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TABLE OF CONTENTS
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AIM Variable Insurance Funds, Inc.
AIM V.I. Aggressive Growth Fund........................................... 1
AIM V.I. Balanced Fund.................................................... 13
AIM V.I. Blue Chip Fund................................................... 29
AIM V.I. Capital Appreciation Fund........................................ 37
AIM V.I. Capital Development Fund......................................... 50
AIM V.I. Dent Demographic Trends Fund..................................... 63
AIM V.I. Diversified Income Fund.......................................... 71
AIM V.I. Global Growth and Income Fund.................................... 86
AIM V.I. Global Utilities Fund............................................ 97
AIM V.I. Government Securities Fund....................................... 109
AIM V.I. Growth Fund...................................................... 119
AIM V.I. Growth and Income Fund........................................... 130
AIM V.I. High Yield Fund.................................................. 141
AIM V.I. International Equity Fund........................................ 151
AIM V.I. Money Market Fund................................................ 163
AIM V.I. Telecommunications Fund.......................................... 171
AIM V.I. Value Fund....................................................... 182
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The Managers' Overview
AIM V.I. AGGRESSIVE GROWTH FUND ENDS YEAR ON HIGH NOTE
A roundtable discussion with the fund management team for AIM V.I. Aggressive
Growth Fund about the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. AGGRESSIVE the year up a stunning 85.59%. If the and computer software and services have
GROWTH FUND PERFORM DURING 1999? current economic expansion lasts performed well, and the portfolio has
A. 1999, the fund's first complete year of through the early months of 2000, it will quite a bit of exposure to all three, as
operation, was much kinder than 1998, become the longest expansion period in shown in our Top 10 Industries list.
the year in which the fund opened. For U.S. history. Emulex, the fund's largest equity holding
the year ended December 31, 1999, AIM designs connectivity products for business
V.I. Aggressive Growth Fund returned Q. HOW WAS THE FUND STRUCTURED networks, including network-access servers
44.67%, outperforming the Russell 2000 AT THE CLOSE OF THE YEAR? and printer servers. Other technology
Index (which returned 43.09%) and the A. At the end of 1999, technology stocks holdings that helped the fund's 1999
Lipper Small Cap Fund Index (which composed about 47% of the fund's holdings performance are Harmonic (which designs
returned 41.54%). (up from 36% at June 30, 1999); consumer and builds fiber-optic transmission
cyclicals (such as auto parts, equipment for cable, satellite and
Q. WHAT WERE THE MAJOR TRENDS IN publishing and textiles) accounted for wireless networks) and Check Point
THE FINANCIAL MARKETS DURING THE just over 12%, down from 18% in June; Software Technologies (which makes
REPORTING PERIOD? and consumer staples (such as broad- firewalls--software applications that
A. Early in the year, a technology sell-off casting, restaurants and food safeguard corporate networks from
affected the portfolio because of our retailers) made up a little more than 8%, unauthorized intrusion).
significant tech holdings. But the markets down from just over 10% six months ago.
rebounded when first-quarter earnings Q. WHAT OTHER FACTORS CONTRIBUTED
came in quite strong. Q. HOW DID THE PORTFOLIO'S TO THE FUND'S GAINS?
In May, the Fed hinted that it might TECHNOLOGY STOCKS PERFORM? A. Even in other sectors, technology-
raise interest rates, and in June it did so, A. Technology was the big winner for related stocks helped the fund's
raising the federal funds rate to 5% and most of 1999. Industries such as semi- performance. Our semiconductor
announcing its shift to a neutral bias. conductors, communications equipment holdings, approximately 10% of
That announcement sparked a "relief the portfolio, have
rally" in the markets. The technology-
oriented Nasdaq, which had languished PORTFOLIO COMPOSITION
for the past few months, began its As of 12/31/99, based on total net assets
upward trek.
Late August and most of September TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
saw a pretty severe sell-off as investors
fretted about the trade deficit, the dollar 1. Emulex Corp. 1.88% 1. Computers (Software & Services) 11.79%
and the possibility of higher interest rates 2. Applied Micro Circuits Corp. 1.76 2. Electronics (Semiconductors) 10.03
when the Federal Reserve Board switched 3. SDL, Inc. 1.76 3. Communications Equipment 6.71
gears and adopted a "tightening bias." 4. Harmonic, Inc. 1.70 4. Electrical Equipment 5.59
Despite persistent inflation fears, the U.S. 5. Check Point Software 1.61 5. Computers (Networking) 4.51
economy continued to experience a near- Technologies Ltd. (Israel) 6. Computers (Peripherals) 4.29
record level of consumer confidence. 6. Alpha Industries, Inc. 1.44 7. Retail (Specialty Apparel) 4.20
Markets reached a fever pitch by the 7. Cree Research, Inc. 1.43 8. Services (Data Processing) 3.96
end of 1999; driven by some leading 8. Microchip Technology, Inc. 1.42 9. Equipment (Semiconductor) 3.13
technology stocks, the Nasdaq finished 9. Concord EFS, Inc. 1.40 10. Retail (Specialty) 2.54
10. QLogic Corp. 1.38
The fund's portfolio composition is subject to change, and there is no
assurance that the fund will continue to hold any particular security.
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AIM V.I. AGGRESSIVE GROWTH FUND 1
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[GRAPH APPEARS HERE]
almost all appreciated during the fiscal RESULTS OF A $10,000 INVESTMENT
year. One such company is Applied Micro -------------------------------
Circuits, which designs circuits to 5/1/98 - 12/31/99
transmit large volumes of complex data
at high speeds; we increased our holding AVERAGE ANNUAL TOTAL RETURNS
in Applied Micro Circuits during the As of 12/31/99
fiscal year. Another semiconductor stock Inception (5/1/98) 24.07%
the fund owns is SDL, which makes 1 Year 44.67%
semiconductor laser-pump modules for
companies that operate fiber-optic, LIPPER SMALL RUSSELL AIM V.I.
cable-TV and satellite communication CAP FUND 2000 AGGRESSIVE
networks; our holding in SDL increased (In thousands) INDEX INDEX GROWTH FUND
during 1999 as well. -------------------------------------
5/1/98 10,000 10,000 10,000
Q. WHAT IS YOUR OUTLOOK FOR THE NEW YEAR? 6/98 9,700 9,481 9,565
A. The climate appears favorable for 9/98 8,090 7,571 7,283
stocks, particularly for small-cap issues. 12/98 9,906 8,806 9,006
The economy is growing at a healthy pace 3/99 9,443 8,328 8,713
and corporate profits are solid, 6/99 10,700 9,624 9,955
especially for smaller companies. Perhaps 9/99 11,062 9,015 10,135
most significant has been the improvement 12/99 14,331 10,678 14,515
in the performance of small-cap stocks.
We remain optimistic about the long-term -------------------
prospects for these stocks because of their Source: Lipper, Inc.
attractive valuations and the positive Past performance cannot guarantee comparable future results.
earnings-growth projections of smaller companies.
We will strive to select the stocks of MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
smaller companies with outstanding growth INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
prospects for inclusion in the fund's portfolio. SHOWN.
The performance figures shown here, which represent AIM V.I. Aggressive
Growth Fund, are not intended to reflect actual annuity values, and they do
not reflect charges at the separate-account level which (if applied) would
lower them. AIM V.I. Aggressive Growth Fund's performance figures are
historical, and they reflect changes in net asset value and the reinvestment of
distributions. The fund's investment return and principal value will fluctuate,
so an investor's shares, when redeemed, may be worth more or less than their
original cost. Had fees and expenses not been waived during the reporting
period, returns would have been lower.
The unmanaged Lipper Small Cap Fund Index represents an average of the
performance of the 30 largest small-capitalization growth funds tracked by
Lipper, Inc., an independent mutual fund performance monitor. The unmanaged
National Association of Securities Dealers Automated Quotation System Composite
Index (the Nasdaq) is a group of more than 5,000 over-the-counter securities
representing the small and mid-sized company universe. The unmanaged Russell
2000 Stock Index is generally considered representative of the performance of
the stocks of small-capitalization companies. Data for the indexes are for the
period 4/30/98-12/31/99.
Investing in smaller companies may involve greater risk and potential
reward than investing in more established companies.
An investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends.
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2 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
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>
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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 3
<PAGE>
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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>
4 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
<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 5
<PAGE>
<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.
6 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
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 7
<PAGE>
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.
8 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
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 $66,764 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
$43,901 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 $3,440
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 9
<PAGE>
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.
10 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. AGGRESSIVE GROWTH FUND 11
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
12 AIM V.I. AGGRESSIVE GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
FUND BENEFITS FROM TECHNOLOGY DOMINANCE
A roundtable discussion with the fund management team for AIM V.I. Balanced
Fund about the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. BALANCED FUND PERFORM third quarter, while technology stocks bonds. The ensuing bond sell-off
DURING THE FISCAL YEAR? continued to soar through year-end. produced the worst calendar-year
A. Boosted by strong technology holdings, Global equity markets ended 1999 at performance for bonds since 1994.
AIM V.I. Balanced Fund posted a robust record levels. Every major index in the
19.31% return for the fiscal year ended United States, as well as markets across Q. WHAT FACTORS CONTRIBUTED
December 31,1999. Fund performance Europe, Asia and Latin America, hit new TO THE FUND'S PERFORMANCE?
slightly underperformed the S&P 500, highs at year-end. But in the midst of A. The fund continued to maintain its
which returned 21.03%, but handily this prosperity we continued to struggle consistent 60/40 allocation of stocks and
outpaced the Lipper Balanced Fund Index, with a stealth bear market. At the end bonds during the fiscal year. Although
which gained 8.98% during the same period. of 1999, a third of New York Stock our fixed-income component detracted
Exchange and over-the-counter stocks from fund performance, losses in this
Q. WHAT WERE THE MAJOR TRENDS IN were off 20% or more from their previous area were more than offset by the
THE FINANCIAL MARKETS DURING 1999? 12-month highs. excellent gains on the equity side.
A. Although there were several prominent This past year has been a challenging We had significant exposure to the
shifts in market sentiment during the period for bond investors. Throughout technology and communication services
fiscal year, the overriding theme for 1999, downward pressure on bond prices sectors, which remained very strong
financial markets in 1999 was the came from the U.S. economy's continued during the year, driven largely by the
dominance of the technology sector. strong growth, improving global explosion in Internet and data
During the first half of 1999, investors economies, rising long-term interest communications traffic. At the end of
favored large-cap and cyclical stocks. rates and inflation fears. These factors 1999, these sectors, which accounted
Then the markets began to broaden into contributed to a market environment in for more than 50% of total net assets,
small- and mid-cap issues during the which investors favored stocks over were the fund's largest sector
allocations. Our international holdings,
9% of the fund's total net assets,
enhanced performance on the renewed
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
% OF
NET
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 FIXED-INCOME HOLDINGS ASSETS
1. Nokia Oyj-ADR (Finland) 1.26% 1. Computers (Software & Services) 6.64% 1. U.S. Treasury Notes 5.75%-7.25% 8.61%
2. Infospace.com Inc. 1.20 2. Telephone 5.27 2. FNMA Notes 6.18%-6.50% 1.24
3. Lucent Technologies Inc. 1.18 3. Communications Equipment 5.20 3. VERITAS Software Corp. 1.86% 0.84
4. Cisco Systems, Inc. 1.11 4. Broadcasting 5.05 4. Comverse Technology Corp. 4.50% 0.78
5. EMC Corp. 1.02 (Television, Radio & Cable) 5. Niagara Mohawk Power Corp. 7.75% 0.62
6. America Online Inc. 1.00 5. Telecommunications 4.54 6. Torchmark Corp. 7.88% 0.56
7. Univision Communications 0.95 (Long Distance) 7. Southern Energy, Inc. 7.90% 0.55
8. Freemarkets Inc. 0.92 6. Electric Companies 3.53 8. CSX Corp. 9.00% 0.55
9. Sun Microsystems, Inc. 0.91 7. Financial (Diversified) 2.97 9. Equistar Chemical, L.P. 8.50% 0.51
10. Global Crossing Ltd. (Bermuda) 0.85 8. Natural Gas 2.44 10. Private Export Funding 8.35% 0.49
9. Telecommunications 1.93
(Cellular/Wireless)
10. Electronics (Semiconductors) 1.93
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any particular
security.
</TABLE>
AIM V.I. BALANCED FUND 13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPH APPEARS HERE}
strength of global economies. A particu- RESULTS OF A $10,000 INVESTMENT
larly strong performer was Nokia, the -------------------------------
world's number one mobile phone 5/1/98 - 12/31/99
maker. During the year, the company's
stock rose from the low $60s per share AVERAGE ANNUAL TOTAL RETURNS
to more than $175 at year-end. As of 12/31/99
Inception (5/1/98) 19.62%
Q. DID YOU MAKE ANY CHANGES TO 1 year 19.31
THE FUND'S PORTFOLIO DURING 1999? LIPPER
A. Due to the rising interest rate environ- BALANCED S & P AIM V.I
ment in 1999, we elected to reduce the FUND 500 BALANCED
fund's holdings in financial stocks to (In thousands) INDEX INDEX FUND
approximately 10% of total net assets. ----------------------------------------
When investors' inflation fears were at 5/1/98 10,000 10,000 10,000
their peak, financial stocks bore the 6/98 10,150 10,081 10,227
brunt of the market decline. The financial 9/98 10,030 9,498 9,212
component of the S&P 500 finished with 12/98 11,302 10,591 11,172
a return of only 3.97% for the year. 3/99 11,678 10,761 11,729
Several ongoing concerns have created 6/99 11,941 11,244 12,555
pressure on the profit margins of phar- 9/99 11,657 10,778 11,771
maceutical companies and led us to 12/99 $13,484 $11,541 $13,522
decrease holdings in that area also. Many -----------------------
market watchers predict that global phar- Source: Lipper, Inc.
maceutical sales will slow from 1999's Past performance cannot guarantee comparable future results.
sales growth of nearly 10%. One reason
for this slide is that there may be fewer MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
new drugs with blockbuster potential in INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
the 2000 lineup. At the same time, SHOWN.
government debate over various plans to
add prescription-drug benefits to Medicare The performance figures shown here, which represent AIM V.I. Balanced Fund,
will keep a spotlight on drug prices and are not intended to reflect actual annuity values, and they do not reflect
make it more difficult for pharmaceutical charges at the separate-account level which (if applied) would lower them.
companies to increase prices. AIM V.I. Balanced Fund's performance figures are historical, and they reflect
We have used the proceeds from these changes in net asset value and the reinvestment of distributions. The fund's
reductions to increase our holdings in the investment return and principal value will fluctuate, so an investor's
technology sector, particularly in the shares, when redeemed, may be worth more or less than their original cost.
wireless communications arena. A new Had fees and expenses not been waived during the reporting period, returns
addition to the fund's portfolio is Western would have been lower.
Wireless, which provides cellular service The unmanaged Lipper Balanced Fund Index is a net-asset-value-weighted
under the Cellular One brand to more than average of the performance of the 30 largest balanced funds tracked by
774,000 subscribers in rural areas in Lipper, Inc., an independent mutual fund performance monitor; it is
western U.S. states. During 1999, the calculated daily, with adjustments for distributions as of the ex-dividend
company's stock more than doubled to dates. The unmanaged Standard & Poor's Composite of 500 Stocks (the S&P 500)
finish the year above $65 a share. is generally considered representative of the performance of the stock market
Q. WHAT IS YOUR OUTLOOK in general. Data for the indexes are for the period 4/30/98 - 12/31/99.
FOR 2000? An investment cannot be made in an index. Unless otherwise indicated,
A. Given the market volatility that we've index results include reinvested dividends.
seen in 1999 and the uncertainty regard- -----------------------------------------------------------------------------------
ing interest rates in 2000, it's apparent caps, so investors can benefit from
that changes in market and economic the strong growth potential of stocks
conditions cannot be predicted and should of all sizes. On the fixed-income side,
always be expected. The best way to address further interest rate increases may
these market risks, we believe, is through hamper bond performance in the near
diversification. We encourage investors to future. However, the fund's balanced
stay the course in terms of balancing their allocation of stocks and bonds should
portfolios with a variety of investment continue to produce favorable relative
vehicles. AIM V.I. Balanced Fund has a returns by mitigating risk in any
distinct advantage in this arena. Unlike market environment.
the majority of its peers, which invest
only in large-cap stocks, the fund is
well diversified across all market
</TABLE>
14 AIM V.I. BALANCED FUND
<PAGE>
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 15
<PAGE>
<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>
16 AIM V.I. BALANCED FUND
<PAGE>
<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 17
<PAGE>
<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>
18 AIM V.I. BALANCED FUND
<PAGE>
<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 19
<PAGE>
<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 -
Series 302 (Sovereign Debt), Bonds,
10.00%, 03/15/02 NZD 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>
20 AIM V.I. BALANCED FUND
<PAGE>
<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 21
<PAGE>
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, FOREIGN CURRENCY CONTRACTS AND FUTURES AND
OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities (565,510)
- -----------------------------------------------------------------------------
Foreign currencies 2,366
- -----------------------------------------------------------------------------
Foreign currency 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)
- -----------------------------------------------------------------------------
Foreign currency contracts 8,768
- -----------------------------------------------------------------------------
Futures contracts (15,441)
- -----------------------------------------------------------------------------
Option contracts written 3,920
- -----------------------------------------------------------------------------
5,577,116
- -----------------------------------------------------------------------------
Net gain from investment securities, foreign currencies, foreign
currency 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.
22 AIM V.I. BALANCED FUND
<PAGE>
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, foreign currency contracts and futures
and option contracts 8,710 135,495
- ---------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities, foreign currencies, foreign currency
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, foreign currency
contracts and futures and option contracts (91,342) 109,017
- ---------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies, foreign currency 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 23
<PAGE>
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.
24 AIM V.I. BALANCED FUND
<PAGE>
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
$43,975 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.-
Class H 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 25
<PAGE>
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.
26 AIM V.I. BALANCED FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. BALANCED FUND 27
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Balanced Fund paid ordinary dividends in the amount of $0.201 per share
to shareholders during its tax year ended December 31, 1999. Of these amounts
12.43% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $134,890 during the Fund's
tax year ended December 31, 1999. Of long-term capital gains distributed, 100%
is 20% rate gain.
28 AIM V.I. BALANCED FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
MEET AIM V.I. BLUE CHIP FUND
A roundtable discussion with the fund management team for AIM V.I. Blue Chip Fund for the fiscal year ended December 31, 1999.
Q. AIM V.I. BLUE CHIP FUND HAD ----------------- Q. HOW WILL THE FUND BE POSITIONED GOING FORWARD?
BEEN IN EXISTENCE FOR ONLY A A. Because we actively manage the fund, we can
COUPLE OF DAYS WHEN THE REPORT- ...we look for stocks make active stock selection, stock weighting
ING PERIOD ENDED. WHAT IS THE and sector allocation decisions that give us
FUND'S STRATEGY? that we think will most benefit the flexibility to position the fund in dif-
A. The fund uses a core equity strategy frent market environments. Regardless of market
that blends the best of AIM's growth the fund over the long term. trends in the coming year, we will adhere to
and value investment styles by focusing our investment discipline to determine which
on high-conviction ideas within a ----------------- companies may benefit the fund in the year
diversified framework. What that means ahead and beyond.
is we look for stocks that we think For the fund's portfolio, we
will most benefit the fund over the long select the top-performing companies
term. We use a bottom-up process to from across all business sectors of
build the portfolio, focusing on the fund's primary benchmark, the
fundamentals such as earnings growth and Russell 1000 Index. These sectors
attractive valuations when we look at include consumer staples, financial
potential holdings. services, health care and technology,
among others. We think the fund's broad
diversification across holdings and
market sectors can potentially dampen
volatility for the fund and still allow
it to produce excellent returns.
</TABLE>
The unmanaged Russell 1000 Stock Index is generally considered representative
of the performance of stocks of large-capitalization companies.
AIM V.I. BLUE CHIP FUND 29
<PAGE>
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%, 01/30/00(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>
Investment Abbreviations:
Disc.- Discounted
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 money market fund has the same investment advisor as the Fund.
(i) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
30 AIM V.I. BLUE CHIP FUND
<PAGE>
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 41
- ---------------------------------------------------------------------
Accrued administrative services fees 274
- ---------------------------------------------------------------------
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 31
<PAGE>
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.
32 AIM V.I. BLUE CHIP FUND
<PAGE>
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 33
<PAGE>
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.
34 AIM V.I. BLUE CHIP FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. BLUE CHIP FUND 35
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
36 AIM V.I. BLUE CHIP FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
TECH STOCKS SEND FUND RETURN SKYWARD
A roundtable discussion with the fund management team for AIM V.I. Capital
Appreciation Fund about the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. CAPITAL APPRECIATION interest rates when the Federal Reserve around 6%, down from more than 11% six
FUND PERFORM DURING 1999? Board switched gears and adopted a months ago.
A. For the year ended December 31, 1999, "tightening bias." Despite persistent
cumulative total return for AIM V.I. inflation fears, the U.S economy Q. HOW DID TECHNOLOGY STOCKS HELP BOOST
Capital Appreciation Fund was an continued to experience a near-record THE PORTFOLIO'S RETURN?
impressive 44.61%. The fund's return level of consumer confidence. A. Technology was the big winner for
more than doubled those of its Markets reached a fever pitch by the most of 1999. Industries such as
benchmarks, the S&P 500 Index (which end of 1999; driven by some leading semiconductors, communications equipment
returned 21.03%) and the Russell Midcap technology stocks, the Nasdaq (the and computer software and services have
Index (which returned 18.23%). leading technology index) finished the performed well, and the portfolio has
year up a stunning 85.59%. If the quite a bit of exposure to all three, as
Q. WHAT WERE MARKETS LIKE DURING THE current economic expansion lasts through shown in the Top 10 Industries list.
FISCAL YEAR? the early months of 2000, it will become VERITAS Software Corporation, our
A. Early in the year, a technology sell- the longest expansion period in U.S. largest equity holding, is the world's
off affected the portfolio because of history. largest maker of storage-management
our significant tech holdings. But the software, which (among other functions)
markets rebounded when first-quarter Q. HOW WAS THE FUND STRUCTURED AT THE guards networks against data loss from
1999 earnings came in quite strong. CLOSE OF THE YEAR? crashes and errors. The fund's second-
In May, the Fed hinted that it might A. At the end of 1999, technology stocks largest equity holding, JDS Uniphase (in
raise interest rates, and in June it did accounted for just over 46% of the the communications-equipment industry),
so, raising the federal funds rate to 5% fund's portfolio (up from almost 32% at makes laser equipment to increase the
and announcing its shift to a neutral June 30, 1999); consumer staples (such carrying capacity of optical fibers.
bias. That announcement sparked a as broadcasting, restaurants and food
"relief rally" in the markets. retailers) comprised almost 15% and Q. WHAT OTHER FACTORS CONTRIBUTED TO
Late August and most of September saw financial services some 6% (both almost THE FUND'S GAINS?
a pretty severe sell-off as investors unchanged since June); and consumer A. Even in other sectors, technology-
fretted about the trade deficit, the cyclicals (such as auto parts, home related stocks helped the fund's
dollar and the possibility of higher building and most retailers) stood at performance. Our semiconductor holdings,
just
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
1. VERITAS Software Corporation 2.75% 1. Computers (Software & Services) 18.96%
2. JDS Uniphase 2.48 2. Communications Equipment 11.06
3. Yahoo! Inc. 2.33 3. Electronics (Semiconductors) 7.09
4. America Online, Inc. 2.13 4. Electrical Equipment 4.99
5. Corning, Inc. 2.11 5. Broadcasting
6. VeriSign Inc. 1.81 (Television, Radio & Cable) 4.83
7. Lycos, Inc. 1.62 6. Services (Advertising & Marketing) 3.50
8. Solectron Corp. 1.46 7. Oil & Gas (Drilling & Equipment) 3.09
9. Nokia Oyj - ADR (Finland) 1.46 8. Services (Data Processing) 2.56
10. Citrix Systems, Inc. 1.45 9. Computers (Peripherals) 2.41
10. Health Care
(Drugs-Generic & Other) 2.09
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any particular
security.
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND 37
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPH APPEARS HERE]
over 7% of the portfolio, have all RESULTS OF A $10,000 INVESTMENT
appreciated during the fiscal year. One -------------------------------
such company is Analog Devices, a 5/5/93 - 12/31/99
leading maker of both analog and digital
integrated circuits, which translate AVERAGE ANNUAL TOTAL RETURNS
real-world phenomena such as pressure, As of 12/31/99
temperature and sound into digital Inception (5/5/93) 22.33%
signals. We increased our holding in 5 Years 25.59
Analog Devices during the year. 1 Year 44.61
Q. WHAT IS YOUR OUTLOOK FOR THE AIM V.I. CAPITAL RUSSELL S & P
NEW YEAR? APPRECIATION MIDCAP 500
A. Small- and mid-cap stocks are still (In thousands) FUND INDEX INDEX
historically undervalued. We expect them -----------------------------------------------
to outperform large-cap stocks over the 5/5/93 10,000 10,000 10,000
next 12 months. With valuations as low 12/93 11,949 11,136 10,807
as they are, we don't see the risk to 12/94 12,248 10,903 10,949
smaller stocks that we did at this time 12/95 16,618 14,659 15,058
last year. Mid-cap stocks, often 12/96 19,540 17,445 18,513
overshadowed by the comforting, familiar 12/97 22,179 22,505 24,687
large-caps and the sizzling dot-com 12/98 26,460 24,777 31,748
small-caps, offer unique advantages: 12/99 38,245 29,295 38,265
their management is usually a bit more -------------------------
seasoned than that of small-caps and SOURCE: LIPPER, INC.
startups, and they have a better chance Past performance cannot guarantee comparable future results.
than large-caps to beat GDP growth and
to attack niche markets. MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
We will continue to seek out the best- INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE
performing companies in the small-and SHOWN.
mid-cap sectors; the fund should be well
positioned should there be an ongoing The performance figures shown here, which represent AIM V.I. Capital
rally in small- and mid-cap stocks. Appreciation Fund, are not intended to reflect actual annuity values, and
they do not reflect charges at the separate-account level which (if applied)
would lower them. AIM V.I. Capital Appreciation Fund's performance figures
are historical, and they reflect changes in net asset value and the
reinvestment of distributions. The fund's investment return and principal
value will fluctuate, so an investor's shares, when redeemed, may be worth
more or less than their original cost.
The unmanaged Russell Midcap Index measures the performance of 800
selected common stocks of medium-sized domestic companies. The unmanaged
Standard & Poor's Composite of 500 Stocks (the S&P 500) is generally
considered representative of the performance of the stock market in general.
Data for the indexes are for the period 4/30/93-12/31/99.
An investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends.
</TABLE>
38 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
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 39
<PAGE>
<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>
40 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
<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 41
<PAGE>
<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.
42 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
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 43
<PAGE>
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
44 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
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 45
<PAGE>
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>
46 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
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 47
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital Appreciation Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
48 AIM V.I. CAPITAL APPRECIATION FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Capital Appreciation Fund paid ordinary dividends in the amount of
$0.0240 per share to shareholders during its tax year ended December 31, 1999.
Of these amounts 99.68% is eligible for the dividends received deduction for
corporations.
The Fund also distributed long-term capital gains of $23,048,204 for the
Fund's tax year ended December 31, 1999. Of long-term capital gains
distributed, 100% is 20% rate gain.
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND 49
<PAGE>
The Managers' Overview
Improving Small-Cap Market Boosts Fund Returns
A roundtable discussion with the fund management team for AIM V.I. Capital
Development Fund about the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. HOW DID AIM V.I. CAPITAL Late August and most of September some retailers) accounted for just under
DEVELOPMENT FUND PERFORM? saw a pretty severe sell-off as investors 19% (down from 28% in June); capital
A. For the year ended December 31, fretted about the trade deficit, the dolla goods (such as electrical equipment and
1999, cumulative total return for AIM V.I. and the possibility of higher interest rates machinery) made up a little under 9%,
Capital Development Fund was a solid when the Federal Reserve Board switched almost the same as six months ago; and
29.10%. The fund outperformed its gears and adopted a "tightening bias." financial-services stocks, just over 10%
benchmark, the Russell 2000 Index, Despite persistent inflation fears, the U.S of the portfolio in June, now constitute
which returned 21.26%. economy continued to experience a near- a little more than 7% of our holdings. We
record level of consumer confidence. increased our weighting in technology
Q. WHAT WERE MARKETS LIKE DURING Markets reached a fever pitch by the stocks from around 17% at the end of
THE FISCAL YEAR? end of 1999; driven by some leading June to just above 32% at year-end.
A. Early in 1999, a technology sell-off technology stocks, the Nasdaq (the lead-
affected the portfolio because of our sig- ing technology index) finished the year Q. HOW DID TECHNOLOGY STOCKS
nificant tech holdings, but the markets up a stunning 85.59%. If the current HELP BOOST THE PORTFOLIO'S RETURN?
rebounded when first-quarter earnings economic expansion lasts through the A. Technology was the big winner for
came in quite strong. early months of 2000, it will become the most of 1999. Industries such as semi-
In May, the Fed hinted that it might longest expansion period in U.S. history. conductors, communications equipment
raise interest rates, and in June it did so, and computer software and services have
raising the federal funds rate to 5% and Q. HOW WAS THE FUND STRUCTURED performed well, and the fund's portfolio
announcing its shift to a neutral bias. AT THE CLOSE OF THE YEAR? has quite a bit of exposure to all three,
That announcement sparked a "relief A. At the end of 1999, consumer staples as shown in the Top 10 Industries list.
rally" in the markets. (such as broadcasting, restaurants and Cree Research, the fund's largest equity
holding, makes silicon carbide diodes,
PORTFOLIO COMPOSITION used in LED devices, for manufacturers of
products like car dashboards, market
As of 12/31/99, based on total net assets tickers and large-area video screens.
TriZetto Group, new to the fund this year
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES provides the health-care industry access
to software applications, network-connec-
1. Cree Research, Inc. 1.32% 1. Computers (Software/Services) 15.68% tivity services and information-access
2. DII Group, Inc. 1.09 2. Broadcasting 4.92 and reporting services.
3. Check Point Software 1.08 (Television, Radio & Cable)
Technologies Ltd. (Israel) 3. Electronics (Semiconductors) 4.01 Q. WHAT OTHER FACTORS CONTRIBUTED
4. Osicom Technologies, Inc. 1.07 4. Electrical Equipment 3.95 TO THE FUND'S GAINS?
5. Symantec Corp. 1.06 5. Communications Equipment 3.89 A. Even in other sectors, technology-
6. Sterling Software, Inc. 1.06 6. Electronics (Instrumentation) 3.29 related stocks helped the fund's perfor-
7. TeleTech Holdings, Inc. 1.04 7. Retail (Specialty) 3.15 mance. Our semiconductor holdings,
8. TriZetto Group, Inc. (The) 0.97 8. Oil & Gas (Drilling & Equipment) 3.04 approximately 5% of the portfolio, have
9. Heidrick & Struggles 0.94 9. Services (Advertising & Marketing) 2.75 all appreciated during the fiscal year.
International, Inc. 10. Services (Commercial & Consumer) 2.69 One such company is Microchip Technology,
10. CSG Systems International, Inc. 0.94 which makes chips for the automotive,
The fund's portfolio composition is subject to change, and there is no assurance
that the fund will continue to hold any particular security.
</TABLE>
50 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
consumer, communications, industrial [GRAPH APPEARS HERE]
and office automation markets.
The fund also benefited from owning RESULTS OF A $10,000 INVESTMENT
the stocks of many non-technology com- 5/1/98 - 12/31/99
panies, like Heidrick & Struggles
International, an executive-recruiting
firm, and Emmis Communications, which AVERAGE ANNUAL TOTAL RETURNS
owns 21 radio and seven TV stations and As of 12/31/99
publishes several magazines, including Inception (5/1/98) 11.22%
Atlanta, Cincinnati, Indianapolis 1 Year 29.10
Monthly and Texas Monthly.
AIM V.I.
Q. WHAT IS YOUR OUTLOOK FOR THE CAPITAL RUSSELL
NEW YEAR? DEVELOPMENT 2000
A. The climate appears favorable for (In thousands) FUND INDEX
stocks, particularly for small-cap issues. ------------------------
The economy is growing at a healthy pace 5/1/98 10,000 10,000
and corporate profits are solid, especially 6/98 9,530 9,481
for smaller companies. Perhaps most 9/98 7,760 7,571
significant has been the improvement in 12/98 9,249 8,806
the performance of small-cap stocks. We 3/98 8,546 8,328
remain optimistic about long-term 6/99 9,430 9,624
prospects for these stocks because of 9/99 9,209 9,015
their attractive valuations and the positive 12/99 11,941 10,678
earnings-growth projections of smaller
companies. ----------------------------
We will continue to seek out the best- SOURCE: LIPPER, INC.
performing companies in the small-and Past performance cannot guarantee comparable future results.
mid-cap sectors; the fund should be well
positioned should there be an ongoing rally MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
in both types of stocks. AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
PERFORMANCE SHOWN.
The performance figures shown here, which represent AIM V.I. Capital
Development Fund, are not intended to reflect actual annuity values, and they
do not reflect charges at the separate-account level which (if applied) would
lower them. AIM V.I. Capital Development Fund's performance figures are
historical, and they reflect changes in net asset value and the reinvestment
of distributions. The fund's investment return and principal value will
fluctuate, so an investor's shares, when redeemed, may be worth more or less
than their original cost. Had fees and expenses not been waived during the
reporting period, returns would have been lower.
The unmanaged Russell 2000 Stock Index (the Russell 2000) is generally
considered representative of the performance of the stocks of
small-capitalization companies. Data for the index are for the period
4/30/98-12/31/99.
An investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends.
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND 51
<PAGE>
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>
52 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
<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 53
<PAGE>
<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>
54 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
<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>
Investment Abbreviations:
ADR - American Depositary Receipt
DECS - Dividend Enhanced Convertible Stock
Pfd. - Preferred
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. CAPITAL DEVELOPMENT FUND 55
<PAGE>
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 expenses 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.
56 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
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 57
<PAGE>
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 $35,726 and reimbursed expenses of
$68,305.
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
$43,901 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 $3,438
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.
58 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
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 59
<PAGE>
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.
60 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Capital 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. CAPITAL DEVELOPMENT FUND 61
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
62 AIM V.I. CAPITAL DEVELOPMENT FUND
<PAGE>
<TABLE>
<CAPTION>
The Managers' Overview
NEW FUND INVESTS WITH BOOMERS IN MIND
A roundtable discussion with the fund management team for AIM V.I. Dent
Demographic Trends Fund about the fiscal year ended December 31, 1999.
<S> <C> <C>
Q. CAN YOU DESCRIBE THE FUND'S care, financial services and consumer- big-picture analysis of economic trends,
INVESTMENT PHILOSOPHY? related products and services. The tech- highlighting important sectors and indus-
A. AIM V.I. Dent Demographic Trends nology and telecommunications sector is ries. AIM's team uses that information in
Fund is designed to capitalize on con- booming and the growth opportunities in its stock-selection process. We look for
sumer's spending habits. Our manage- this area are long-term and far-reaching. the fastest-growing companies in the best
ment team is guided by the opinions and The fund will concentrate on companies position to take advantage of those
research of Harry S. Dent, Jr., a strategic that are building out the Internet's infra- trends. We use our proven strategy:
consultant and best-selling author of structure, such as computer hardware investing in stocks with earnings track
The Great Boom Ahead, The Roaring and software makers. records and good prospects for future
2000s and The Roaring 2000s Investor. Health care is another attractive earnings growth.
According to Dent's analysis: sector. The aging baby-boom generation
. The stock market has historically been and their parents should spend more on Q. WHAT IS YOUR OUTLOOK FOR THE
driven primarily by consumer spend- health care. Pharmaceutical companies, NEW YEAR?
ing on major purchases such as hous- health-care services and medical-device A. Our outlook for the market (and the
ing, furnishings, appliances and cars. manufacturers should benefit from this economy) is quite positive. The U.S.
. The market has usually done well increased spending. economy is experiencing one of the
when a generation's spending peaks, Financial-services companies stand to lengthiest expansion periods in its histo-
at about age 46 1/2. profit from demographic trends as well. ry; if it continues through the first
. As more baby boomers reach their Baby boomers are just beginning to save quarter of 2000, it will become the
peak spending age, they may propel and invest for retirement; they are turning longest economic expansion the country
the stock market for the next decade. to financial consultants for advice, invest- has ever enjoyed. Our domestic economy
The fund focuses on companies in mar- ing in mutual funds and buying insurance remains strong, inflation is low and
ket sectors that are expected to benefit policies. The fund will examine major the country is enjoying a budget surplus.
from this spending wave. investment-management businesses, We believe this environment, combined with
insurance companies and other leading the demographic trends we have identified,
Q. BASED ON DEMOGRAPHIC TRENDS, financial-services firms for investment bodes well for equities.
WHAT SECTORS WOULD THOSE BE? opportunities.
A. Among the sectors Dent considers
most promising are technology, health Q. WHAT IS THE RELATIONSHIP
BETWEEN DENT AND AIM'S MAN-
AGEMENT TEAM?
A. Dent, president of H.S. Dent Advisors,
Inc. (the fund's subadvisor), offers a
</TABLE>
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND 63
<PAGE>
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>
Investment Abbreviations:
Disc.- Discounted
See Notes to Financial Statements.
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 money market fund has the same investment advisor as the Fund.
(i) Also represents cost for federal income tax purposes.
See Notes to Financial Statements.
64 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<PAGE>
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 expenses 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 65
<PAGE>
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.
66 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<PAGE>
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 $47 and
reimbursed expenses of $566.
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 $274 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 67
<PAGE>
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.
68 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND 69
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
70 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
Fund Contends With
Difficult Bond Market
A roundtable discussion with the fund
management team for AIM V.I. Diversified
Income Fund for the fiscal year ended
December 31, 1999.
Q. 1999 WAS THE WORST YEAR FOR BONDS SINCE supply was generally met by weak demand year. Unlike other types of bonds, high-
1994. HOW DID THE FUND PERFORM? until the fourth quarter of the fiscal yield securities tend to benefit from a
A. The rising interest rate environment year when rising yields made corporate vibrant economy. The issuers of high-yield
negatively affected most bond-market bonds more attractive to investors. bonds are generally better able to meet
sectors, and this trend detracted from the Corporate bonds rallied and ended up their debt obligations when the economy
fund's performance. For the fiscal year posting only modest losses for the year. and corporate profits are strong. Because
ended December 31, 1999, total return Corporate bonds fared much better than the value of high-yield bonds is largely
was - 1.92%. U.S. Treasury issues, which endured their dependent on the ability of their issuers
worst 12-month performance in 22 years. to meet their debt obligations, these
Q. WHAT WERE THE KEY TRENDS IN THE The weakness in the Treasury market was securities tend to be less sensitive to
DOMESTIC INVESTMENT-GRADE BOND MARKET? reflected in the yield of the benchmark interest-rate fluctuations.
A. The weakness in the bond market 30-year Treasury bond, which rose from
stemmed from investor concerns that strong 5.09% at the beginning of the fiscal year Q. HOW DID FOREIGN BONDS FARE?
economic growth would prompt the Federal to 6.48% at its conclusion. At the end of A. Although the U.S. dollar weakened
Reserve Board (the Fed) to raise interest the reporting period, Treasury yields were against the Japanese yen, it remained
rates to keep inflation at bay. Ultimately, at their highest levels in more than two strong against other major currencies,
in three separate moves, the central bank years. And because of rising Treasury including the euro. The strength of the
raised the key federal funds rate from yields, the yield spread between dollar against most other currencies hurt
4.75% to 5.50%. The bond market was also Treasuries and investment-grade corporate returns for U.S. investors in foreign
rattled by Y2K concerns, which largely bonds, while contracting toward the end of bonds. We continued to mitigate the effect
proved to be unfounded, and the decline in the year, remained wide from a historical of a strong dollar by selectively hedging
value of the U.S. dollar against the perspective. our currency exposure.
Japanese yen. Even without taking currency factors
For much of the year, an overabundance Q. HOW DID HIGH-YIELD BONDS PERFORM? into consideration, the performance of
of new issues hurt the performance of A. After being in the doldrums for much of foreign bonds (except for emerging markets
investment-grade corporate bonds. Companies the reporting period, high-yield bonds debt) was lackluster for the year. As
rushed to issue new bonds before Y2K rallied in the fourth quarter of 1999 and domestic corporate bonds did, foreign
concerns became more pronounced toward wound up posting modest gains for the corporate bonds outperformed their
the end of 1999. This overabundance of government counterparts. Rising interest
rates around the world had a negative
Portfolio Composition
As of 12/31/99, based on total net assets
High-Yield Investment- Foreign
Top Five Bond Holdings Coupon Maturity % Net Assets Bonds Grade Bonds Bonds Other
1. U.S. Treasury 7.250% 08/2004 5.19% 22.25% 50.56% 21.06% 6.13%
2. Time Warner Inc. 9.125 01/2013 1.55
3. Niagara Mohawk Power Corp. 7.75 10/2018 1.51
4. CSC Holdings Inc. 7.825 07/2018 1.31
5. ConAgra, Inc 7.125 10/2026 1.27
The fund's portfolio composition is subject to change, and there is no assurance that
the fund will continue to hold any particular security.
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND 71
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPH APPEARS HERE]
impact on foreign as well as U.S. bonds. RESULTS OF A $10,000 INVESTMENT
Two of the better-performing bond -------------------------------
markets were Canada and the United 5/5/93 - 12/31/99
Kingdom, and the fund benefited from its
significant exposure to these markets. In AVERAGE ANNUAL TOTAL RETURNS
the United Kingdom, the bond market got a As of 12/31/99
boost from low inflation and a Bank of Inception (5/5/93) 5.93%
England that acted diligently to keep it 5 Years 7.83
in check. Bonds in the Euroland regions 1 Year -1.92%
performed poorly in the face of a
strengthening economy before showing signs AIM V.I. Lehman
of recovering toward the end of the fiscal Diversified Aggregate
year as economic conditions moderated. (In thousands) Income Fund Bond Index
------------------------------
Q. GIVEN THE WEAKNESS OF THE BOND MARKET, 5/5/93 10,000 10,000
WHAT STRATEGIES DID YOU EMPLOY? 12/93 10,605 10,466
A. The market downturn allowed us to buy 12/94 10,068 10,161
attractive bonds at reduced prices. 12/95 11,982 12,038
Additionally, as a defensive measure, we 12/96 13,204 12,475
reduced the fund's duration. The fund 12/97 14,444 13,679
maintained an average portfolio quality 12/98 14,961 14,868
rating of BBB/Baa as measured by 12/99 14,674 14,746
Standard & Poor's Corporation and Moody's --------------
Investor Service and other widely known SOURCE: LIPPER, INC.
credit-rating agencies. These ratings are Past performance cannot guarantee comparable future results.
historical and are based on analysis of
the credit quality of the individual MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
securities in the fund's portfolio. INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN.
The fund's exposure to investment-
grade bonds increased slightly as V. I. The performance figures shown here, which represent AIM V.I. Diversified Income Fund,
Strategic Income Fund and V. I. Global are not intended to reflect actual annuity values, and they do not reflect charges
Government Income Fund (both former GT at the separate-account level which (if applied) would lower them. AIM V.I. Diversified
Global funds) were merged into the fund. Income Fund's performance figures are historical, and they reflect changes in net
At the end of the reporting period, the asset value and the reinvestment of distributions. The fund's investment return and
fund's total assets were divided as principal value will fluctuate, so an investor's shares, when redeemed, may be worth
follows: domestic investment-grade bonds, more or less than their original cost.
50.56%; high-yield bonds, 22.25%; foreign The unmanaged Lehman Aggregate Bond Index, which represents the performance of
bonds, 21.06% and other assets, 6.13%. corporate debt securities, is compiled by Lehman Brothers, a well-known global
The fund's corporate holdings spanned a investment bank. Data for the index is for the period 4/30/93-12/31/99.
wide range of industries. Government securities (such as U.S. Treasury bills, notes and bonds)
We believe this diversified investment offer a high degree of safety, and they guarantee the timely payment of principal and
strategy can reduce risk and enhance interest if held to maturity. Fund shares are not insured, and their value will vary
potential returns. with market conditions. An investment cannot be made in an index. Unless otherwise
indicated, index results include reinvested dividends.
Q. WHAT IS YOUR OUTLOOK? ---------------------------------------------------------------------------------------
A. In the United States, the near-term the Fed raised the federal funds rate to investment options. And Asia appears to
outlook for bonds will likely depend 5.75%. We expect the Fed to raise interest be well on the road to recovery from the
largely on the strength of the economy. If rates again in the months ahead to slow economic crisis that had worldwide
the economy continues to grow at a economic growth and forestall inflation. ramifications in 1997-1998. However, the
blistering pace, it could have a negative If economic growth moderates, interest global acceleration in economic growth
impact on the bond market. On February 2, rates could level off, and such a could lead to higher interest rates to
after the close of the reporting period, development could have a positive impact keep inflation in check, which could
on the bond market. And while past affect total returns for bonds.
performance cannot guarantee comparable Nevertheless, we adhere to our
future results, the U.S. bond market has strategy of primarily investing in
seldom had two dismal years in a row. domestic investment-grade, high-yield and
Globally, there are encouraging signs. foreign corporate bonds. Normally, these
In Europe, for example, inflation remains bonds tend to react differently to various
subdued. The introduction of the euro in economic and market conditions. Over the
11 countries has stimulated the long term, we believe this investment
development of the corporate bond market approach has the potential to enhance
in Europe, giving the fund more potential returns and reduce risk.
</TABLE>
72 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
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 73
<PAGE>
<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>
74 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
<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 75
<PAGE>
<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 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>
76 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
<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%, 03/15/02NZD 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 Bonds & Notes (Cost
$21,527,812) 20,443,970
- --------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND 77
<PAGE>
<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>
78 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
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
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.
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND 79
<PAGE>
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.
80 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
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 81
<PAGE>
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.
82 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
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 83
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
84 AIM V.I. DIVERSIFIED INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Diversified Income Fund paid ordinary dividends in the amount of
$0.6735 per share to shareholders during its tax year ended December 31, 1999.
Of these amounts, 0.00% is eligible for the dividends received deduction for
corporations.
AIM V.I. DIVERSIFIED INCOME FUND 85
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
BOND MARKET DIFFICULT DURING
FISCAL YEAR
A roundtable discussion with the fund
management team for AIM V.I. Global Growth
& Income Fund for the fiscal year ended
December 31, 1999.
Q. WHAT WERE MARKET CONDITIONS LIKE DURING followed Standard & Poor's 500 Index lost year to 6.479% at its end, reflecting the
THIS TIME? value during the fiscal year. downward pressure on the bond's price,
A. During the reporting period, the MSCI The second most important story was which moves in the opposite direction to
World Index, a stock index, rose 24.93%, the tremendous surge in Asian equities. its yield.
while the J.P. Morgan Global Government For most of the fiscal year Japan led
Bond Index returned -5.08%. Asia's recovery. The MSCI Japan Index Q. HOW DID YOU MANAGE THE FUND IN THIS
From a global equity perspective, rose by nearly 62% during the year, as the ENVIRONMENT?
clearly the most important story of the stock market surged and the value of the A. The fund maintained its strict blue-
year was high technology. According to yen appreciated. Investors flocked to chip investment discipline for most of the
Morgan Stanley Capital International, Japanese securities after Japan posted two year, investing in stocks with a market
the electrical and electronics sector rose consecutive quarters of economic growth, capitalization of more than $1 billion and
122%, electronic components rose 116%, and signaling an end to its extended a dividend yield greater than that of the
appliances and household durables (of recession. MSCI World Index. We also look for good
which much is technology related) rose For bonds, 1999 was the worst year stocks selling at a discount relative to
110%. For traditional blue chip sectors, since 1994, and the second worst year on the market. Because of these criteria, the
the picture was far less rosy. For record. For example, the yield of the fund has avoided several areas that have
example, despite advances by the main benchmark 30-year U.S. Treasury bond rose performed well over the fiscal year. The
market indexes, most stocks in the widely from 5.092% at the beginning of the fiscal universe of Japanese stocks that meet our
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 HOLDINGS TOP 10 COUNTRIES TOP 10 INDUSTRIES
1. Koninklijke KPN NV - ADR 3.49% 1. United States 38.72% 1. Sovereign Debt 8.73%
(Netherlands) 2. United Kingdom 12.07 2. Electrical Equipment 7.44
2. McGraw Hill Cos., Inc. (The) 3.38 3. Japan 10.60 3. Publishing 7.01
3. Bundesrepublik Deutschland 2.88 4. Netherlands 9.28 4. Oil--International Integrated 5.50
Series 91 Bonds 8.25% (Germany) 5. Germany 6.51 5. Telephone 5.21
4. Bristol-Myers Squibb Co. 2.84 6. France 5.15 6. Beverages--Alcoholic 5.11
5. Royal Dutch Petroleum Co. 2.82 7. Italy 2.72 7. Banks--Major Regional 4.55
New York Shares (Netherlands) 8. Australia 2.25 8. Electronics--Component
6. Fujitsu Ltd. (Japan) 2.82 9. Switzerland 2.06 Disributors 3.91
7. Seat-Pagine Gialle S.p.A. (Italy)2.72 10. Spain 1.67 9. Foods 3.66
8. Exxon Mobil Corp. 2.68 10. Financial--Diversified 3.54
9. Bell Atlantic Corp. 2.60
10. Rohm Co. Ltd. (Japan) 2.54
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
</TABLE>
86 AIM V.I. GLOBAL GROWTH & INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
criteria is very small. In addition, the Q. WHAT'S YOUR OUTLOOK FOR THE FUND OVER have receded. We have seen improving
fund has avoided high-flying technology THE NEAR TERM? worldwide industrial production with a
stocks, again because few investment A. The fund offers a portfolio of blue bottoming of commodity prices and stronger
candidates enjoy above average dividend chip stocks offering growth at a consumption in many areas.
yields. reasonable price, high-quality bonds, The balance of forces responsible for
regular income, a long-term investment the long and pervasive disinflation has
Q. WHAT ABOUT THE FUND'S BOND COMPONENT? horizon, and low volatility. These basic now shifted. Because of monetary
A. The fund's portfolio consisted of 81% attributes have not changed, but we plan conditions and an accelerating recovery in
stocks and 15% bonds as of December 31, in the future to be flexible about global growth, we now expect stable to
1999. We invested in investment-grade U.S. dividend yields. Our recent investments moderately rising prices. Recent interest
and European government bonds. Sovereign in Japan and in the technology sector rate increases already take into account
debt made up 9% of the fund's total assets. reflect this change. The conservative these conditions, and we expect inflation
character of this fund will be maintained, to remain low. There is excess capacity in
Q. WHAT CHANGES HAVE YOU MADE TO THE but we intend to take better advantage of many industries and competition will
FUND'S PORTFOLIO? our proven asset allocation and stock frustrate those wishing to push prices
We believe that fourth quarter of 1999 research capabilities. higher. Indeed, we believe the consumer
marked an important turning point for the We are in the midst of a global will not accept higher prices while
fund. economic upturn. There is evidence that enjoying unparalleled and abundant choice.
Our long-standing discipline of Europe and the United Kingdom are seeing Nonetheless, in this environment, markets
investing only in stocks with above- increasing growth rates. In Asia, economic are likely to be increasingly nervous
average dividend income worked in the past, recovery has commenced and is broadening about inflation picking up in the
but we do not expect it to be as as exports rise and domestic demand traditional cyclical manner. The stronger
meaningful in the future. Many of the most improves. In Japan, the tentative signs global economic growth now under way may
attractive companies, countries and of stabilization in the country's fortunes fuel more rapid earnings growth and so, in
sectors no longer emphasize dividends as have been supplemented by corporate action spite of market valuations, we favor
a way of rewarding shareholders. that should be highly positive for markets. stocks over bonds.
Our long-standing investment in In the United States, the dynamism has not
long-term U.S. Treasuries was based on a slowed but, given valuations and interest
disinflationary view of the world during a rates, prospective stock market returns
period of rising interest rates. Our view
of long-term interest rates has changed
over the past six months, and we have
positioned the bond portfolio accordingly. The J.P. Morgan Global Government Bond Index is a market-value-weighted average of
We changed our investment strategy government bonds from 13 major developed bond markets. It is measured in U.S. dollars,
during the forth quarter. We should and it includes the effect of reinvested coupons. The unmanaged MSCI World Index is a
emphasize that we remain quite sensitive group of global securities listed on major world stock exchanges and tracked by Morgan
to valuation in our investment decisions. Stanley Capital International. The unmanaged Standard & Poor's Composite Index of 500
However, opportunities in low-yielding, Stocks (S&P 500) is generally considered representative of the stock market in general.
attractive, cheap growth companies are too An investment cannot be made in any index listed. Unless otherwise indicated,
appealing to pass up. index results include reinvested dividends and do not reflect sales charges.
--------------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL GROWTH & INCOME FUND 87
<PAGE>
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>
88 AIM V.I. GLOBAL GROWTH AND INCOME FUND
<PAGE>
<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>
Investment Abbreviations:
ADR- American Depositary Receipt
Deb.- Debentures
Gtd.- Guaranteed
Pfd.- Preferred
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.
See Notes to Financial Statements.
AIM V.I. GLOBAL GROWTH AND INCOME FUND 89
<PAGE>
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 90
<PAGE>
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 91
<PAGE>
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. During the year ended
December 31, 1999, AIM waived fees of $11,500.
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 $32,370 for such services.
The Company has entered into a master distribution agreement with
A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor 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.
92 AIM V.I. GLOBAL GROWTH AND INCOME FUND
<PAGE>
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 93
<PAGE>
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) 1.22% 1.13% 1.20% 1.23%
- ------------------------------------------------------------------------------
Without reimbursement 1.37%(a) 1.22% 1.27% 1.30% 1.44%
==============================================================================
Ratio of expenses to average
net assets excluding
interest expense:
With reimbursement 1.33%(a) 1.18% 1.13% 1.20% 1.23%
- ------------------------------------------------------------------------------
Without reimbursement 1.36%(a) 1.18% 1.27% 1.30% 1.44%
==============================================================================
Ratio of net investment
income to average net
assets:
With reimbursement (Note 2) 2.32%(a) 2.53% 2.86% 3.58% 3.87%
- ------------------------------------------------------------------------------
Without reimbursement 2.29%(a) 2.53% 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.
94 AIM V.I. GLOBAL GROWTH AND INCOME FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GLOBAL GROWTH AND INCOME FUND 95
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
96 AIM V.I. GLOBAL GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
AIM V.I. GLOBAL UTILITIES FUND
OUTPACES INDEXES
A roundtable discussion with the
fund management team for AIM V.I.
Global Utilities Fund for the
fiscal year ended December 31,
1999.
Q. HOW DID AIM V.I. GLOBAL UTILITIES stocks. Then the markets began to improving global economies, rising
FUND PERFORM DURING THE FISCAL YEAR? broaden into small- and mid-cap long-term interest rates and inflation
A. Buoyed by the renewed strength of issues during the third quarter, fears. These factors contributed to a
global economies and favorable sector while technology stocks continued market environment in which investors
positioning, AIM V.I. Global Utilities to soar through year-end. favored stocks over bonds. The ensuing
Fund posted a robust 33.56% return for Global equity markets ended bond sell-off produced the worst
the fiscal year ended December 31, 1999 at record levels. Every major calendar-year performance for bonds
1999. Fund performance handily outpaced index in the United States, as well since 1994.
the 21.03% gain of the S&P 500 and the as markets across Europe, Asia and
14.53% return of the Lipper Utility Latin America, hit new highs at Q. WHAT FACTORS CONTRIBUTED TO THE
Fund Index for the same period. year-end. But in the midst of this FUND'S STRONG PERFORMANCE?
prosperity we continued to struggle A. Our international stake enhanced
Q. WHAT WERE THE MAJOR TRENDS IN with a stealth bear market. At the fund performance for the year, amid
FINANCIAL MARKETS IN 1999? end of 1999, a third of New York promising signs of recovery in Asia
A. Although there were several Stock Exchange and over-the-counter and other global economies. Fund
prominent shifts in market stocks were off 20% or more from performance also greatly benefited from
sentiment during the fiscal year, their previous 12-month highs. our exposure to the telecommunications
the overriding theme for financial This past year has been a sector, which continued to be very
markets in 1999 was the dominance challenging period for bond investors. strong. The sector's growth has been
of the technology sector. During Throughout 1999, downward pressure driven largely by the explosion in
the first half of 1999, investors on bond prices came from the U.S. Internet and
favored large-cap and cyclical economy's continued strong growth,
FUND OUTPERFORMS INDEXES
One-year returns as of 12/31/99
AIM V.I. Global
Utilities Fund 33.56%
S&P 500 Index 21.03%
Lipper Utility
Fund Index 14.53%
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
1. SBC Communications, Inc. 3.85% 1. Telephone 19.13% 1. United States 62.61%
2. Redback Networks, Inc. 3.26 2. Electric Companies 14.08 2. United Kingdom 4.44
3. Broadwing Inc. 2.93 3. Telecommunications 11.27 3. Finland 3.16
4. MCI WorldCom Inc. 2.46 (Long Distance) 4. Netherlands 3.06
5. Nokia Corp.-ADR (Finland) 2.25 4. Communications Equipment 9.16 5. Spain 3.02
6. Lucent Technologies Inc. 1.96 5. Telecommunications 6.80 6. Italy 2.59
7. Eircom PLC (Ireland) 1.67 (Cellular/Wireless) 7. France 2.56
8. Williams Companies, Inc. (The) 1.64 6. Natural Gas 5.41 8. Canada 2.30
9. Qwest Communications 1.62 7. Computers (Networking) 5.00 9. Ireland 1.34
International Inc. 8. Telecommunications 4.40 10. Germany 1.69
10. Univision Communications, Inc. 1.62 9. Broadcasting 3.84
-Class A (Television, Radio & Cable)
10. Power Producers (Independent) 1.97
The fund's portfolio composition is subject to change, and there is no assurance
that the fund will continue to hold any particular security.
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
97
<PAGE>
PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
data communications traffic. Fund holdings In this vein, investors who include
in this arena, such as Redback Networks global companies in their portfolios
and Lucent Technologies, provide the may be successful by taking advantage
infrastructure for sending data over the of the free flow of business and
Internet. These holdings also allow us capital worldwide. AIM V.I. Global
to participate in the growth of Internet Utilities Fund offers this type of
traffic, the fastest-growing segment in diversification through its investments
these industries, without subjecting the in stable, growing companies in both
fund to the volatility of pure Internet the United States and abroad.
investments. A particularly strong
telecommunications performer was Nokia,
the world's number one mobile phone maker. [GRAPH APPEARS HERE]
During the year, the company's stock rose RESULTS OF A $10,000 INVESTMENT
from the low $60s per share to more than -------------------------------
$175 at year-end. 5/2/94 - 12/31/99
Q. DID YOU MAKE ANY CHANGES TO THE FUND'S AVERAGE ANNUAL TOTAL RETURNS
PORTFOLIO? As of 12/31/99
A. A big change during the fiscal year was Inception (5/2/94) 18.45%
our decision to decrease the fund's holdings 5 Years 21.87
in electric utilities. On December 31, 1 Year 33.56
electric utilities represented about 14% of AIM V.I. LIPPER
the fund's net assets, down from more than GLOBAL S & P UTILITY
30% a year ago. In light of the challenges UTLIITIES 500 FUND
that this industry is facing, we elected to (In thousands) FUND INDEX INDEX
reduce companies with less favorable ---------------------------------
short-term prospects. We also decreased 5/2/94 10,000 10,000 10,000
holdings in the natural gas industry, which 12/94 9,708 10,396 9,593
accounted for 5.41% of the fund's net assets 12/95 12,303 14,299 12,194
at year-end. In early 1999 the wholesale 12/96 13,789 17,579 13,331
market for natural gas was very expensive 12/97 16,772 23,443 16,759
and created some pricing concerns. A large 12/98 19,537 30,147 19,842
part of the reduction in this industry also 12/99 26,094 36,488 22,725
came from merger activities. -----------------------
On the other hand, we increased our SOURCE: LIPPER, INC.
holdings in the communications equipment Past performance cannot guarantee comparable future results.
industries, particularly with holdings in
cellular-equipment companies. We continue to MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS
believe these industries represent attractive OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
value. PERFORMANCE SHOWN.
Given the negative interest-rate
environments for fixed-income holdings, we The performance figures shown here, which represent AIM V.I. Global Utilities
eliminated about 12% of our bond holdings Fund, are not intended to reflect actual annuity values, and they do not
and rolled the proceeds from these sales reflect charges at the separate-account level which (if applied) would lower
into the stocks of companies with stronger them. AIM V.I. Global Utilities Fund's performance figures are historical, and
growth prospects. they reflect changes in net asset value and the reinvestment of distributions.
The fund's investment return and principal value will fluctuate, so an
Q. WHAT IS YOUR OUTLOOK FOR 2000? investor's shares, when redeemed, may be worth more or less than their original
A. Given the market volatility that we've cost.
seen in 1999, it is apparent that changes The unmanaged Lipper Utility Fund Index represents an average of the
in market and economic conditions cannot performance of the 30 largest utility funds tracked by Lipper, Inc., an
be predicted but should always be independent mutual fund performance monitor. The unmanaged Standard & Poor's
expected. The best way to address these Composite of 500 Stocks (the S&P 500) is generally considered representative
market risks, we believe, is through of the performance of the stock market in general. Data for the indexes are
diversification. We encourage investors for the period 4/30/94-12/31/99.
to stay the coursein terms of balancing An investment cannot be made in an index. Unless otherwise indicated,
their portfolios with a variety of index results include reinvested dividends.
investment vehicles.
A key trend that is shaping our
financial future is the increasing
extent to which the U.S. economy is
blending with those of other countries.
</TABLE>
98 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
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 99
<PAGE>
<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>
100 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
<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 101
<PAGE>
<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.
102 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
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 103
<PAGE>
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").
104 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
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 105
<PAGE>
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.
106 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GLOBAL UTILITIES FUND 107
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Global Utilities Fund paid ordinary dividends in the amount of
$0.3652 per share to shareholders during its tax year ended December 31, 1999.
Of these amounts 0.36% is eligible for the dividends received deduction for
corporations.
</TABLE>
108 AIM V.I. GLOBAL UTILITIES FUND
<PAGE>
The Managers' Overview
FUND CONTINUES TO PROVIDE INCOME IN
UNFAVORABLE BOND MARKET
A roundtable discussion with the fund management team for AIM V.I. Government
Securities Fund about the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. IT WAS A DIFFICULT YEAR FOR THE Russia's debt default that August, and Board (the Fed) lowered the federal
FIXED-INCOME MARKET. HOW DID continued growing through 1999. With funds rate three times. When the global
THE FUND PERFORM DURING 1999? unemployment at its lowest since 1975, crisis eased in early 1999, the Fed
A. Strong economic growth and resulting wages rose, consumers had more money began to refocus on domestic issues: the
inflationary concerns created a difficult to spend and consumer prices rose. The strength of the U.S. economy, low unem-
environment for intermediate-term debt red-hot economy sparked concerns that ployment and inflationary pressures.
securities. For the fiscal year ended inflation, which undermines fixed-income To cool the economy, the Fed raised
December 31, 1999, the fund's total returns, would rise. Bond prices tumbled interest rates three times during 1999,
annual return was -1.32%. The bench- and yields, which move in the opposite by 25 basis points (0.25%) each time.
mark Lehman Intermediate Government direction of price, climbed during the The Fed's tightening policy had a
Bond Index returned 0.49% for the year. The yield of the benchmark 30-year negativeimpact on the bond market. It
same period. Treasury bond increased to 6.48% by seems increasingly likely that the Fed
the end of December, up from 5.09% at will raise the federal funds rate again
Q. WHAT MAJOR FACTORS INFLUENCED the beginning of the year. These factors at its next meeting in February 2000.
THE FIXED-INCOME ENVIRONMENT combined to create the worst bond mar- (The Fed did raise the federal funds
IN 1999? ket since 1994 and the second worst rate by 25 basis points at that meeting.)
A. Major factors influencing the econo- since 1973.
my in general, and the fixed-income mark- Q. WHAT IS THE FUND'S STRATEGY
et in particular, were the strength of the Q. HOW DID THE FEDERAL FUNDS AND DO YOU ADJUST IT IN UNCERTAIN
U.S. economy, low unemployment and RATE INCREASE AFFECT THE FIXED- BOND MARKETS?
inflation concerns. Let's look at each INCOME MARKET? A. The fund is managed for relative
more closely. A. In an effort to increase liquidity and share-price stability, without
The global economy grew in the third ease investor anxiety during 1998's over- sacrificing a competitive level of
and fourth quarters of 1998, despite seas economic crisis, the Federal Reserve monthly income. The fund's disciplined
strategy remains the same in all market
PORTFOLIO COMPOSITION conditions. The fund's portfolio
managers combine cash equivalents,
As of 12/31/99, based on total investments Treasuries, government-agency debentures
and mortgage-back securities to try to
[PIE CHART] provide the yield of a 30-year Treasury
U.S bond with the relative low price
Treasury U.S. Agency Cash volatility of a five-year Treasury note.
Other Obligations Obligations Equivalents To achieve this objective mix of
1% 18% 61% 20% portfolio holdings may be adjusted
periodically, as it was in 1999. The
The fund's portfolio composition is subject to change, and there is no percentages of U.S. Treasury securities,
assurance that the fund will continue to hold any particular security. U.S. agency securities and cash
equivalents were increased from their
1998 allocations, while mortgage-backed
securities were reduced. The fund
generally relies on mortgage-backed
securities, whose prices have histo-
rically been less
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND 109
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
_________________________
OUR PRIMARY OBJECTIVE IS TO PRODUCE [GRAPH APPEARS HERE]
RESULTS OF A $10,000 INVESTMENT
COMPETITIVE RETURNS FOR OUR INVESTORS -------------------------------
5/5/93-12/31/99
WHILE MAINTAINING
AVERAGE ANNUAL TOTAL RETURNS
SHARE-PRICE STABILITY As of 12/31/99
Inception (5/5/93) 4.67%
_________________________ 5 Years 6.33
1 Year -1.32
volatile, to provide fund price stability. LEHMAN
While the prices of most debt securities AIM V.I. INTERMEDIATE
fall with rising interest rates, those of GOVERNMENT GOVERNMENT
mortgage-backed securities generally do SECURITIES BOND
not fall as much as those of Treasuries. (In thousands) FUNDS INDEX
However, as demand for the safety of gov- ---------------------------
ernment securities dwindled in favor of 5/5/93 10,000 10,000
higher-yielding, lower-rated debt securi- 12/93 10,355 10,346
ties during the year, mortgage-backed 12/94 9,969 10,165
securities were, at times, as volatile as 12/95 11,520 11,632
Treasuries. Therefore, the percentage of 12/96 11,784 12,104
mortgage-backed securities was reduced 12/97 12,745 13,039
from 68% at the beginning of the year to 12/98 13,730 14,143
39% at year's end. The sales proceeds 12/99 13,550 14,213
thereof were invested in short-maturity
Treasury and government-agency notes. ------------------------
SOURCE: LIPPER, INC.
Q. WHAT IS YOUR OUTLOOK FOR THE Past performance cannot guarantee comparable future results.
NEAR TERM?
A. The key issue currently under debate MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
is whether inflation looms ahead. Despite AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
an economic expansion that entered a PERFORMANCE SHOWN.
record-breaking ninth year after the
close of the fiscal year, the technological The performance figures shown here, which represent AIM V.I. Government
revolution is helping maintain a healthy Securities Fund, are not intended to reflect actual annuity values, and they
economic balance by boosting producti- do not reflect charges at the separate-account level which (if applied) would
vity, thereby keeping inflation under con- lower them. AIM V.I. Government Securities Fund's performance figures are
trol. However, economic analysts expect historical, and they reflect changes in net asset value and the reinvestment
the Fed to continue raising the federal of distributions. The fund's investment return and principal value will
funds rate, perhaps through the first half fluctuate, so an investor's shares, when redeemed, may be worth more or less
of 2000, until the U.S. economy shows than their original cost.
signs of slowing. The unmanaged Lehman Intermediate Government Bond Index, which is
What does this mean for the bond generally considered representative of intermediate-term U.S. Treasury and
market? Most analysts anticipate a U.S. government agency securities, is compiled by Lehman Brothers, a
well-known global investment bank. Data for the index is for the period
4/30/93 - 12/31/99.
Government securities (such as U.S. Treasury bills, notes and bonds)
offer a high degree of safety, and they guarantee the timely payment of
principal and interest if held to maturity. Fund shares are not insured, and
their value will vary with market conditions.
An investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends.
__________________________________________________________________________________
rebound in the second half of 2000. falling prices. Moreover, lower prices
In most cases in recent history, the bond afford attractive bond purchase and fund
market has bounced back the year after investment opportunities. Therefore,
a decline. we are optimistic about the fund's
Lower bond prices will reduce the performance in 2000.
value of the bonds currently in the fund's
portfolio, but the relatively high dividend
paid to shareholders will help offset
</TABLE>
110 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
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") -
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 111
<PAGE>
<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
- ----------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS - (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
See Notes to Financial Statements.
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.
112 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
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)
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND 113
<PAGE>
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
114 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
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 115
<PAGE>
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% 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.
116 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Government Securities Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GOVERNMENT SECURITIES FUND
117
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Government Securities Fund paid ordinary dividends in the amount of
$0.4047 per share to shareholders during its tax year ended December 31, 1999.
Of these amounts, 0.00% is eligible for the dividends received deduction for
corporations.
REQUIRED STATE INCOME TAX INFORMATION
Of the total ordinary dividends paid, 95.89% was derived from U.S. Treasury
obligations.
</TABLE>
118 AIM V.I. GOVERNMENT SECURITIES FUND
<PAGE>
The Managers' Overview
AIM V.I. GROWTH FUND BEATS INDEX, BOOSTED BY TECHNOLOGY HOLDINGS
A roundtable discussion with the fund management team for AIM V.I. Growth
Fund about the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. HOW DID THE FUND PERFORM? Jones Industrial Average revised its mem- integral parts of the structure of the
A. Benefiting from the technology bership to include Microsoft, Intel, SBC Internet. These companies are seeing
sector's continued strength, AIM V.I. Communications and Home Depot. The steady growth in their revenues and
Growth Fund posted impressive gains move signaled the markets' transition to earnings, and their success greatly
for the fiscal year ended December 31, the "new economy," dominated by tech- contributed to the fund's excellent returns
1999. Total return was 35.24%. The fund nology, telecommunications and ware- during the fiscal year. As of December 31,
handily outpaced the S&P 500 and the house retailers. As of December 31, technology holdings accounted for
Russell 1000 Index, which returned 1999, the fund had holdings in Microsoft, approximately 45% of the fund's total net
21.03% and 20.91%, respectively, for the Intel and Home Depot. assets. Our continued emphasis on mar-
same period. ket leaders in this sector shows in the
Q. WHAT CONTRIBUTED TO THE FUND'S large number of technology companies in
AIM V.I. GROWTH FUND VS. STRONG GAINS? our top 10 holdings.
BENCHMARK INDEXES A. The fund's sterling performance can
be credited to our exposure to the tech-
nology sector, which performed very well Q. THE FUND OWNS MICROSOFT
One-year returns as of 12/31/99 during 1999. The continued growth of the STOCK. HOW WILL THE RULING IN
Internet drove demand, especially in THE DEPARTMENT OF JUSTICE CASE
AIM companies that are building the Internet's AFFECT YOUR INVESTMENT?
V.I. GROWTH S & P RUSSELL infrastructure. Fund holdings Cisco A. In November, a federal judge ruled
FUND 500 1000 Systems, a networking company, and Sun that Microsoft is a monopoly. As of this
- ----------- ------ ------- Microsystems, which makes servers, are writing, neither a settlement nor an
appeal has been announced, and it is
35.24% 21.03% 20.91% unlikely that a final decision will be made
Q. WHAT WERE MARKET CONDITIONS PORTFOLIO COMPOSITION
DURING THE REPORTING PERIOD?
A. Most market trends of the last few As of 12/31/99, based on total net assets
years continued. Though at times during
the year the markets broadened to the TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES
benefit of value stocks and the securities
of smaller companies, in the end, the 1. Comcast Corp.-Class A 2.70% 1. Computers (Software & Services) 13.93%
largest stocks in the S&P 500 again domi- 2. Sun Microsystems Inc. 2.51 2. Communications Equipment 11.72
nated that index's returns while the 3. Infinity Broadcasting Corp.-Class A 2.34 3. Broadcasting 9.21
remainder produced lackluster results. In 4. America Online, Inc. 2.34 (Television, Radio & Cable)
fact, more than half the stocks in the S&P 5. Nortel Networks Corp. (Canada) 2.30 4. Electronics (Semiconductors) 6.69
500 lost value in the course of the year. 6. Cisco Systems, Inc. 2.25 5. Computers (Hardware) 5.31
In one of the biggest shake-ups of its 7. Home Depot, Inc. (The) 2.06 6. Health Care (Diversified) 4.65
103-year history, in October the Dow 8. Time Warner Inc. 2.06 7. Electrical Equipment 4.00
9. Gateway Inc. 1.98 8. Computers (Networking) 3.23
10. Warner-Lambert Co. 1.98 9. Retail (Building Supplies) 3.05
10. Financial (Diversified) 2.65
The fund's portfolio composition is subject to change, and there is no assurance
that the fund will continue to hold any particular security.
</TABLE>
AIM V.I. GROWTH FUND 119
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
until 2001. We believe that the company's [GRAPH APPEARS HERE]
growth prospects remain strong, espe- RESULTS OF A $10,000 INVESTMENT
cially with the upcoming introduction of -------------------------------
two new products: Office 2000 and 5/5/93-12/31/99
Windows 2000. In the short term, the
stock may be volatile, but this is a core Average Annual Total Returns
growth company that should continue As of 12/31/99
to be a part of our portfolio. Inception (5/5/93) 22.93%
5 Years 29.64
Q. DID YOU MAKE ANY CHANGES 1 Year 35.24
TO THE FUND'S PORTFOLIO DURING THE
FISCAL YEAR? AIM V.I.
A. In keeping with AIM's earnings- GROWTH RUSSELL S & P
momentum investment strategy, we sold (In thousands) FUND 1000 500
stocks with negative earnings revisions.
These sales allowed us to concentrate on 5/5/93 10,000 10,000 10,000
the highest-growth stocks. We believe that 12/93 11,066 10,861 10,806
the overall effect of focusing on the best- 12/94 10,792 10,902 10.948
performing stocks has been positive, and 12/95 14,544 15,020 15,058
it should improve fund performance over 12/96 17,175 18,392 18,513
the long term. 12/97 21,790 24,434 24,687
12/98 29,224 31,036 31,747
Q. WHAT IS YOUR OUTLOOK FOR 12/99 39,521 37,527 38,425
THE FUTURE?
A. Although uncertainty continues about ----------------------------
potentially higher interest rates, the long- SOURCE: LIPPER, INC.
term outlook for the market remains Past performance cannot guarantee complarable future results.
positive. The United States is experiencing
one of the longest economic expansions MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
in its history while inflation remains low. AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
Given these conditions, we remain excited PERFORMANCE SHOWN.
about AIM V.I. Growth Fund. Although
market sectors will always go in and out The performance figures shown here, which represent AIM V.I. Growth Fund, are
of favor, we believe that high-growth com- not intended to reflect actual annuity values, and they do not reflect
panies in the large- and mid-cap sectors charges at the separate-account level which (if applied) would lower them.
will continue to fare well in the current AIM V.I. Growth Fund's performance figures are historical, and they reflect
strong business environment here changes in net asset value and the reinvestment of distributions. The fund's
and abroad. investment return and principal value will fluctuate, so an investor's
shares, when redeemed, may be worth more or less than their original cost.
The unmanaged Russell 1000 Stock Index (the Russell 1000) is generally
considered representative of the performance of the stocks of
large-capitalization companies. The unmanaged Standard & Poor's Composite of
500 Stocks (the S&P 500) is generally considered representative of the
performance of the stock market in general. Data for the indexes are for the
period 4/30/93-12/31/99.
Since the last reporting period, AIM V.I. Growth Fund has elected to
use the Russell 1000 Stock Index as its benchmark instead of the S&P 500. The
new index more closely resembles the securities in which the fund invests.
The fund will no longer measure its performance against the S&P 500, the
index published in previous shareholder reports. Because this is the first reporting
period since we have adopted the new index, SEC guidelines require us to compare the
fund's performance to that of both the old and the new index. An investment cannot
be made in an index. Unless otherwise indicated, index results include reinvested
dividends.
</TABLE>
120 AIM V.I. GROWTH FUND
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES 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> MARKET
SHARES 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 121
<PAGE>
<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>
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.
Investment Abbreviation:
ADR - American Depositary Receipt
See Notes to Financial Statements.
122 AIM V.I. GROWTH FUND
<PAGE>
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 123
<PAGE>
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
124 AIM V.I. GROWTH FUND
<PAGE>
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 125
<PAGE>
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>
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>
126 AIM V.I. GROWTH FUND
<PAGE>
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 127
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
128 AIM V.I. GROWTH FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Growth Fund paid ordinary dividends in the amount of $0.4222 per
share to shareholders during its tax year ended December 31, 1999. Of these
amounts 20.80% is eligible for the dividends received deduction for
corporations.
The Fund also distributed long-term capital gains of $15,763,474 for the
Fund's tax year ended December 31, 1999. Of long-term capital gains
distributed, 100% is 20% rate gain.
AIM V.I. GROWTH FUND 129
<PAGE>
The Managers' Overview
AIM V.I. GROWTH AND INCOME FUND OUTPERFORMS BENCHMARK
A roundtable discussion with the fund management team for AIM V.I. Growth and
Income Fund for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. THE STOCK MARKET HAS BEEN Q. WHAT WERE MARKET CONDITIONS many large companies, fewer stocks met
VERY VOLATILE OVER THE REPORTING LIKE OVER THE REPORTING PERIOD? our investment criteria. Over the fiscal
PERIOD. HOW DID AIM V.I. GROWTH A. Most market trends of the last few year, we cut the number of holdings in
AND INCOME FUND PERFORM? years continued. The largest stocks in the fund's portfolio. Paring down the port-
A. AIM V.I. Growth and Income Fund the S&P 500 again dominated that index's folio allowed us to concentrate on
produced outstanding results despite returns while the remainder produced stocks that exhibited the strongest
market volatility. For the year ended lackluster results. In fact, despite earnings performance.
December 31, 1999, the fund produced advances by the main market indexes,
a total return of 34.25%, significantly out- most S&P 500 stocks lost value during Q. WHAT WERE THE TOP SECTORS
performing the S&P 500, which returned the fiscal year. FOR THE FUND?
21.03% over the same period. In one of the biggest shake-ups of its A. The fund continued to focus on lead-
103-year history, in October the Dow ing technology, financial and health-care
AIM V.I. GROWTH AND INCOME Jones Industrial Average revised its mem- stocks. Over the fiscal year, the fund's
FUND VS. BENCHMARK INDEX bership to include Microsoft, Intel, SBC technology concentration increased,
Communications and Home Depot. The while its investments in financial and
One-year return as of 12/31/99 move signaled the markets' transition to health-care stocks held steady or
the "new economy," dominated by tech- decreased slightly.
AIM nology, telecommunications and ware-
V.I. GROWTH and S & P 500 house retailers. As of December 31, Q. WHY IS TECHNOLOGY SO
INCOME FUND INDEX 1999, the fund had holdings in Microsoft, IMPORTANT TO THE FUND?
--------------- ---------- SBC Communications and Home Depot. A. Technology was one of the strongest
34.25% 21.03% market sectors over the fiscal year. Our
Q. HOW DID YOU MANAGE THE FUND heavy weighting in technology is one of
DURING THESE CONDITIONS? the main reasons the fund beat the S&P
A. With earnings growth slowing for 500 over the fiscal year.
The fund held the stocks of companies
PORTFOLIO COMPOSITION involved in Internet infrastructure, such
as software, wireless communications
As of 12/31/99, based on total net assets and cable-TV firms. A new stock among
our top 10 holdings is Novell, which
TOP 10 HOLDINGS TOP 10 INDUSTRIES makes software that connects PCs to cor-
porate networks. The company has seen
1. Novell, Inc. 5.15% 1. Computers (Software & Services) 17.17% excellent growth this year based on the
2. Microsoft Corp. 4.78 2. Communications Equipment 8.06 success of its Internet-related products.
3. Tyco International Ltd. 3.58 3. Health Care (Diversified) 7.51
4. Warner-Lambert Co. 3.35 4. Financial (Diversified) 5.40 Q. THE FUND HOLDS MICROSOFT
5. Cisco Systems Inc. 3.07 5. Investment Banking/Brokerage 4.90 STOCK. HOW WILL THE RULING IN
6. Dayton-Hudson Corp. 3.01 6. Manufacturing (Diversified) 3.98 THE DEPARTMENT OF JUSTICE CASE
7. Morgan Stanley Dean Witter 7. Broadcasting AFFECT YOUR INVESTMENT?
& Co. 2.97 (Television, Radio & Cable) 3.80 A. In November, a federal judge ruled
8. Sun Microsystems Inc. 2.92 8. Computers (Hardware) 3.75 that Microsoft is a monopoly. As of this
9. American Express Co. 2.89 9. Retail (General Merchandise) 3.45 writing, neither a settlement nor an
10. General Electric Co. 2.69 10. Computers (Networking) 3.07 appeal has been announced, and it's
unlikely that a final decision will be made
The fund's portfolio composition is subject to change, and there is no assurance until 2001. While we cannot comment on
that the fund will continue to hold any particular security.
</TABLE>
130 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
our specific plans to buy or sell stocks, [GRAPH APPEARS HERE]
we can say that as of this time, Microsoft RESULTS OF A $10,000 INVESTMENT
remains a large holding in the fund. We -------------------------------
believe that the company's growth 5/2/94 - 12/31/99
prospects remain strong, especially with
the upcoming introduction of two new AVERAGE ANNUAL TOTAL RETURNS
software products: Office 2000 and As of 12/31/99
Windows 2000. Over the short term, the Inception (5/2/94) 24.49%
stock may be volatile, but this is a core 5 Years 28.18
growth company that should continue to 1 Year 34.25
be a part of our portfolio.
AIM V.I.
Q. WHAT WERE CONDITIONS LIKE FOR GROWTH AND INCOME RUSSELL S & P
FINANCIAL STOCKS? (In thousands) FUND 1000 500
A. Interest-rate concerns have plagued ------------------------------------------
financial stocks, causing them to experi- 5/2/94 10,000 10,000 10,000
ence substantial volatility. But the long- 12/94 9,999 10,326 10,396
term prospects for banks and insurance 12/95 13,385 14,227 14,299
companies seem favorable based on the 12/96 16,054 17,420 17,579
continued strength of their earnings. 12/97 20,183 23,143 23,443
Another issue gives us reason to believe 12/98 25,771 29,397 30,147
that financial stocks may soon recover. 12/99 34,597 35,545 36,489
Late in 1999, Congress reformed the
Glass-Steagall Act, which was created to ----------------------------------
separate commercial and investment SOURCE: LIPPER, INC.
banking. Many analysts believe this may Past performance cannot guarantee comparable future results.
set off a blizzard of merger-and-acqui-
sition activity among banks, insurance MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE.
companies, investment managers and RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM
brokers. THE HISTORICAL PERFORMANCE SHOWN.
Q. WHAT HAPPENED IN THE HEALTH- The performance figures shown here, which represent AIM V.I. Growth and
CARE INDUSTRY OVER THE PAST YEAR? Income Fund, are not intended to reflect actual annuity values, and they do
A. Health-care stocks have been disap- not reflect charges at the separate-account level which (if applied) would
pointing for several reasons: First, at lower them. AIM V.I. Growth and Income Fund's performance figures are
times during 1999 growth stocks such as historical, and they reflect changes in net asset value and the reinvestment
health care went out of favor and of distributions. The fund's investment return and principal value will
investors looked into cyclical stocks that fluctuate, so an investor's shares, when redeemed, may be worth more or less
are more sensitive to the economy. than their original cost.
Second, many health-care stocks were The unmanaged Russell 1000 Stock Index (the Russell 1000) is generally
considered too expensive, and they have considered representative of the performance of the stocks of
fallen out of favor with some investors. large-capitalization companies. The unmanaged Standard & Poor's Composite of
Third, concerns about political reform 500 Stocks (the S&P 500) is generally considered representative of the
continue to hang over the health-care performance of the stock market in general. Data for the indexes are for the
industry. Recent changes in Medicare's period 4/30/94-12/31/99.
reimbursement programs affect the bot- The fund will no longer measure its performance against the S&P 500,
tom lines of hospitals, nursing homes and the index published in previous shareholder reports. Because this is the
other service providers. Over the long first reporting period since we have adopted the new index, SEC guidelines
term, we believe the industry will make a require us to compare the fund's performance to that of both the old and the
comeback, if for the simple fact that baby new index. An investment cannot be made in an index. Unless otherwise
boomers will spend more money on indicated, index results include reinvested dividends.
health care as they age. The fund's health-
care holdings decreased over the year. Q. BESIDES TECHNOLOGY, WHAT Q. WHAT'S YOUR OUTLOOK FOR THE
OTHER AREAS PERFORMED WELL FOR NEAR TERM?
THE FUND? A. Our outlook for the market remains
A. The fund increased its holdings in positive. The United States is experiencing
consumer cyclicals, including retail one of the longest expansion periods in
stocks. Consumer-cyclical companies its history and inflation is low. We believe
benefited from a booming economy, the environment remains favorable for
nearly full employment and robust sales. equities despite short-term market
Dayton-Hudson, which owns Marshall volatility.
Fields, Target and Mervyn's stores,
became a top 10 holding for the fund
during the year. The company, which
operates more than 1,200 stores, report-
ed strong earnings in its most recent
quarter.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND 131
<PAGE>
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>
132 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
<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>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Deb. - Debentures
Pfd. - Preferred
Sr. - Senior
Sub. - Subordinate
Unsec. - Unsecured
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.
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND 133
<PAGE>
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.
134 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
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 135
<PAGE>
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the 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.
136 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
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 137
<PAGE>
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.
138 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. GROWTH AND INCOME FUND 139
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Growth & Income Fund paid ordinary dividends in the amount of $0.1583
per share to shareholders during its tax year ended December 31, 1999. Of
these amounts 37.20% is eligible for the dividends received deduction for
corporations.
The Fund also distributed long-term capital gains of $8,277,648 for the Fund's
tax year ended December 31, 1999. Of long-term capital gains distributed, 100%
is 20% rate gain.
140 AIM V.I. GROWTH AND INCOME FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
FUND BEATS INDEXES DESPITE
SECOND-WORST BOND MARKET
A roundtable discussion with the fund management team for AIM V.I. High Yield
Fund for the fiscal year ended December 31, 1999.
Q. THE PAST YEAR WAS THE WORST FOR return of the Lehman High Yield Q. HOW DID HIGH-YIELD BONDS
BONDS SINCE 1994. HOW DID AIM V.I. Bond Index. FARE IN THIS DIFFICULT MARKET?
HIGH YIELD FUND PERFORM? A. High-yield bonds withstood some
A. Despite the difficult market environment Q. WHAT WERE THE MAJOR TRENDS IN BOND of the pressure of rising interest
for fixed-income investments during the MARKETS DURING 1999? rates to outperform the rest of the
fiscal year, AIM V.I. High Yield Fund A. This past year has been a challenging fixed-income market for most of 1999.
continued to report solid returns. For the period for bond investors. Throughout Nonetheless, these bonds continued
fiscal year ended December 31, 1999, the 1999, downward pressure on bond prices to face other challenges. At midyear,
fund posted a 10.52% return. Boosted by came from the U.S. economy's continued a flood of new high-yield issuance
our success in identifying companies that strong growth, improving global economies, created an imbalance between supply
continue to enjoy rapid earnings growth, rising long-term interest rates and and demand as Y2K concerns suppressed
fund performance handily outpaced the 4.78% inflation fears. These factors contributed demand for these bonds. This
gain of the Lipper High Current Yield to a market environment in which investors combination of oversupply and
Fund Index, as well as the 2.39% favored stocks over bonds. Against this shrinking demand pushed high-yield
backdrop, low unemployment and rising bond prices downward.
FUND OUTPERFORMS INDEXES commodity prices created fears of High-yield bond funds also suffered
inflation. Bond investors are particularly as a result of negative fund flows
One-year returns as of 12/31/99 attuned to hints of higher prices because during 1999. In contrast to the past
inflation erodes the purchasing power of several years, when high-yield bond
AIM V.I. High Yield Fund 10.52% future interest and principal payments. funds enjoyed record cash inflows,
Lipper High Current Yield For these reasons, 1999 saw the worst lower bond prices and greater market
Fund Index 4.78% calendar-year performance for bonds volatility during the fiscal year
Lehman High Yield Bond Index 2.39% since 1994. eroded investor interest in this sector.
Although high-yield bonds enjoyed
a rally early in 1999, tax-loss selling
and Y2K pressures in December caused
more disappointments. These actions
pushed the average yield of high-yield
bonds up to almost 12% at year-
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 HOLDINGS TOP 10 INDUSTRIES
1. American Tissue Inc. 4.45% 1. Telecommunications 17.95%
2. Perry Ellis International, Inc. 4.38 (Long Distance)
3. DJ Orthopedics, LLC/ 4.29 2. Telecommunications 14.77 [PIE CHART]
DJ Orthopedics Capital Corp. (Cellular/Wireless)
4. Hollywood Casino Corp. 4.25 3. Telephone 10.23 Domestic High-Yield Bonds 71.13%
5. Tele 1 Europe B.V. (Netherlands) 4.18 4. Gaming, Lottery & 9.83 International High-Yield Bonds 16.79%*
6. Primus Telecommunications 4.14 Parimutuel Companies Equities 3.16%
Group, Inc. 5. Textiles (Apparel) 6.13 Cash/Cash Equivalents 6.11%
7. Worldwide Fiber Inc. (Canada) 4.11 6. Personal Care 4.45 Other Assets 2.81%
8. Jazztel PLC (United Kingdom) 4.09 7. Health Care 4.29
9. KMC Telecom Holdings, Inc. 3.98 (Medical Products & Supplies) * The fund did not invest in emerging
10. Winsloew Furniture, Inc. 3.92 8. Household Furnishings & markets during the fiscal year.
Appliances 4.14
9. Leisure Time (Products) 2.59
10. Computers (Peripherals) 2.59
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
</TABLE>
AIM V.I. HIGH YIELD FUND 141
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
end-approximately 1.2% over historical [GRAPH APPEARS HERE]
standards.
In light of the challenging market RESULTS OF A $10,000 INVESTMENT
conditions faced by bond issuers, the 5/1/98 - 12/31/99
default rate for the high-yield bond
sector continued to climb and is AVERAGE ANNUAL TOTAL RETURNS
expected to top 5% for the year. As of 12/31/99
Fortunately, our credit research allowed Inception (5/1/98) -1.26%
AIM V.I. High Yield Fund to avoid any 1 Year 10.52
defaults during 1999.
LIPPER
Q. HOW DID YOU MANAGE THE FUND? AIM V.I. LEHMAN HIGH HIGH CURRENT
A. Coming into year-end, we believed HIGH YIELD YIELD BOND YIELD FUND
that the perception of risk surrounding FUND INDEX INDEX
Y2K might give financial markets some (In thousands) ---------------------------------------------------------
troubles as investors decided to stay 5/1/98 10,000 10,000 10,000
on the sideline in terms of fund purchases. 6/98 10,050 10,070 9,989
In anticipation of these events, we 9/98 9,130 9,613 9,226
slightly increased the fund's cash holdings 12/98 9,239 9,817 9,477
at year-end. On December 31, cash and cash- 3/99 9,584 9,998 9,672
equivalent holdings accounted for more than 6/99 9,804 10,032 9,703
6% of the fund's total net assets. We believe 9/99 9,720 9,890 9,503
that it was prudent to have extra cash when 12/99 10,212 10,052 9,998
the changeover to 2000 occurred, because our ---------------------
first priority is to safeguard our investors' SOURCE: LIPPER, INC.
assets, especially in a turbulent market. Past performance cannot guarantee comparable future results.
While yield spreads have come down from
their 1998 levels, they still remained MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
high on a historical basis. As a result we AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
have found opportunities for higher yields PERFORMANCE SHOWN.
in the lower-quality sectors of the high-
yield market. We repositioned the fund's The performance figures shown here, which represent AIM V.I. High Yield Fund,
portfolio to include more CCC bonds in are not intended to reflect actual annuity values, and they do not reflect
exchange for the opportunity to achieve charges at the separate-account level which (if applied) would lower them.
higher yields. Lower-quality sectors in AIM V.I. High Yield Fund's performance figures are historical, and they
the high-yield bond market generally reflect changes in net asset value and the reinvestment of distributions. The
offer higher yields than most other issues fund's investment return and principal value will fluctuate, so an
as a way to compensate investors for investors's shares, when redeemed, may be worth more or less than their
taking on more risks. original cost. Had fees and expenses been waived during the reporting period,
On the other hand, due to its greater returns would have been lower.
interest-rate sensitivity, the BB sector The unmanaged Lehman High Yield Bond Index, which represents the
of the high-yield market underperformed as performance of investment-grade debt securities, is compiled by Lehman
interest rates rose during the year. Thus, Brothers, a well-known global investment firm. The unmanaged Lipper High
we reduced our holdings in this sector to Current Yield Fund Index represents an average of the performance of the 30
1.65% of total net assets at the end of largest high-yield funds tracked by Lipper, Inc., an independent mutual fund
1999. Overall, the fund has an average performance monitor. Data for the indexes are for the period 4/30/98-12/31/99.
credit quality of B. Government securities (such as U.S. Treasury bills, notes and bonds)
offer a high degree of safety, and they guarantee the timely payment of
Q. WHAT IS YOUR OUTLOOK FOR 2000? principal and interest if held to maturity. Fund shares are not insured, and
A. The prospect of higher interest rates their value will vary with market conditions. The fund invests in
and further defaults will keep the level higher-yielding, lower-rated corporate bonds, commonly known as junk bonds.
of uncertainty and volatility high in the These bonds have a greater risk of price fluctuation and loss of principal
high-yield sector. As a result, a recovery than do U.S. government securities (such as U.S. Treasury bills, notes and
in the high-yield market may not occur until bonds) for which the government guarantees the repayment of principal and
the second half of 2000. Although the past interest if held to maturity.
year and a half have been a rough period An investment cannot be made in an index. Unless otherwise indicated, index
results include reinvested dividends.
-------------------------------------------------------------------------------
for the high-yield market, we believe price for a high-yield bond over the
that the worst may be behind us. period 1992-1999 was about 95% of par
We also believe that the current value. At the end of 1999, however, it
high-yield environment represents an was 85% of par value. Thus, we believe
excellent opportunity for investors that there are some built-in gains in the
for several reasons. First, on an difference between where prices are now
absolute-yield basis, the average and where they have been historically.
high-yield bond finished the year Aggressive investors who can take an
at approximately 12%. When you compare extended view and withstand short-term
that to the long-term yield average, market volatility may be rewarded in
high-yield bonds seem cheap relative the future.
to other alternatives in the fixed-
income universe. On an interesting
note, the average
</TABLE>
142 AIM V.I. HIGH YIELD FUND
<PAGE>
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 143
<PAGE>
<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>
Abbreviations:
Conv. - Convertible
Ctfs. - Certificates
Disc. - Discounted
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
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.
See Notes to Financial Statements.
144 AIM V.I. HIGH YIELD FUND
<PAGE>
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 145
<PAGE>
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").
146 AIM V.I. HIGH YIELD FUND
<PAGE>
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
$43,433 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 147
<PAGE>
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.
148 AIM V.I. HIGH YIELD FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. HIGH YIELD FUND 149
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. High Yield Fund paid ordinary dividends in the amount of $0.7471 per
share to shareholders during its tax year ended December 31, 1999. Of these
amounts 0.20% is eligible for the dividends received deduction for corporations.
150 AIM V.I. HIGH YIELD FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
JAPANESE REBOUND BOOSTS FUND PERFORMANCE
A roundtable discussion with the fund management team for AIM V.I.
International Equity Fund about the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. INTERNATIONAL The Japanese stock market dominated deals were announced in the third
EQUITY FUND PERFORM? the EAFE, especially near the end of the quarter with values of more than $10 bil-
A. For the fiscal year ended December reporting period. Investors flocked to lion each.
31, 1999, cumulative total return for AIM Japanese securities amid prospects of a Given the healthy economic prospects
V.I. International Equity Fund was an out- brighter economy. Japan posted two con- for the region, we believe Europe's large
standing 55.04%. The fund handily out- secutive quarters of economic growth, discount in equity valuations relative to
performed both its benchmarks, the signaling an end to its extended reces- the United States is likely to narrow.
Lipper International Funds Index (which sion. Market activity drove the value of
returned 37.83%) and the MSCI EAFE the yen to powerful heights. Q. WHAT COUNTRIES' INVESTMENTS
- --Registered Trademark-- Index (which Japan's growth still depends on gov- CONTRIBUTED TO THE FUND'S GAINS?
returned 26.96%). ernment spending. During the fourth A. Japan, the United Kingdom, Canada,
quarter, Japan poured another $67 Mexico and France all contributed signifi-
Q. WHAT WERE THE MAJOR TRENDS IN billion into its economy, the ninth stimu- cantly to the fund's stellar performance in
THE FINANCIAL MARKETS DURING THE lus package of the decade. The fund was 1999. Over the course of the year, we
REPORTING PERIOD? slow to return to Japan because its more than tripled our Japanese holdings
A. International equities recovered economy is so dependent on government from just over 8% of the portfolio to
strongly during the year. The index for intervention. almost 27%, focusing on Japanese com-
international stocks, the EAFE, gained The major trend in Europe has been panies with a global reach, principally in
more than 25% in 1999, compared with the feverish pace of merger activity. In the technology, telecommunications and
a 21% rise in the domestic S&P 500. fact, toward the end of the year, European electronics industries. Some technology
Overseas stocks benefited from improving merger activity topped that of the United (or tech-related) Japanese stocks that
investor expectations of economic States for the first time. Ten European helped the fund's performance were
growth and favorable valuations relative Matsushita Communications Industrial,
to U.S. stocks.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES TOP 10 COUNTRIES
1. Mannesmann A.G. (Germany) 4.00% 1. Communications Equipment 10.19% 1. Japan 26.88%
2. Nokia Oyj AB (Finland) 3.01 2. Telephone 9.50 2. France 12.32
3. Sony Corp. (Japan) 2.60 3. Telecommunications 3. United Kingdom 10.67
4. Nortel Networks Corp. (Canada) 2.52 (Cellular & Wireless) 7.74 4. Canada 6.71
5. Matsushita Communications 4. Electronics (Component Distributors) 7.38 5. Germany 4.99
Industrial Co., Ltd. (Japan) 2.29 5. Electrical Equipment 4.62 6. Finland 3.96
6. NTT Mobile Communications 6. Services (Commercial & Consumer) 4.45 7. Switzerland 3.52
Network, Inc. (Japan) 2.31 7. Machinery (Diversified) 4.31 8. Hong Kong 3.39
7. Carrefour S.A. (France) 2.20 8. Computers (Software & Services) 3.48 9. Netherlands 3.33
8. Murata Manufacturing Co., Ltd. 9. Retail (Food Chains) 3.16 10. Mexico 3.22
(Japan) 2.17 10. Banks (Regional) 2.95
9. Kyocera Corp. (Japan) 2.06
10. Banca Popolare di Brescia (Italy) 1.96
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND 151
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
which makes pagers, cell phones, net- [GRAPH APPEARS HERE]
work systems, traffic-control systems RESULTS OF A $10,000 INVESTMENT
and surveillance equipment; Murata -------------------------------
Manufacturing, a maker of electronic 5/5/93-12/31/99
components; and the household name
Sony, whose PlayStation gaming console AVERAGE ANNUAL TOTAL RETURNS
accounts for more than 10% of its world- As of 12/31/99
wide sales. Inception (5/5/93) 18.82%
We decreased our exposure to 5 Years 21.93
Belgium significantly during the year, 1 Year 55.04
from more than 3% of the portfolio at the
end of 1998 to under 0.5% at the close of AIM V.I LIPPER
1999. We also exited Argentina during the INTERNATIONAL MSCI INTERNATIIONAL
year, mostly because of concerns over its EQUITY EAFE FUND
debt profile. (In thousands) FUND INDEX INDEX
---------------------------------------
Q. WHAT IS YOUR OUTLOOK 5/2/93 10,000 10,000 10,000
FOR 2000? 12/93 11,890 10,811 12,188
A. We believe we have reached a period 12/94 11,698 11,652 12,098
of synchronized global expansion. The 12/95 13,714 12,958 13,311
United States drove the markets for the 12/96 16,464 13,742 15,231
past two years, but with Europe and Asia 12/97 17,606 13,986 16,335
gaining strength, we believe growth in the 12/98 20,333 16,783 16,403
future will be more balanced. 12/99 31,525 21,308 25,366
We're encouraged by signs of econom- -------------------------
ic growth in Japan, but much-needed cor- SOURCE: LIPPER, INC.
porate restructuring has yet to occur on a Past performance cannot guarantee comparable future results.
wide scale. However, restructuring at
major Japanese companies (including MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF
fund holdings Sony and NTT and auto AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL
makers Nissan and Mitsubishi Motors) PERFORMANCE SHOWN.
indicates that key corporations are ready
to cut costs and to become more The performance figures shown here, which represent AIM V.I. International
efficient. Equity Fund, are not intended to reflect actual annuity values, and they do
In Europe, we expect positive eco- not reflect charges at the separate-account level which (if applied) would
nomic growth, stronger corporate earn- lower them. AIM V.I. International Equity Fund's performance figures are
ings and higher consumer demand. In historical, and they reflect changes in net asset value and the reinvestment
fact, if European growth continues on its of distributions. The fund's investment return and principal value will
current path, Europe stands poised to fluctuate, so an investor's shares, when redeemed, may be worth more or less
surpass the United States in economic than their original cost.
growth during 2000. The unmanaged Lipper International Fund Index represents an average of
the performance of the 30 largest international funds tracked by Lipper, Inc.,
an independent mutual fund performance monitor. The unmanaged MSCI EAFE(R)
(Europe, Australasia and the Far East) Index is a group of foreign securities
tracked by Morgan Stanley Capital International. Data for the indexes are for the
period 4/30/93-12/31/99.
International investing presents certain risks not associated with
investing solely in the United States. These include risks relating to
fluctuations in the value of the U.S. dollar relative to other currencies,
the custodial arrangements made for the fund's foreign holdings, accounting
differences, political risks and the lesser degree of information required to
be provided by non-U.S. companies.
An investment cannot be made in an index. Unless otherwise indicated,
index results include reinvested dividends.
</TABLE>
152 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
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 153
<PAGE>
<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>
154 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
<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>
See Notes to Financial Statements.
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Wts. - Warrants
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.
AIM V.I. INTERNATIONAL EQUITY FUND 155
<PAGE>
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.
156 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
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 157
<PAGE>
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the 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>
158 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
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 159
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. International Equity Fund, a series of shares of common stock of AIM
Variable Insurance Funds, Inc. including the schedule of investments as of
December 31, 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
160 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND 161
<PAGE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. International Equity Fund paid ordinary dividends in the amount of
$0.1934 per share to shareholders during its tax year ended December 31, 1999.
Of these amounts 0.00% is eligible for the dividends received deduction for
corporations.
The Fund also distributed long-term capital gains of $12,247,382 during the
Fund's tax year ended December 31, 1999. Of long-term capital gains
distributed, 100% is 20% rate gain.
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1999, THE AMOUNT OF INCOME RECEIVED BY
THE FUND FROM SOURCES WITHIN FOREIGN COUNTRIES AND POSSESSIONS OF THE UNITED
STATES WAS $0.2013 PER SHARE (REPRESENTING A TOTAL OF $3,120,591). THE AMOUNT
OF TAXES PAID BY THE FUND TO SUCH COUNTRIES FOR THE FISCAL YEAR ENDED DECEMBER
31, 1999 WAS $0.0224 PER SHARE (REPRESENTING A TOTAL OF $347,678). THE
FOLLOWING TABLE PROVIDES A BREAKDOWN BY COUNTRY OF ORDINARY INCOME DIVIDENDS
AND FOREIGN TAXES PAID BY THE FUND DURING THE FISCAL YEAR ENDED DECEMBER 31,
1999:
<TABLE>
<CAPTION>
GROSS FOREIGN
INCOME TAX PAID
COUNTRY % %
------- ------- --------
<S> <C> <C>
Argentina............................ 1.27% 0.00%
Australia............................ 1.22% 1.07%
Belgium.............................. 0.35% 0.50%
Brazil (BRL)......................... 2.49% 1.64%
Canada............................... 3.52% 6.53%
Chile................................ 0.03% 0.00%
Finland.............................. 0.82% 1.46%
France............................... 16.29% 24.55%
Germany.............................. 3.34% 3.58%
Hong Kong............................ 4.39% 0.00%
India................................ 0.02% 0.00%
Ireland.............................. 2.89% 1.97%
Italy................................ 2.20% 3.89%
Japan................................ 3.60% 6.45%
Malaysia............................. 0.09% 0.27%
Mexico............................... 1.74% 1.48%
The Netherlands...................... 2.80% 4.93%
Norway............................... 0.05% 0.09%
Philippine........................... 0.08% 0.19%
Portugal............................. 1.53% 3.17%
Singapore............................ 0.95% 2.35%
Spain................................ 2.06% 3.63%
South Africa......................... 0.04% 0.00%
South Korea.......................... 0.98% 1.66%
Sweden............................... 1.52% 2.70%
Switzerland.......................... 3.93% 5.42%
United Kingdom....................... 17.29% 14.11%
Venezuela............................ 0.01% 0.00%
Various.............................. 0.47% 8.36%
------- -------
75.97% 100.00%
U.S. 24.03% 0.00%
------- -------
TOTAL 100.00% 100.00%
======= =======
</TABLE>
162 AIM V.I. INTERNATIONAL EQUITY FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
FUND PROVIDES STABILITY AMIDST UNCERTAINTY
A roundtable discussion with the fund management team for AIM V.I. Money Market Fund for the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. MONEY --------------------- consumer prices, have shown that the
MARKET FUND PERFORM DURING THE frenetic growth has produced a surprising
FISCAL YEAR? In February, the current period lack of inflation. However, now that
A. Even with the prevalence of inflation Y2K is past and the Fed no longer has to
fears, the fund continued to provide of economic expansion sit on the sidelines, the Fed will again
consistent income. The fund maintained begin to address concerns that imbalances
a weighted average maturity (WAM) in became the longest in U.S. history. between supply and demand may be
the 20- to 25-day range throughout the developing within the economy.
reporting period. As of December 31, --------------------
1999, the WAM stood at 20 days, and the Q. WHAT IS YOUR NEAR-TERM
seven-day yield for the fund was 4.90%. mance. Inflation fears and an overabun- OUTLOOK?
dance of corporate bond supply coupled A. In February, the current period of
Q. WHAT WAS THE INTEREST-RATE with generally weak demand contributed economic expansion became the longest in
ENVIRONMENT LIKE DURING THE to a rather anemic bond market, as U.S. history. Many analysts expect this
FISCAL YEAR? reflected in the yield of a benchmark growth to continue through at least the
A. With the worst of the global financial 30-year Treasury bond. The benchmark first half of 2000. This has led to the
crisis past, the question throughout much bond's yield rose from 5.09% at the belief that the Fed will need to raise
of 1999 was whether or not the Federal beginning of 1999 to 6.48% at the end interest rates at least once-if not
Reserve Board (the Fed) would need to of the year-1999 proved to be one of more-to slow economic growth to a
raise interest rates to forestall inflation. the worst years on record for bonds. more sustainable pace. It seems that
Inflation fears spawned volatility in However, cash in the form of three - the same story that dogged markets in
equity markets, unsettling bond markets as and six-month Treasury bills still 1999 is continuing, with persistent upward
investors were concerned that ongoing performed well for the year; yields pressure on interest rates.
strong economic growth in the United for these bills rose from 4.46% to
States would prompt the Fed to raise 5.31% and 4.54% to 5.73%, respectively, Q. HOW WILL THE FUND RESPOND IF
interest rates. Ultimately, in three during the 12-month period. INTEREST RATES CONTINUE TO RISE?
separate moves, the Fed raised the key A. The fund's short WAM makes it able
federal funds rate from 4.75% to 5.50%. Q. WAS THE ECONOMY ADVERSELY to respond quickly to any change in
AFFECTED BY THE MARKET rates. It can take advantage of any
Q. HOW DID EQUITY AND BOND UNCERTAINTY? reversal in interest rates to provide
MARKETS FARE? A. In the midst of it all, the U.S. competitive yield while maintaining a
A. While many stock indexes finished economy continued to blaze ahead conservative position with respect to
the year quite strongly, the bond market relentlessly, experiencing a near interest-rate risk.
did not enjoy the same upward perfor- -record level of consumer confidence.
Recent economic indicators, such as
employment data and
- -----------------------------------------------------------------------------------------------------------------------------------
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. There can be no assurance that the fund will be able to maintain a stable net asset value of $1.00
per share.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
AIM V.I. MONEY MARKET FUND 163
<PAGE>
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PAR
(000) VALUE
<S> <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.
164 AIM V.I. MONEY MARKET FUND
<PAGE>
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 165
<PAGE>
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
166 AIM V.I. MONEY MARKET FUND
<PAGE>
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.
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.
AIM V.I. MONEY MARKET FUND 167
<PAGE>
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the 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.
168 AIM V.I. MONEY MARKET FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Money Market Fund, a series of shares of common stock of AIM Variable
Insurance Funds, Inc. including the schedule of investments as of December 31,
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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. MONEY MARKET FUND 169
<PAGE>
<TABLE>
<S> <C> <C> <C>
. DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, Senior Vice President A I M Advisors, Inc.
and Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of Assistant Vice President
the U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION (UNAUDITED)
AIM V.I. Money Market Fund paid ordinary dividends in the amount of $0.0457
per share to shareholders during its tax year ended December 31, 1999. Of
these amounts 0.00% is eligible for the dividends received deduction for
corporations.
170 AIM V.I. MONEY MARKET FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
FUND TARGETS GROWING TELECOM INDUSTRY
A roundtable discussion with the fund management team for AIM V.I. Telecommunications Fund for the fiscal year ended
December 31, 1999.
Q. WHAT WAS THE MARKET ENVIRONMENT Despite persistent inflation fears, the shares. Strong merger-and-acquisition
LIKE DURING THE FISCAL YEAR? U.S. economy continued to experience a near- activity also continues in Europe,
A. With the worst of the global record level of consumer confidence. Markets stimulated by the launch of the euro
financial crisis past, the question reached a feverish pitch by the end of at the beginning of 1999.
throughout much of 1999 was whether 1999. If the current economic expansion
or not the Federal Reserve Board (the lasts through the early months of 2000, Q. HOW HAVE TELECOM STOCKS FARED?
Fed) would need to raise interest rates it will become the longest in U.S. A. At the end of the reporting period,
to forestall inflation. Inflation history. the communications component of the
fears spawned volatility in the S&P 500 was up 18.81% for 1999. The
markets, curbing high-flying com- Q. HOW DID FOREIGN MARKETS PERFORMS? sector experienced ups and downs
munications and technology stocks in A. Global economic news was good on the during the year, and technology was
the spring and bringing on a resurgence whole, thanks largely to recoveries in the only sector of the index to post a
of more cyclical stocks. Europe, Asia and Japan. Markets that were positive return for the third quarter.
By mid-summer, major stock indexes devastated a year ago came along well The venerable Dow Jones Industrial
reached new record highs, boosted by during 1999; countries that focused on Average incorporated four new stocks
solid corporate earnings, continued cleaning up their banking systems and on November 1, including fund holdings
tame inflation and renewed vitality stabilizing their currencies enjoyed the Microsoft and SBC Communications.
among many stocks. But investors' best performance. Experts say these stocks represent the
fears dampened stocks in general as European companies are undergoing the "new economy," dominated largely by
key economic indicators, such as same type of restructuring that U.S. telecommunications and technology,
employment data and consumer prices, companies experienced in the 1980s. They replacing stocks that represented the
showed that the economy blazed ahead are selling unproductive assets, cutting old, industrial economy. Because the
relentlessly. Ultimately, in three workforces and buying back United States dominates telecom-
separate moves, the Fed raised the key munications, the majority of our
federal funds rate from 4.75% to 5.50%. holdings are U.S.-based.
PORTFOLIO COMPOSITION
As of 12/31/99, based on total net assets
TOP 10 EQUITY HOLDINGS TOP 10 COUNTRIES
1. JDS Uniphase Corp. 5.95% 1. United States 68.87%
2. Cisco Systems, Inc. 4.58 2. Japan 6.93
3. Microsoft Corp. 4.52 3. Germany 3.18
4. Yahoo! Inc. 3.79 4. Canada 3.09
5. Motorola, Inc. 3.79 5. Finland 2.93
6. Mannesmann AG (Germany) 3.18 6. Netherlands 2.17
7. NTL Inc. 2.98 7. United Kingdom 1.48
8. Nokia Oyj ADR (Finland) 2.93 8. Hong Kong 1.27
9. eBay, Inc. 2.89 9. Ireland 1.18
10. NTT Mobile Communications 2.84 10. Spain 1.10
Network, Inc. (Japan)
The fund's portfolio composition is subject to change, and there is no assurance that the fund will continue to hold any
particular security.
</TABLE>
AIM V.I. TELECOMMUNICATIONS FUND 171
<PAGE>
Q. HOW HAVE YOU BEEN TAKING . Equipment makers like fund
ADVANTAGE OF TRENDS IN TELECOM- holding Cisco Systems focus on
MUNICATIONS? building communications networks
A. Major trends include deregulation, to improve Internet bandwidth
the enormous growth in data traffic, (a measure of how wide the
the move from wired to wireless connection pipeline is and how
phones and increasing bandwidth. much information can be sent
We look for companies that are through it). JDS Uniphase, our
working to meet the increasing top holding, makes chips used to
telecommunications demands increase the carrying capacity
created by the e-revolution. of optical fibers. We continue
. Telephone companies all over the to see strength in these
world-long regulated and often types of companies.
state-owned-are being turned
loose to compete, resulting Q. WHAT IS YOUR OUTLOOK FOR
in a flurry of merger-and- THE FUTURE?
acquisition activity. Companies A. Most experts agree that the demand
are preparing for the day when for new telecommunications technology
there is effectively no separation will continue to increase in the
between local and long-distance new century because each time
calling or between carrying voice, one consumer demand is met,
data or video. Fund holdings another is born. People all
Vodafone Group, Qwest Com- over the world want more information
munications and MCI WorldCom faster. This global thirst for
all made major acquisitions bandwidth (the ability to increase
in 1999. the speed of information) should
. According to IDC, a technology continue to drive the information
research group, more than 111 economy, which we see as the new
million people subscribed to economy. In this environment, we will
wireless services in 1998. continue to target companies with
Experts say five years from above-average earnings growth that
now, cell-phone users will be we believe will be market leaders in
able to download pictures from telecommunications.
the Web and even do videocon-
ferencing from their mobile The unmanaged Standard & Poor's
phones. Nokia, a fund holding Composite of 500 Stocks (the S&P 500) is
and mobile-phone leader, generally considered representative of
predicts that 15% of those sold the performance of the stock market
by the end of 2000 will be in general. The Dow Jones Industrial
Internet-capable. Average is a price-weighted average
of 30 actively traded primarily
industrial stocks.
172 AIM V.I. TELECOMMUNICATIONS FUND
<PAGE>
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 173
<PAGE>
<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>
Investment Abbreviations:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
a) Non-income producing security.
b) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
174 AIM V.I. TELECOMMUNICATIONS FUND
<PAGE>
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 FOREIGN CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 21,278,655
- -----------------------------------------------------------------------------
Foreign currencies (240,556)
- -----------------------------------------------------------------------------
Foreign currency contracts 26,029
- -----------------------------------------------------------------------------
21,064,128
- -----------------------------------------------------------------------------
Change in net unrealized appreciation of:
Investment securities 36,821,340
- -----------------------------------------------------------------------------
Foreign currencies 325
- -----------------------------------------------------------------------------
Foreign currency contracts 44,287
- -----------------------------------------------------------------------------
36,865,952
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies and
foreign 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 175
<PAGE>
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 foreign currency
contracts 21,064,128 6,543,917
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
foreign 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 foreign
currency contracts 11,463,291 6,486,142
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and foreign 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").
176 AIM V.I. TELECOMMUNICATIONS FUND
<PAGE>
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 177
<PAGE>
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.
178 AIM V.I. TELECOMMUNICATIONS FUND
<PAGE>
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 179
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
180 AIM V.I. TELECOMMUNICATIONS FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
AIM V.I. TELECOMMUNICATIONS FUND 181
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
The Managers' Overview
TECHNOLOGY BUOYS AIM V.I. VALUE FUND
A roundtable discussion with the fund management team for AIM V.I. Value Fund for the fiscal year ended December 31, 1999.
Q. HOW DID AIM V.I. VALUE FUND potential: technology, telecom- ---------------------
PERFORM DURING 1999? munications and broadcasting.
A. The fund reported a total annual Computers, e-commerce and the If the 1998 market
return of 29.90% as of December 31, Internet are changing the way the
1999, outpacing the 21.03% return of world communicates and conducts could be considered a flight to quality,
the S&P 500. business, and investors sought
to capitalize on this revolution. the 1999 market could be characterized
Q. WHAT WERE MARKET CONDITIONS Technology stocks dominated the
LIKE OVER THE FISCAL YEAR? market; in fact, while the S&P 500 as a stampede to growth.
A. If the 1998 market could be as a whole returned 21.03% in 1999,
considered a flight to quality, the the index's technology sector ---------------------
1999 market could be characterized returned 75.21%.
as a stampede to growth. The bull Stocks with no ties to infor- Q. HOW DID YOU MANAGE THE FUND
market in technology stocks sent mation technology faced a volatile DURING THESE CONDITIONS?
the stock market to new heights in year. Investors worried about interest A. We maintained our investment
1999, but this tide did not lift rates throughout 1999. In June and discipline: growth at a reasonable
all boats. While the S&P 500, the August, the Federal Reserve Board price, or GARP. For a stock to be
Dow and the Nasdaq reached new (the Fed) raised rates in two quarter- included in our portfolio, it must
levels, many stocks suffered down point moves. The Fed chose to leave meet the following criteria:
or flat years. Of the S&P 500 stocks, rates unchanged in October but . Earnings-we believe earnings drive
256 declined, 241 rose and three increased them by another quarter- stock prices.
were unchanged. point in November. In December, a Fed . Momentum-we analyze a company's
The best-performing stocks were decision to leave rates unchanged growth rate to determine whether
those with the most perceived growth sparked a market rally. it is accelerating or slowing.
. Value-we look for stocks with
PORTFOLIO COMPOSITION relatively low prices compared to
their earnings and projected growth
As of 12/31/99, based on total net assets rates.
Many stocks offered growth in 1999, but
TOP 10 EQUITY HOLDINGS TOP 10 INDUSTRIES did not sell at a reasonable price.
Some sold at low prices but didn't offer
1. Nokia Corp. ADR (Finland) 7.46% 1. Communications Equipment 9.99% the growth we require. Because it was
2. Dayton Hudson Corp. 4.83 2. Computers (Hardware) 8.99 harder to find stocks that met our
3. Nextel Communications, Inc. 4.79 3. Broadcasting 8.78 criteria, we trimmed the number of
-Class A (Television, Radio & Cable) holdings in the portfolio from 90 to 54
4. Comcast Corp.-Class A 4.77 4. Retain (General Merchandise) 6.67 over the fiscal year. This allowed us
5. Cox Communications, Inc. 5. Computers (Software & to concentrate on the best-performing
-Class A 3.32 Services) 6.11 stocks.
6. American International 3.13 6. Telecommunications 4.79 Q. WHAT CHANGES DID YOU MAKE TO
Group, Inc. (Cellular/Wireless) THE PORTFOLIO?
7. Time Warner, Inc. 3.10 7. Insurance (Multi-Line) 3.63 A. We boosted the fund's holdings in
8. Gateway Inc. 2.92 8. Financial (Diversified) 3.58 technology stocks throughout the year;
9. Apple Computer Inc. 2.91 9. Entertainment 3.10 we were overweighted in this area com-
10. Tyco International Ltd. 2.67 10. Equipment (Semiconductors) 2.85
Please keep in mind that the fund's portfolio composition is subject to change, and
there is no assurance that the fund will continue to hold any particular security.
</TABLE>
182 AIM V.I. VALUE FUND
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
[GRAPH APPEARS HERE]
RESULTS OF A $10,000 INVESTMENT lion merger with America Online after the
5/5/93 - 12/31/99 close of the fiscal year. This record-
breaking deal combines the world's
AVERAGE ANNUAL TOTAL RETURNS largest media and entertainment company
As of 12/31/99 with the world's top Internet provider.
We believe this merger further solidifies
Inception (5/5/93) 23.07% the future of the Internet as a media
5 Years 27.23 powerhouse.
1 Year 29.90 AIM V.I. S & P New to the portfolio are Nextel and
VALUE 500 Apple. Nextel is a national wireless-phone
(In thousands) FUND INDEX company, covering 92 of the top 100 U.S.
--------- ------- metropolitan areas. The company is
5/5/93 10,000 10,000 launching Nextel Online, which allows
12/93 11,482 10,806 customers to use their cellular phones for
12/94 11,945 10,948 Internet access and e-mail.
12/95 16,275 15,058 Apple Computer is a turnaround story
12/96 18,721 18,513 that perfectly met our investment criteria:
12/97 23,155 24,687 relatively low stock price, attractive new
12/98 30,658 31,747 products and good earnings momentum.
12/99 39,825 38,425 Its co-founder Steve Jobs has resumed
- -------------------------- control of the once-foundering company,
Source: Lipper, Inc. which has won back many consumers
Past performance cannot guarantee comparable future results. with products like the iMac, iBook and
G4 computers.
MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE. RESULTS OF AN
INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM THE HISTORICAL PERFORMANCE SHOWN. Q. WHAT IS YOUR OUTLOOK FOR
THE YEAR?
The performance figures shown here, which represent AIM V.I. Value Fund, are A. We believe the long-term outlook is
not intended to reflect actual annuity values, and they do not reflect positive for equities. The United States is
charges at the separate-account level which (if applied) would lower them. experiencing one of the longest expansion
AIM V.I. Value Fund's performance figures are historical, and they reflect periods in its history. The economy remains
changes in net asset value and the reinvestment of distributions. The fund's strong, inflation is low and the country
investment return and principal value will fluctuate, so an investors's is enjoying a budget surplus.
shares, when redeemed, may be worth more or less than their original cost. Looking into 2000, many economists
The unmanaged Standard & Poor's Composite of 500 Stocks (the S&P 500) predict that the Fed will raise rates again
is generally considered representative of the performance of the stock market to keep inflation at bay. With this expec-
in general. Data for the indexes are for the period 4/30/93-12/31/99. tation, the market could remain volatile
An investment cannot be made in an index. Unless otherwise indicated, for the near term. In this type of
index results include reinvested dividends. environment, it pays to maintain our
- ------------------------------------------------------------------------------------- disciplined investment strategy. The fund
pared to the S&P 500. The portfolio's stocks because of regulatory concerns will continue to look for buying
holdings included the stocks of clouding the industry in 1999. opportunities during market troughs and
companies involved in Internet selling opportunities at peaks.
infrastructure, such as tele- Q. WHAT STOCKS DID YOU LIKE?
communications, wireless com- A. Nokia remained a core holding for
munications, cable-TV firms and the fund. The Finnish cellular-phone
computer-hardware makers. maker has maintained its leading posi-
At the same time we reduced the tion in the wireless market and is a
fund's exposure in financial stocks, as pioneer in delivering Internet content
interest-rate concerns caused substantial over cellular phones.
volatility in that sector. The fund also Time Warner, another long-time holding
trimmed its holdings in pharmaceutical for the fund, announced a $166 bil-
</TABLE>
AIM V.I. VALUE FUND 183
<PAGE>
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>
184 AIM V.I. VALUE FUND
<PAGE>
<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>
Investment Abbreviations:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. VALUE FUND 185
<PAGE>
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
- ------------------------------------------------------------------------
Foreign 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>
See Notes to Financial Statements.
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, FOREIGN CURRENCY CONTRACTS
AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 107,241,613
- -----------------------------------------------------------------------------
Foreign currencies (13,279)
- -----------------------------------------------------------------------------
Foreign 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
- -----------------------------------------------------------------------------
Foreign currency contracts 5,354,529
- -----------------------------------------------------------------------------
Option contracts (7,521)
- -----------------------------------------------------------------------------
360,547,238
- -----------------------------------------------------------------------------
Net gain on investment securities, foreign currencies, foreign
currency contracts and option contracts 472,358,456
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $475,799,193
=============================================================================
</TABLE>
186 AIM V.I. VALUE FUND
<PAGE>
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, foreign currency
contracts and futures and option contracts 111,811,218 30,475,488
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies,
foreign 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,
foreign currency contracts and futures and
option contracts 108,030,109 28,274,001
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies, foreign
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 187
<PAGE>
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 decreased 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.
188 AIM V.I. VALUE FUND
<PAGE>
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 189
<PAGE>
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.
190 AIM V.I. VALUE FUND
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance
Funds, Inc. including the schedule of investments as of December 31, 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.
TAIT, WELLER & BAKER
Philadelphia, Pennsylvania
February 4, 2000
AIM V.I. VALUE FUND 191
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
DIRECTORS, OFFICERS, BOARD OF DIRECTORS OFFICERS OFFICE OF THE FUND
AND OTHER SERVICE
PROVIDERS OF AIM Charles T. Bauer Charles T. Bauer 11 Greenway Plaza
VARIABLE INSURANCE Chairman Chairman Suite 100
FUNDS, INC. A I M Management Group Inc. Houston, TX 77046
Robert H. Graham (800) 347-1919
Bruce L. Crockett President
Director INVESTMENT ADVISOR
ACE Limited; Carol F. Relihan
Formerly Director, President, and Senior Vice President A I M Advisors, Inc.
Chief Executive Officer and Secretary 11 Greenway Plaza
COMSAT Corporation Suite 100
Gary T. Crum Houston, TX 77046
Owen Daly II Senior Vice President
Director TRANSFER AGENT AND CUSTODIAN
Cortland Trust Inc. Dana R. Sutton
Vice President and State Street Bank and Trust Company
Edward K. Dunn Jr. Treasurer 225 Franklin Street
Chairman, Mercantile Mortgage Corp.; Boston, MA 02110
Formerly Vice Chairman, President Robert G. Alley
and Chief Operating Officer, Vice President COUNSEL TO THE FUNDS
Mercantile-Safe Deposit & Trust Co.;
and President, Mercantile Bankshares Stuart W. Coco Freedman, Levy, Kroll &
Vice President Simonds
Jack Fields 1050 Conn. Avenue, N.W.
Chief Executive Officer Melville B. Cox Washington, D.C. 20036
Texana Global Inc.; Vice President
Formerly, Member of the COUNSEL TO THE DIRECTORS
U.S. House of Representatives Karen Dunn Kelley
Vice President Kramer, Levin, Naftalis & Frankel LLP
Carl Frischling 919 Third Avenue
Partner Edgar M. Larsen New York, NY 10022
Kramer, Levin, Naftalis & Frankel LLP Vice President
DISTRIBUTOR
Robert H. Graham Mary J. Benson
President and Chief Executive Officer Assistant Vice President A I M Distributors, Inc.
A I M Management Group Inc. and Assistant Treasurer 11 Greenway Plaza
Suite 100
Prema Mathai-Davis Sheri Morris Houston, TX 77046
Chief Executive Officer, YWCA of the Assistant Vice President
U.S.A. and Assistant Treasurer INDEPENDENT AUDITORS
Lewis F. Pennock Renee A. Friedli Tait, Weller & Baker
Attorney Assistant Secretary 8 Penn Center Plaza
Suite 800
Louis S. Sklar P. Michelle Grace Philadelphia, PA 19103
Executive Vice President Assistant Secretary
Hines Interests
Limited Partnership Nancy L. Martin
Assistant Secretary
Ofelia M. Mayo
Assistant Secretary
Lisa A. Moss
Assistant Secretary
Kathleen J. Pflueger
Assistant Secretary
Samuel D. Sirko
Assistant Secretary
Stephen I. Winer
Assistant Secretary
</TABLE>
REQUIRED FEDERAL INCOME TAX INFORMATION
AIM V.I. Value Fund paid ordinary dividends in the amount of $0.1769 per share
to shareholders during its tax year ended December 31, 1999. Of these amounts
16.03% is eligible for the dividends received deduction for corporations.
The Fund also distributed long-term capital gains of $26,680,760 for the
Fund's tax year ended December 31, 1999. Of long-term capital gains
distributed, 100% is 20% rate gain.
192 AIM V.I. VALUE FUND
