the erroneous net asset value
and the correct net asset value is .5% of the correct net asset
value or greater, then AIM will determine the impact of the error
to the affected Fund and shall reimburse such Fund (and/or LIFE
COMPANY, as appropriate) to the extent of any loss resulting from
the error. To the extent that an overstatement of net asset value
per share is detected quickly and LIFE COMPANY has not mailed
redemption checks to Participants, LIFE COMPANY and AIM agree to
examine the extent of the error to determine the feasibility of
reprocessing such redemption transaction (for purposes of
reimbursing the Fund to the extent of any such overpayment).
Reprocessing Cost Reimbursement
To the extent a reprocessing of Participant transactions is required pursuant to
paragraph (b), above, AIM shall reimburse LIFE COMPANY for LIFE COMPANY's
reprocessing costs in an amount not to exceed $3.00 per contract affected by $10
or more.
The Pricing Policies described herein may be modified by AVIF as approved by its
Board of Directors. AIM agrees to use its best efforts to notify LIFE COMPANY at
least five (5) days prior to any such meeting of the Board of Directors of AVIF
to consider such proposed changes.
29
<PAGE> 33
SCHEDULE C
EXPENSE ALLOCATIONS
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DESCRIPTION LIFE COMPANY AVIF
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Registration
Prepare and file Account registration Fund registration statements
registration statements(1) statements
Payment of fees Account fees Fund fees
- --------------------------------------------------------------------------------------------
Prospectuses
Typesetting Account Prospectuses Fund Prospectuses
Printing(2) Account Prospectuses Fund Prospectuses
- --------------------------------------------------------------------------------------------
SAIs
Typesetting Account SAIs Fund SAIs
Printing Account SAIs Fund SAIs
- --------------------------------------------------------------------------------------------
Supplements (to
Prospectuses or SAIs)
Typesetting and Printing Account Supplements (unless Fund Supplements (unless
changes relate only to the changes relate only to the
Fund) Account)
Account Supplements (for
Fund Supplements (for changes changes that relate
only to that relate only to
Fund) Account)
- --------------------------------------------------------------------------------------------
Financial Reports
Typesetting
Account Reports Fund Reports
Printing(2)
Account Reports Fund Reports
- --------------------------------------------------------------------------------------------
</TABLE>
- -----------------------
(1) Includes all filings and costs necessary to keep registrations
current and effective; including, without limitation, filing Forms N-SAR and
Rule 24f-2 Notices as required by law.
(2) To the extent that documents prepared by LIFE COMPANY and AVIF are
printed together, the printing cost shall be allocated in proportion to the
number of pages attributable to each document.
30
<PAGE> 34
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
DESCRIPTION LIFE COMPANY AVIF
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Proxies(3)
Typesetting, printing and Account and Fund Proxies Account and Fund Proxies
where mailing of proxy where the matters submitted the matters submitted are
solicitation materials and are solely Account related solely Fund related voting
instruction solicitation materials and tabulation of proxies to Participants
- --------------------------------------------------------------------------------------------
Other (Sales Related)
Contract owner Account related items Fund related items
communication
Distribution Policies
Administration Account (Policies)
- --------------------------------------------------------------------------------------------
</TABLE>
- ------------------
(3) When proxy materials are required for both Account and Fund matters,
the costs shall be split proportionately based upon those materials related
solely to the Account and those materials related solely to the Fund. The cost
with respect to joint materials shall be allocated evenly between LIFE COMPANY
and AVIF.
31
<PAGE> 1
EXHIBIT i(1)(h)
[LETTERHEAD OF FREEDMAN, LEVY, KROLL & SIMONDS]
February 17, 2000
OPINION AND CONSENT OF COUNSEL
AIM Variable Insurance Funds
11 Greenway Plaza, Suite 100
Houston, Texas 77046-1173
Executives:
This opinion is given in connection with the filing with the
Securities and Exchange Commission ("SEC") by AIM Variable Insurance Funds, a
Delaware business trust (the "Trust"), of Post-Effective Amendment No. 16 under
the Securities Act of 1933 ("1933 Act") to the Trust's Registration Statement
on Form N-1A (File No. 33-57340, the "Registration Statement") relating to an
indefinite number of the Trust's authorized shares of beneficial interest,
including each series ("Fund") of the Trust.
The Trust currently consists of the following Funds: AIM V.I.
Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM
V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I.
Dent Demographic Trends Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global
Growth and Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government
Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM
V.I. High Yield Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market
Fund, AIM V.I. Telecommunications Fund, and AIM V.I. Value Fund. The Trust's
authorized shares of beneficial interest relating to each Fund are hereinafter
referred to collectively as the "Shares."
We have examined the following: the Certificate of Trust, dated
December 6, 1999; the Agreement and Declaration of Trust, dated December 6,
1999; the By-laws of the Trust; the Registration Statement, and amendments
thereto, including Post-Effective Amendment No. 16 to the Registration
Statement substantially in the form in which it is to be filed with the SEC; a
Certificate of Good Standing issued by the State of Delaware on February 14,
2000; pertinent provisions of the laws of Delaware; and such other records,
certificates, documents and statutes that we have deemed relevant in order to
render the opinion expressed herein.
<PAGE> 2
AIM Variable Insurance Funds
February 17, 2000
Page 2
We are not members of the Delaware bar; nevertheless, based on the
foregoing examination, we are of the opinion that:
1. The Trust is a business trust duly organized, validly
existing, and in good standing under the laws of the State
of Delaware; and
2. The Shares to be offered for sale by the Trust, when
issued in the manner contemplated by the Registration
Statement, as amended, will be legally issued, fully-paid,
and non-assessable.
This letter expresses our opinion as to the Delaware Business Trust
Act, addressing matters such as due formation and, in effect, the authorization
and issuance of shares of beneficial interest, but does not extend to the
securities or "Blue Sky" laws of Delaware or to federal securities or other
laws.
We consent to the use of this opinion as an Exhibit to the
Registration Statement, as amended. In giving this consent, we do not admit
that we are within the category of persons whose consent is required under
Section 7 of the 1933 Act or the rules and regulations of the SEC thereunder.
Very truly yours,
/s/ Freedman, Levy, Kroll & Simonds
Freedman, Levy, Kroll & Simonds
<PAGE> 1
EXHIBIT i(2)
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
We consent to the use of our reports each dated February 4, 2000 on the
financial statements and financial highlights of AIM V.I. Aggressive Growth
Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital
Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic
Trends Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Growth and Income
Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM
V.I. Growth and Income Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM
V.I. International Equity Fund, AIM V.I. Money Market Fund, AIM V.I.
Telecommunications Fund, and AIM V.I. Value Fund, each a series of AIM Variable
Insurance Funds, Inc. Such financial statements and financial highlights are
included in the Post-Effective Amendment No. 16 to the Registration Statement on
Form N-1A of AIM Variable Insurance Funds. We also consent to the references to
our Firm in such Registration Statement.
/s/ TAIT, WELLER & BAKER
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 16, 2000
