<PAGE> 1
STATEMENT OF
ADDITIONAL INFORMATION
AIM VARIABLE INSURANCE FUNDS, INC.
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. BALANCED FUND
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. GROWTH AND INCOME FUND AIM V.I. GROWTH FUND
AIM V.I. HIGH YIELD FUND AIM V.I. INTERNATIONAL EQUITY FUND
AIM V.I. MONEY MARKET FUND AIM V.I. TELECOMMUNICATIONS FUND
AIM V.I. VALUE FUND
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P. O. BOX 4739,
HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS)
OR (800) 410-4246 (ALL OTHERS).
----------
STATEMENT OF ADDITIONAL INFORMATION DATED: FEBRUARY 16, 2000,
AS REVISED MARCH 13, 2000
RELATING TO PROSPECTUS DATED: FEBRUARY 16, 2000
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION .............................................................. 1
Submission of Matters to Shareholders ................................... 1
GENERAL INFORMATION ABOUT THE FUNDS ....................................... 3
The Company and Its Shares .............................................. 3
PERFORMANCE ............................................................... 4
Total Return Calculations ............................................... 4
Historical Portfolio Results ............................................ 4
Yield Information ....................................................... 6
PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 6
General Brokerage Policy ................................................ 6
Allocation of IPO Securities Transactions ............................... 8
Section 28(e) Standards ................................................. 9
Portfolio Turnover ...................................................... 10
Brokerage Commissions Paid .............................................. 10
INVESTMENT STRATEGIES AND RISKS ........................................... 11
Aggressive Growth Fund .................................................. 11
Balanced Fund ........................................................... 12
Blue Chip Fund .......................................................... 12
Capital Appreciation Fund ............................................... 13
Capital Development Fund ................................................ 14
Dent Demographic Trends Fund ............................................ 14
Diversified Income Fund ................................................. 14
Global Growth and Income Fund ........................................... 15
Global Utilities Fund ................................................... 16
Government Securities Fund .............................................. 16
Growth Fund ............................................................. 17
Growth and Income Fund .................................................. 17
High Yield Fund ......................................................... 17
International Equity Fund ............................................... 18
Money Market Fund ....................................................... 18
Telecommunications Fund ................................................. 19
Value Fund .............................................................. 20
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES .............................. 21
Money Market Obligations ................................................ 21
Repurchase Agreements ................................................... 22
U.S. Government Agency Mortgage-Backed Securities ....................... 22
Convertible Securities .................................................. 23
Real Estate Investment Trusts ("REITs").................................. 23
Foreign Securities ...................................................... 23
Foreign Exchange Transactions ........................................... 25
ADRs and EDRs ........................................................... 25
Lending of Portfolio Securities ......................................... 25
Reverse Repurchase Agreements ........................................... 26
Delayed Delivery Agreements and When-Issued Securities .................. 26
Dollar Roll Transactions ................................................ 27
</TABLE>
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<TABLE>
<S> <C>
Borrowing ............................................................... 27
Illiquid Securities ..................................................... 28
Special Situations ...................................................... 28
Warrants ................................................................ 28
Short Sales ............................................................. 28
Rule 144A Securities .................................................... 28
Equity-Linked Derivatives ............................................... 29
Investment in Other Investment Companies ................................ 29
Temporary Defensive Investments ......................................... 29
Asset Allocation Among Countries ........................................ 30
Utilities Industry ...................................................... 30
OPTIONS, FUTURES AND CURRENCY STRATEGIES .................................. 31
Introduction ............................................................ 31
General Risks of Options, Futures and Currency Strategies ............... 31
Cover ................................................................... 31
Writing Call Options .................................................... 32
Writing Put Options ..................................................... 32
Purchasing Put Options .................................................. 33
Purchasing Call Options ................................................. 33
Over-The-Counter Options ................................................ 33
Index Options ........................................................... 34
Limitations on Options .................................................. 34
Interest Rate, Currency and Stock Index Futures Contracts ............... 34
Options on Futures Contracts ............................................ 35
Forward Contracts ....................................................... 35
Limitations on Use of Futures, Options on Futures and
Certain Options on Currencies ......................................... 36
RISK FACTORS .............................................................. 36
Small Capitalization Companies .......................................... 36
Non-Investment Grade Debt Securities .................................... 36
Foreign Securities ...................................................... 37
Non-diversified Portfolio (Global Utilities Fund Only) .................. 38
INVESTMENT RESTRICTIONS ................................................... 38
Fundamental Restrictions ................................................ 38
Non-fundamental Restrictions ............................................ 39
MANAGEMENT ................................................................ 39
Directors and Officers .................................................. 39
Remuneration of Directors ............................................. 43
AIM Funds Retirement Plan for Eligible Directors/Trustees ............. 44
Deferred Compensation Agreements ...................................... 45
Investment Advisory, Sub-Advisory and Administrative Services
Agreements ............................................................ 45
The Distribution Agreement .............................................. 51
DETERMINATION OF NET ASSET VALUE .......................................... 51
PURCHASE AND REDEMPTION OF SHARES ......................................... 53
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS .................................. 54
MISCELLANEOUS INFORMATION ................................................. 56
Organization of the Company ............................................. 56
Audit Reports ........................................................... 57
Legal Matters ........................................................... 57
</TABLE>
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<TABLE>
<S> <C>
Custodian and Transfer Agent ............................................ 57
Principal Holders of Securities ......................................... 57
Other Information ....................................................... 62
APPENDIX A ................................................................ A-1
APPENDIX B ................................................................ B-1
APPENDIX C ................................................................ C-1
FINANCIAL STATEMENTS ...................................................... FS
</TABLE>
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INTRODUCTION
AIM Variable Insurance Funds, Inc. (the "Company") is a mutual fund.
The rules and regulations of the United States Securities and Exchange
Commission (the "SEC") require all mutual funds to furnish prospective investors
certain information concerning the activities of the fund being considered for
investment. This information is included in Prospectuses dated February 16, 2000
(referred to collectively as the "Prospectuses" and separately as a
"Prospectus"), which relate to one or more of the seventeen series portfolios of
the Company (referred to collectively as the "Funds" and separately as a
"Fund"). One or more of the Funds may not be available under a particular
variable annuity contract or variable life insurance policy. Accordingly, this
Statement of Additional Information may contain information that is not relevant
to the investment options under such a contract or policy. Copies of each
Prospectus available under a contract or policy and additional copies of this
Statement of Additional Information may be obtained without charge by contacting
the principal distributor of each Fund's shares, A I M Distributors, Inc. ("AIM
Distributors"), 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 or by
calling (800) 410-4246. Investors must receive a Prospectus before they invest.
To the extent that this Statement of Additional Information contains information
concerning a Fund that is not available under a contract or policy, the
Statement of Additional Information does not constitute the offer of the shares
of that Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Funds' current Prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement filed with the SEC. Copies
of the Registration Statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
SUBMISSION OF MATTERS TO SHAREHOLDERS
At a meeting held on February 3, 2000, the Board of Directors of the
Company, on behalf of the Funds, voted to request shareholder approval to amend
the Funds' fundamental investment restrictions. The Board of Directors has
called a meeting of the Funds' shareholders to be held on or about April 10,
2000. Only shareholders of record as of January 20, 2000 are entitled to vote at
the meeting. Proposals that are approved are expected to become effective on or
about April 17, 2000.
If shareholders approve the proposal to amend the Funds' fundamental
investment restrictions, each of AIM V.I. Aggressive Growth Fund, AIM V.I.
Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Appreciation Fund, AIM
V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I.
Diversified Income Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. Global
Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth and Income
Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM V.I. International
Equity Fund, AIM V.I. Money Market Fund, AIM V.I. Telecommunications Fund and
AIM V.I. Value Fund, will operate under the following fundamental investment
restrictions:
Each Fund is subject to the following investment restrictions, which
may be changed only by a vote of a majority of such Fund's outstanding shares,
except that AIM V.I. Global Utilities Fund is not subject to restrictions (a) or
(d):
(a) the Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the
Fund would fail to be a diversified company within the meaning of the 1940
Act, and the rules and regulations promulgated thereunder, as such statute,
rules and regulations are amended from time to time or are interpreted from
time to time by the SEC staff (collectively, the 1940 Act laws and
interpretations) or except to the extent that the Fund may be permitted to
do so by exemptive order or similar relief (collectively, with the 1940 Act
laws and interpretations, the 1940 Act laws, interpretations and
exemptions). In complying with this restriction, however, the Fund may
purchase securities of other investment companies to the extent permitted
by the 1940 Act laws, interpretations and exemptions.
(b) the Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act laws, interpretations and exemptions.
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(c) the Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions
involving the acquisition, disposition or resale of its portfolio
securities, regardless of whether the Fund may be considered to be an
underwriter under the Securities Act of 1933.
(d) the Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act
laws, interpretations and exemptions) of its investments in the securities
of issuers primarily engaged in the same industry. This restriction does
not limit the Fund's investments in (i) obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt
obligations issued by governments or political subdivisions of governments,
or (iii) for AIM V.I. Money Market Fund, bank instruments. In complying
with this restriction, the Fund will not consider a bank-issued guaranty or
financial guaranty insurance as a separate security.
(e) the Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that
invest, deal, or otherwise engage in transactions in real estate or
interests therein, or investing in securities that are secured by real
estate or interests therein.
(f) the Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing
in securities that are secured by physical commodities.
(g) the Fund may not make personal loans or loans of its assets to
persons who control or are under common control of the Fund, except to the
extent permitted by 1940 Act laws, interpretations and exemptions. This
restriction does not prevent the Fund from, among other things, purchasing
debt obligations, entering into repurchase agreements, loaning its assets
to broker-dealers or institutional investors, or investing in loans,
including assignments and participation interests.
(h) the Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a
single open-end management investment company with substantially the same
fundamental investment objectives, policies and restrictions as the Fund.
AIM V.I. Global Utilities Fund will concentrate (as such term may be
defined or interpreted by the 1940 Act laws, interpretations and exemptions) its
investments in the securities of domestic and foreign public utility companies.
The investment restrictions set forth above provide the Funds with the
ability to operate under new interpretations of the 1940 Act or pursuant to
exemptive relief from the SEC without receiving prior shareholder approval of
the change. Even though the Funds have this flexibility, the Board of Directors
of the Company has adopted internal guidelines for each Fund relating to certain
of these restrictions which the adviser must follow in managing the Funds. Any
changes to these guidelines, which are set forth below, require the approval of
the Board of Directors.
1. In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total
assets (and for AIM V.I. Money Market Fund, with respect to 100% of its
total assets), purchase the securities of any issuer (other than
securities issued or guaranteed by the U.S. Government or any of its
agencies or instrumentalities), if, as a result, (i) more than 5% of
the fund's total assets would be invested in the securities of that
issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii)
the Fund would hold more than 10% of the outstanding voting securities
of that issuer. The Fund may (i) purchase securities of other
investment companies as permitted by Section 12(d)(1) of the 1940 Act
and (ii) invest its assets in securities of other money market funds
and lend money to other investment companies and their series
portfolios that have AIM as an investment adviser, subject to the terms
and conditions of any exemptive orders issued by the SEC.
2. In complying with the fundamental restrictions regarding borrowing
money and issuing senior securities, the Fund may borrow money in an
amount not exceeding 33 1/3% of its total assets (including the amount
borrowed) less liabilities (other than borrowings). The Fund may borrow
from
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banks, broker/dealers or other investment companies or their series
portfolios that have AIM or an affiliate of AIM as an investment
advisor (an "AIM Fund"). The Fund may not borrow for leveraging, but
may borrow for temporary or emergency purposes, in anticipation of or
in response to adverse market conditions, or for cash management
purposes. The Fund may not purchase additional securities when any
borrowings from banks exceed 5% of the Fund's total assets.
3. In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the
same industry (this guideline does not apply to AIM V.I. Global
Utilities Fund).
4. In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend
money to another AIM Fund, on such terms and conditions as the SEC may
require in an exemptive order.
5. Notwithstanding the fundamental restriction on investing all of the
Fund's assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment
company with the same fundamental investment objectives, policies and
limitations as the Fund.
If a percentage restriction is adhered to at the time of investment, a
later change in percentage resulting from changes in values of assets will not
be considered a violation of the restriction.
GENERAL INFORMATION ABOUT THE FUNDS
THE COMPANY AND ITS SHARES
The Company was organized on January 22, 1993, as a Maryland
corporation, and is registered with the SEC as an open-end, series, management
investment company. The Company currently consists of seventeen separate Funds
as follows: the AIM V.I. Aggressive Growth Fund ("Aggressive Growth Fund"), the
AIM V.I. Balanced Fund ("Balanced Fund"), the AIM V.I. Blue Chip Fund ("Blue
Chip Fund"), the AIM V.I. Capital Appreciation Fund ("Capital Appreciation
Fund"), the AIM V.I. Capital Development Fund ("Capital Development Fund"), the
AIM V.I. Dent Demographic Trends Fund ("Dent Demographic Trends Fund"), the AIM
V.I. Diversified Income Fund ("Diversified Income Fund"), the AIM V.I. Global
Growth and Income Fund ("Global Growth and Income Fund"), the AIM V.I. Global
Utilities Fund ("Global Utilities Fund") (formerly known as the AIM V.I.
Utilities Fund), the AIM V.I. Government Securities Fund ("Government Fund"),
the AIM V.I. Growth Fund ("Growth Fund"), the AIM V.I. Growth and Income Fund
("Growth and Income Fund"), the AIM V.I. High Yield Fund ("High Yield Fund"),
the AIM V.I. International Equity Fund ("International Fund"), the AIM V.I.
Telecommunications Fund ("Telecommunications Fund"), the AIM V.I. Money Market
Fund ("Money Market Fund"), the AIM V.I. Value Fund ("Value Fund"). Each Fund,
with the exception of the Global Utilities Fund, is a "diversified management
company" as defined in the Investment Company Act of 1940, as amended (the "1940
Act").
Each share of a Fund is entitled to one vote, to participate equally in
dividends and distributions declared by the Board of Directors with respect to
the Fund and, upon liquidation of the Fund, to participate in its proportionate
share of the net assets allocable to the Fund remaining after satisfaction of
outstanding liabilities of the Fund. Fund shares are fully paid, non-assessable
and fully transferable when issued and have no preemptive, conversion or
exchange rights. Fractional shares have proportionately the same rights,
including voting rights, as are provided for a full share.
Shareholders of the Funds do not have cumulative voting rights, and
therefore the holders of more than 50% of the outstanding shares of all Funds
voting together for election of directors may elect all of the members of the
Board of Directors of the Company. In such event, the remaining holders cannot
elect any directors of the Company.
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PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share (NAV) over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular Fund over a stated period, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a Fund's performance is not constant over time,
but changes from year to year, and that average annual returns do not represent
the actual year-to-year performance of such Fund.
In addition to average annual returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, and/or a series of redemptions, over
any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
HISTORICAL PORTFOLIO RESULTS
The Funds' average annual total returns for the one and five year
periods ended December 31, 1999, and average annual and cumulative total returns
for each of the funds since their inception are as follows:
<TABLE>
<CAPTION>
Year Ended Since
December 31, 1999 Inception
----------------- --------------------------------
Average
One Five Inception Annual Cumulative
Year Year Date Return Return
-------- ---- --------- ------- ----------
<S> <C> <C> <C> <C> <C>
AIM V.I. Aggressive Growth Fund 44.67% N/A 05/01/98 24.07% 43.31%
AIM V.I. Balanced Fund 19.31% N/A 05/01/98 19.62% 34.84%
AIM V.I. Blue Chip N/A N/A 12/29/99 N/A 0%
AIM V.I. Capital Appreciation Fund 44.61% 25.59% 05/05/93 22.33% 282.65%
AIM V.I. Capital Development Fund 29.10% N/A 05/01/98 11.22% 19.41%
AIM V.I. Dent Demographic Trends Fund N/A N/A 12/29/99 N/A 0%
AIM V.I. Diversified Income Fund -1.92% 7.83% 05/05/93 5.93% 46.74%
AIM V.I. Global Growth and Income Fund -0.13% 13.28% 02/10/93 11.63% 113.34%
AIM V.I. Global Utilities Fund 33.56% 21.87% 05/02/94 18.45% 160.94%
AIM V.I. Government Securities Fund -1.32% 6.33% 05/05/93 4.67% 35.50%
AIM V.I. Growth Fund 35.24% 29.64% 05/05/93 22.93% 295.21%
AIM V.I. Growth and Income Fund 34.25% 28.18% 05/02/94 24.49% 245.97%
AIM V.I. High Yield Fund 10.52% N/A 05/01/98 1.26% 2.12%
AIM V.I. International Equity Fund 55.04% 21.93% 05/05/93 18.82% 215.25%
AIM V.I. Money Market Fund 4.66% 5.10% 05/05/93 4.60% 34.90%
AIM V.I. Telecommunications Fund 106.52% 33.65% 10/18/93 29.52% 397.56%
AIM V.I. Value Fund 29.90% 27.23% 05/05/93 23.07% 298.25%
</TABLE>
The total returns quoted above do not reflect charges levied at the
insurance company separate account level. For a complete description of the
applicable charges, see the fee table in the prospectus for the appropriate
insurance company separate account.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance
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data may be prepared by Lipper Inc., Morningstar, Inc. and other independent
services which monitor the performance of mutual funds. The Funds may also
advertise mutual fund performance rankings which have been assigned to each
respective Fund by such monitoring services.
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the Consumer Price Index ("CPI"),
the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such
as bank certificates of deposit and/or savings accounts.
The International Fund's performance may also be compared in
advertising to performance of comparative benchmarks such as The Financial
Times-Actuaries World Indices (a wide range of comprehensive measures of stock
price performance for the major stock markets and regional areas), Morgan
Stanley Capital International Indices (including the EAFE Index) Pacific Basin
Index and Pacific Ex Japan Index (a widely recognized series of indices in
international market performance), and indices of stocks comparable to those in
which the Fund invests.
Each Fund's advertising may from time to time include historical
discussions of general economic conditions such as inflation rates and changes
in the stock market, foreign and domestic interest rates and foreign and
domestic political circumstances and events.
From time to time, Dent Demographic Trends Fund sales literature and/or
advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming
decade may offer unprecedented opportunities for investors, including his
opinions on the stock market outlook and where growth may be strongest; (ii)
Harry S. Dent, Jr.'s opinions and theories from his books and publications,
including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring
2000s, including his beliefs that (a) people's spending patterns may help
predict the stock market, (b) the stock market has tended to perform best when a
generation has reached its peak spending years from ages 45-50, and (c) as more
and more baby boomers reach their peak spending age, they could propel stock
prices up for the next decade; and (iii) Harry S. Dent, Jr.'s S-curve analysis,
a forecasting tool used to analyze products that show remarkable growth.
In addition, each Fund's long-term performance may be described in
advertising in relation to historical, political and/or economic events.
From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may
waive all or a portion of their fees and/or assume certain expenses of any Fund.
Voluntary fee waivers or reductions or commitments to assume expenses may be
rescinded at any time without further notice to investors. During periods of
voluntary fee waivers or reductions or commitments to assume expenses, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions or reimbursement of expenses set
forth in the Fee Table in a Prospectus may not be terminated or amended to the
Funds' detriment during the period stated in the agreement between AIM and the
Fund. Fee waivers or reductions or commitments to reduce expenses will have the
effect of increasing that Fund's yield and total return.
The performance of each Fund will vary from time to time and past
results are not necessarily indicative of future results. A Fund's performance
is a function of its portfolio management in selecting the type and quality of
portfolio securities and is affected by operating expenses of the Fund and
market conditions. A shareholder's investment in a Fund is not insured or
guaranteed. These factors should be carefully considered by the investor before
making an investment in any Fund.
Some of the Funds (except AIM V.I. Diversified Income Fund, AIM V.I.
Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market
Fund) may participate in the initial public offering ("IPO") market. For AIM
V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Development Fund,
AIM V.I. Dent Demographic Trends Fund, AIM V.I. Global Utilities Fund, AIM V.I.
Global Growth and Income Fund, AIM V.I. International Equity Fund and AIM V.I.
Telecommunications Fund (i.e. funds that have a small asset base) any investment
a Fund may make in IPOs may significantly increase its total returns. There is
no guarantee that as a Fund's assets grow, it will continue to experience
substantially similar performance by investing in IPOs.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general
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information about mutual funds, variable annuities, variable life insurance,
dollar-cost averaging, stocks, bonds, money markets, certificates of deposit,
retirement, retirement plans, asset allocation, tax-free investing, college
planning and inflation.
YIELD INFORMATION
Quotations of yield on the Money Market Fund may appear from time to
time in the financial press and in advertisements.
The Money Market Fund's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for an identified
period, usually seven days. The yield is expressed as a simple annualized yield
and as a compounded effective yield. The yield does not reflect the fees and
charges imposed on the assets of the insurance company separate account.
The standard formulas prescribed by the SEC for calculating yield and
effective yield for the Money Market Fund are described below:
The simple annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities, unrealized
appreciation and depreciation, and income other than investment income) in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the period, and annualizing the
resulting quotient (base period return) on a 365-day basis. The net change in
account value reflects the value of additional shares purchased with dividends
from the original shares in the account during the period, dividends declared on
such additional shares during the period, and expenses accrued during the
period.
The compounded effective yield is computed by determining the
unannualized base period return, adding one to the base period return, raising
the sum to a power equal to 365 divided by the number of days in the period, and
subtracting one from the result. Historical yields are not necessarily
indicative of future yields. Rates of return will vary as interest rates and
other conditions affecting money market instruments change. Yields also depend
on the quality, length of maturity and type of instruments in the Fund's
portfolio and the Fund's operating expenses. Quotations of yield will be
accompanied by information concerning the average weighted maturity of the Fund.
Comparison of the quoted yields of various investments is valid only if yields
are calculated in the same manner and for identical limited periods. When
comparing the yield for a Fund with yields quoted with respect to other
investments, shareholders should consider (a) possible differences in time
periods, (b) the effect of the methods used to calculate quoted yields, (c) the
quality and average-weighted maturity of portfolio investments, expenses,
convenience, liquidity and other important factors, and (d) the taxable or
tax-exempt character of all or part of dividends received.
The simple annualized yield and compounded effective yield for the
Money Market Fund for the 7 days ended December 31, 1999 were 4.90% and 5.02%,
respectively.
PORTFOLIO TRANSACTIONS AND BROKERAGE
GENERAL BROKERAGE POLICY
Subject to policies established by the Board of Directors of the
Company, AIM is responsible for decisions to buy and sell securities for each
Fund, for the selection of broker-dealers, for the execution of the Fund's
investment portfolio transactions, for the allocation of brokerage fees in
connection with such transactions and, where applicable, for the negotiation of
commissions and spreads on transactions. AIM's primary consideration in
effecting a security transaction is to obtain the best net price and the most
favorable execution of the order. While AIM generally seeks reasonably
competitive commission rates, each Fund does not necessarily pay the lowest
commission or spread available.
Purchases and sales of portfolio securities for the Diversified Income
Fund, the Money Market Fund and the Government Fund are generally transacted
with the issuer or a primary market maker. In addition,
6
<PAGE> 11
a portion of the securities in which the Funds invest may be traded in
over-the-counter ("OTC") markets. In such transactions, the Fund deals directly
with the dealers who make markets in the securities involved, except in those
circumstances where better prices and executions are available elsewhere.
Portfolio transactions placed through dealers serving as primary market makers
are effected at net prices, without commissions as such, but which include
compensation to the dealer in the form of mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. In recent years, however, an increasing
number of overseas stock markets have adopted a system of negotiated rates,
although a number of markets continue to be subject to an established schedule
of minimum commission rates.
Foreign equity securities may be held by a Fund in the form of American
Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers, or securities
convertible into foreign equity securities. These securities may not necessarily
be denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for use
in the United States securities markets, and EDRs, in bearer form, are designed
for use in European securities markets. ADRs and EDRs may be listed on stock
exchanges, or traded in OTC markets in the United States or Europe, as the case
may be. ADRs, like other securities traded in the United States, will be subject
to negotiated commission rates.
The Funds are not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers who
provide supplemental investment research to AIM may receive orders for
transactions by a Fund. Information so received will be in addition to and not
in lieu of the services required to be performed by AIM under its agreements
with the Fund, and the expenses of AIM will not necessarily be reduced as a
result of the receipt of such supplemental information. Certain research
services furnished by broker-dealers may be useful to AIM in connection with its
services to other advisory clients, including the other mutual funds advised by
AIM (collectively with the Funds, the "AIM Funds"). Also, a Fund may pay a
higher price for securities or higher commissions in recognition of research
services furnished by broker-dealers.
AIM may from time to time determine target levels of commission
business for AIM to transact with various brokers on behalf of its clients
(including the Funds) over a certain time period. The target levels will be
determined based upon the following factors, among others: (1) the execution
services provided by the broker; (2) the research services provided by the
broker; and (3) the broker's attitude toward an interest in mutual funds in
general and in the Funds and the other AIM Funds in particular, including sales
of the Funds and of the other AIM Funds. No specific formula will be used in
connection with any of the foregoing considerations in determining the target
levels. However, if a broker has indicated a certain level of desired
commissions in return for certain research services provided by the broker, this
factor will be taken into consideration by AIM.
Subject to the overall objective of obtaining best price and execution
for the Funds, AIM may also consider sales of shares by broker-dealers of each
Fund and of the other AIM Funds as well as sales of variable annuity contracts
("Contracts") and variable life insurance policies ("Policies") funded through
the Funds ("selling dealers"), as a factor in the selection of broker-dealers to
execute portfolio transactions for a Fund. Such portfolio transactions may be
executed directly by selling dealers or by other broker-dealers with which
selling dealers have clearing arrangements.
AIM and its affiliates manage several other investment accounts, some
of which may have investment objectives similar to those of the Funds. It is
possible that, at times, identical securities will be appropriate for investment
by one or more of such investment accounts. The position of each account,
however, in the securities of the same issue may vary and the length of time
that each account may choose to hold its
7
<PAGE> 12
investment in the securities of the same issue may likewise vary. The timing and
amount of purchases by each account will also be determined by its cash
position. If the purchase or sale of securities is consistent with the
investment policies of a Fund(s) and one or more of these accounts is considered
at or about the same time, AIM will fairly allocate transactions in such
securities among the Fund(s) and these accounts. AIM may combine such
transactions, in accordance with applicable laws and regulations, in order to
obtain the best net price and most favorable execution. Simultaneous
transactions could, however, adversely affect the ability of a Fund to obtain or
dispose of the full amount of a security which it seeks to purchase or sell.
These combined transactions, and related brokerage charges, will be
allocated among the Fund(s) and such accounts in a manner consistent with
guidelines and procedures approved by the Company's Board of Directors that are
designed to achieve an equitable manner of allocation. In some cases the
procedure for allocating portfolio transactions among the various investment
accounts advised by AIM could have an adverse effect on the price or amount of
securities available to a Fund. In making such allocations, the main factors
considered by AIM are the respective investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the judgments of the persons
responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the
Company. Although such transactions may result in custodian, tax or other
related expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
ALLOCATION OF IPO SECURITIES TRANSACTIONS
From time to time, certain of the AIM Funds or accounts may become
interested in participating in security distributions that are available in an
IPO, and occasions may arise when purchases of such securities by one AIM Fund
or account may also be considered for purchase by one or more other AIM Funds or
accounts. In such cases, it shall be AIM's practice to specifically combine or
otherwise bunch indications of interest for IPO securities for all AIM Funds
and accounts participating in purchase transactions for that security, and to
allocate such transactions in accordance with the following procedures:
AIM will determine the eligibility of each AIM Fund or account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's or account's
investment objective, policies and strategies, the liquidity of the AIM Fund or
account if such investment is purchased, and whether the portfolio manager
intends to hold the security as a long-term investment. The allocation of
limited supply securities issued in IPOs will be made to eligible AIM Funds and
accounts in a manner designed to be fair and equitable for the eligible AIM
Funds and accounts, and so that there is equal allocation of IPOs over the
longer term. Where multiple funds or accounts are eligible, rotational
participation may occur, based on the extent to which an AIM Fund or account has
participated in previous IPOs as well as the size of the AIM Fund or account.
Each eligible AIM Fund or account with an asset level of less than $500 million
will be placed on one of three tiers, depending upon its asset level. The AIM
Funds and accounts in the tier containing funds with the smallest asset levels
will participate first, each receiving a 40 basis point allocation (rounded to
the nearest share round lot that approximates 40 basis points) (the
"Allocation"), based on that AIM Fund's or account's net assets. This process
continues until all of the AIM Funds and accounts in the three tiers receive
their Allocations, or until the shares are all allocated. Should securities
remain after this process, eligible AIM Funds and accounts will receive their
Allocations on a straight pro rata basis. For the tier of AIM Funds or accounts
not receiving a full Allocation, the Allocation may be made only to certain AIM
Funds or accounts so that each may receive close to or exactly 40 basis points.
Any AIM Funds or accounts with substantially identical investment
objectives and policies will participate in syndicates in amounts that are
substantially proportionate to each other. In these cases, the net assets of the
largest AIM Fund will be used to determine in which tier, as
described in the paragraph above, such group
8
<PAGE> 13
of AIM Funds or accounts will be placed. The price per share of securities
purchased in such syndicate transactions will be the same for each AIM Fund or
account.
SECTION 28(e) STANDARDS
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
AIM may cause a Fund to pay a broker that provides brokerage and research
services to AIM an amount of commission for effecting a securities transaction
for the Fund in excess of the commission another broker would have charged for
effecting that transaction. To obtain the benefit of Section 28(e), AIM must
make a good faith determination that the commissions paid are "reasonable in
relation to the value of the brokerage and research services provided . . .
viewed in terms of either that particular transaction or [its] overall
responsibilities with respect to the accounts as to which [it] exercises
investment discretion" and that the services provided by a broker provide AIM
with lawful and appropriate assistance in the performance of its investment
decision-making responsibilities. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Funds' investment programs. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM)
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to AIM and to the Company's directors with
respect to the performance, investment activities and fees and expenses of other
mutual funds. Such information may be communicated electronically, orally, in
written form or on computer software. Research services may also include the
providing of equipment used to communicate research information, the arranging
of meetings with management of companies and the providing of access to
consultants who supply research information.
The outside research assistance is useful to AIM since the brokers
utilized by AIM as a group tend to follow a broader universe of securities and
other matters than AIM's staff can follow. In addition, this research provides
AIM with a diverse perspective on financial markets. Research services which are
provided to AIM by brokers are available for the benefit of all accounts managed
or advised by AIM (or by sub-advisors to accounts managed or advised by AIM). In
some cases, the research services are available only from the broker providing
such services. In other cases, the research services may be obtainable from
alternative sources in return for cash payments. AIM is of the opinion that
because the broker research supplements rather than replaces its research, the
receipt of such research does not tend to decrease its expenses, but tends to
improve the quality of its investment advice. However, to the extent that AIM
would have purchased any such research services had such services not been
provided by brokers, the expenses of such services to AIM could be considered to
have been reduced accordingly.
For the fiscal year ended December 31, 1999, certain Funds paid
brokerage commissions to certain brokers for research services. The amount of
such transactions and related commissions paid by each Fund were as follows:
9
<PAGE> 14
<TABLE>
<CAPTION>
Commissions Transactions
------------ ------------
<S> <C> <C>
AIM V. I. Aggressive Growth Fund $ 2,352 $ 1,602,079
AIM V. I. Balanced Fund $ 1,690 $ 1,424,718
AIM V. I. Capital Appreciation Fund $ 125,531 $104,465,850
AIM V. I. Capital Development Fund $ 2,132 $ 1,042,603
AIM V. I. Diversified Income Fund $ 416 $ 224,341
AIM V. I. Global Utilities Fund $ 1,794 $ 1,016,887
AIM V. I. Global Growth and Income Fund $ 13,369 $ 6,616,895
AIM V. I. Growth Fund $ 99,052 $103,527,973
AIM V. I. Growth and Income Fund $ 342,607 $351,987,293
AIM V. I. International Equity Fund $ 16,910 $ 9,546,491
AIM V. I. Telecommunications Fund $ 18,478 $ 21,790,567
AIM V. I. Value Fund $ 244,625 $266,257,808
</TABLE>
As of December 31, 1999, the following Funds entered into repurchase
agreements with the following regular brokers, as that term is defined in Rule
10b-1 under the 1940 Act, having the noted market values.
<TABLE>
<CAPTION>
BANK ONE CIBC GOLDMAN
FUNDS CAPITAL MARKETS, INC. OPPENHEIMER CORP. SACHS
----- --------------------- ----------------- ------------
<S> <C>
AIM V.I. Blue Chip Fund $230,000 $ 230,000 $ -0-
AIM V.I. Dent Demographic Trends Fund $230,000 $ 230,000 $ -0-
AIM V.I. Money Market Fund $ -0- $14,862,435 $3,500,000
</TABLE>
The following information regarding securities acquired by the Funds of
their regular brokers, as defined in Rule 10b-1 under the 1940 Act, is as of
December 31, 1999. The Balanced Fund and the Growth and Income Fund each held an
amount of common stock issued by Merrill Lynch & Co. having a market value of
$200,400 and $12,525,000, respectively. The Balanced Fund, the Capital
Appreciation Fund and the Growth and Income Fund each held an amount of common
stock issued by Goldman Sachs having a market value of $61,222, $9,418,750 and
$21,192,188, respectively. The Balanced Fund, the Growth Fund, the Growth and
Income Fund and the Value Fund each held an amount of common stock issued by
Morgan Stanley Dean Witter having a market value of $314,050, $7,851,250,
$72,674,025 and $57,556,800.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the Prospectus. In any particular year, however, market
conditions could result in portfolio activity at a rate greater or lesser than
anticipated. The estimated portfolio turnover rate for the Blue Chip Fund, Dent
Demographic Trends Fund, Global Growth and Income Fund and Telecommunications
Fund is less than 100%. Higher portfolio turnover increases transaction costs to
the Fund.
BROKERAGE COMMISSIONS PAID
Brokerage commissions paid by each of the Funds (except the AIM V.I.
Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) listed below were
as follows for the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997. The significant change in commissions paid from year to year
for AIM V.I. Capital Appreciation Fund and AIM V.I. Growth and Income Fund is
due to the increase in asset level.
10
<PAGE> 15
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 12,853 $ 2,983* $ N/A
AIM V.I. Balanced Fund $ 18,419 $ 2,241* $ N/A
AIM V.I. Capital Appreciation Fund $1,028,908 $1,017,185 $ 644,279
AIM V.I. Capital Development Fund $ 14,060 $ 3,748* $ N/A
AIM V.I. Diversified Income Fund $ 1,626 $ 282 $ 2,818
AIM V.I. Global Growth and Income Fund $ 96,559 $ 19,966 $ 42,783
AIM V.I. Global Utilities Fund $ 21,661 $ 18,422 $ 12,208
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ 940,142 $ 876,546 $ 621,467
AIM V.I. Growth and Income Fund $2,951,259 $2,834,451 $1,190,597
AIM V.I. High Yield Fund $ -0- $ -0-* $ N/A
AIM V.I. International Equity Fund $1,061,593 $ 814,499 $ 605,318
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications Fund $ 131,019 $ 120,189 $ 123,863
AIM V.I. Value Fund $1,978,681 $1,920,264 $1,503,734
</TABLE>
* Commissions paid are for the period May 1,1998 (date operations commenced)
through December 31, 1998.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's fundamental investment objective is
set forth in the Prospectus under the heading "Investment Objectives and
Strategies." There can be no assurance that any Fund will achieve its objective.
The principal features of each Fund's investment program and the primary risks
associated with that investment program are discussed in the Prospectus under
the following headings: "Investment Objectives and Strategies" and "Principal
Risks of Investing in the Funds". The following discussion of investment
policies supplements the discussion of the investment strategies and risks set
forth in the Prospectus.
Set forth in this section is a description of each Fund's investment
policies, strategies and practices. The investment objective(s) of each Fund,
except the High Yield Fund and Dent Demographic Trends Fund, are deemed to be
fundamental policies and, therefore, unless permitted by law, may not be changed
without the approval of a majority of that Fund's outstanding shares (within the
meaning of the 1940 Act). The Board of Directors on behalf of the High Yield
Fund or Dent Demographic Trends Fund is permitted to change the investment
objective of that Fund without shareholder approval. Each Fund's investment
policies, strategies and practices are not fundamental. The Board of Directors
of the Company reserves the right to change any of these non-fundamental
investment policies, strategies or practices without shareholder approval.
However, shareholders will be notified before any material change in the
investment policies become effective. Each Fund has adopted investment
restrictions, some of which are fundamental and cannot be changed without
shareholder approval. See "Investment Restrictions" in this Statement of
Additional Information. Individuals considering the purchase of shares of any
Fund should recognize that there are risks in the ownership of any security.
AGGRESSIVE GROWTH FUND
The Fund's investment objective is to achieve long-term growth of
capital. The Fund will invest primarily in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies which, in the opinion of
the Fund's investment advisor, are expected to achieve earnings growth over time
at a rate in excess of 15% per year. Many of these companies are in the small to
medium-sized category (i.e., companies with a market capitalization within the
range of small cap stocks in the Russell 2000 Index.) Management of the Fund
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes that should enhance such
companies' prospects for future growth in earnings. As a result of this policy,
the market prices of many of the securities purchased and held by the Fund may
fluctuate widely. Any income received from securities held by the Fund will be
incidental, and an
11
<PAGE> 16
investor should not consider a purchase of shares of the Fund as equivalent to a
complete investment program. The Fund's portfolio is primarily comprised of
securities of two basic categories: (a) "core" companies, which Fund management
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (b)
"earnings acceleration" companies which Fund management believes are currently
enjoying dramatic increase in profits. The Fund's strategy does not preclude
investment in large, seasoned companies which in the judgement of AIM possess
superior potential returns similar to companies with formative growth profiles.
The Fund will also invest in established smaller companies (under $500 million
in market capitalization) which offer exceptional value based upon substantially
above average earnings growth potential relative to market value. The Fund may
invest in non-equity securities, such as corporate bonds or U.S. Government
obligations during periods when, in the opinion of AIM, prevailing market,
financial, or economic conditions warrant, as well as when such holdings are
advisable in light of a change in circumstances of a particular company or
within a particular industry.
BALANCED FUND
The Fund's objective is to achieve as high a total return as possible,
consistent with preservation of capital. The Fund seeks to achieve its objective
by investing in a broadly diversified portfolio of high-yielding securities,
including common stocks, preferred stocks, convertible securities and bonds.
Although equity securities will be purchased primarily for capital appreciation
and fixed income securities will be purchased primarily for income purposes,
income and capital appreciation potential will be considered in connection with
all investments. The Fund normally will have a minimum of 30% and a maximum of
70% of its total assets invested in equity securities and a minimum of 30% and a
maximum of 70% of its total assets invested in (non-convertible) fixed income
securities. Most of such fixed income securities will be rated Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Rating Services ("S&P") or, in unrated, deemed to be of comparable
quality by AIM, although the Fund may invest to a limited extent in lower-rated
securities. (For a description of the various rating categories, see Appendix A
to this Statement of Additional Information.) The fixed income securities in
which the Fund invests may include U.S. Government obligations, mortgage-backed
securities, asset-backed securities, bank obligations, corporate debt
obligations and unrated obligations, including those of foreign issuers. The
Fund may, in pursuit of its objective, invest up to 10% of its total assets in
debt securities rated lower than Baa by Moody's or BBB by S&P, which are
commonly known as "junk bonds." See "Risk Factors -- Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities. The Fund may also invest up to 25% of its total
assets in convertible securities. Compliance with all of the above percentage
requirements may limit the ability of the Fund to maximize total return. The
actual percentage of the assets invested in equity and fixed income securities
will vary from time to time, depending on the judgment of AIM as to general
market and economic conditions and trends, yields and interest rates and changes
in fiscal and monetary policies.
BLUE CHIP FUND
The Fund's primary investment objective is to provide long-term growth
of capital. Current income is a secondary objective. It is anticipated that the
major portion of the Fund's portfolio will ordinarily be invested in common
stocks, convertible securities and bonds of blue chip companies (i.e., companies
with leading market positions and which possess strong financial
characteristics, as described below). There can, of course, be no assurance that
the Fund will in fact achieve its objectives since all investments are
inherently subject to market risks.
The Fund will invest primarily (at least 65% of its total assets) in
the common stocks of blue chip companies as determined by AIM. These companies
will have the potential for above-average growth in earnings or be
well-established in their respective industries. The Fund will generally invest
in large and medium sized companies (i.e., companies which fall in the largest
85% of market capitalization of publicly traded companies listed in the United
States) which possess the following characteristics:
12
<PAGE> 17
o Market Characteristics
Blue chip companies are those which occupy (or in AIM's
judgment have the potential to occupy) leading market
positions that are expected to be maintained or enhanced over
time. Strong market positions, particularly in growing
industries, can give a company pricing flexibility as well as
the potential for strong unit sales. These factors can in turn
lead to higher earnings growth and greater share price
appreciation. Market leaders can be identified within an
industry as those companies which have:
- superior growth prospects compared with other companies in
the same industry;
- possession of proprietary technology with the potential to
bring about major changes within an industry; and/or
- leading sales within an industry, or the potential to become
a market leader.
o Financial Characteristics
Blue chip companies possess at least one of the following
attributes:
- faster earnings growth than its competitors and the market
in general;
- higher profit margins relative to its competitors;
- strong cash flow relative to its competitors; and/or
- a balance sheet with relatively low debt and a high return
on equity relative to its competitors.
The Fund will diversify among industries and therefore will not invest
25% or more of its total assets in any one industry.
When AIM believes securities other than common stocks offer opportunity
for long-term growth of capital and income, the Fund may invest in United States
government securities, corporate bonds and debentures and convertible preferred
stocks and debt securities. The Fund will invest only in debt securities (other
than convertible debt securities) which are rated at "Investment Grade" by
either S&P or Moody's. Debt securities in the lowest investment grade (e.g.,
rated BBB by S&P or Baa by Moody's) have speculative characteristics and changes
in economic conditions and other circumstances are more likely to lead to a
weakened capacity on the part of the issuer to make principal and interest
payments than is the case with higher grade bonds. The Fund will limit its
investments in convertible securities to those in which the underlying common
stock is a suitable investment for the Fund without regard to debt rating
category, but will not invest more than 10% of its total assets in convertible
securities. The Fund may invest in United States government securities and
corporate bonds and debentures when AIM believes interest rates on such
investments may decline thereby potentially increasing the market value of such
securities or to meet the additional investment objective of producing current
income. Under normal market conditions, the Fund expects at all times to have at
least 65% of its total assets invested in securities which AIM believes offer
opportunity for long-term growth of capital or income.
The Fund may invest up to 25% of total assets in securities of issuers
domiciled in foreign countries. For the risks involved in investing in foreign
securities, see "Risk Factors - Foreign Securities" in this Statement of
Additional Information.
CAPITAL APPRECIATION FUND
The Fund's investment objective is growth of capital through investment
in common stocks, with emphasis on medium- and small-sized growth companies. AIM
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes that should enhance such
13
<PAGE> 18
companies' prospects for future growth in earnings. As a result of this policy,
the market prices of many of the securities purchased and held by the Fund may
fluctuate widely. Any income received from securities held by the Fund will be
incidental, and an investor should not consider a purchase of shares of the Fund
as equivalent to a complete investment program. The Capital Appreciation Fund's
portfolio is primarily comprised of securities of two basic categories of
companies: (1) "core" companies, which AIM considers to have experienced
above-average and consistent long-term growth in earnings with excellent
prospects for outstanding future growth, and (2) "earnings acceleration"
companies which AIM believes are currently enjoying a dramatic increase in
profits.
CAPITAL DEVELOPMENT FUND
The Fund's investment objective is long-term growth of capital.
Production of income is incidental to this objective. The Fund's principal
investments are in common stocks, convertible securities and bonds. There can,
of course, be no assurance that the Fund will in fact achieve its objective
since all investments are inherently subject to market risks.
The Fund will invest primarily in securities of small and medium-sized
companies (i.e., companies which fall in the smallest 85% by market
capitalization of publicly traded companies in the United States). Among factors
that AIM may consider when selecting investments in a company for the Fund are
(i) the growth prospects for a company's products, (ii) the economic outlook for
its industry, (iii) a company's new product development, (iv) its operating
management capabilities, (v) the relationship between the price of the security
and its estimated fundamental value, (vi) relevant market, economic and
political environments and (vii) financial characteristics such as balance sheet
analysis and return on assets. The Fund may invest in issuers making initial
public offerings of their securities if AIM determines that the issuer has good
prospects for growth.
DENT DEMOGRAPHIC TRENDS FUND
The Fund's investment objective is long-term growth of capital. The
Fund will seek to achieve its investment objective by investing in companies
that are likely to benefit from demographic, economic and lifestyle trends, as
suggested by Harry S. Dent Jr.'s research.
Dent is an internationally known strategic consultant and best-selling
author who provides the Fund's portfolio managers with macroeconomic and sector
research, along with investment and market capitalization recommendations.
The Fund's portfolio managers then focus on companies that have
historically experienced or are deemed to have the potential for above-average,
long-term growth in revenues and earnings. The Fund makes use of a unique
investment style that blends AIM's earnings momentum approach with proprietary
guidance from Dent.
The Fund's portfolio managers will not hesitate to sell stocks that
experience decelerated earnings and negative earnings revisions. They actively
monitor valuation targets and may reduce positions that they believe have become
too heavily weighted in the Fund's portfolio.
The Fund is not limited exclusively to small-, mid- or large-cap
stocks, which may help minimize the risks associated with sector investing.
Demographic, economic and lifestyle trends may occur in different
phases around the world. The Fund is positioned to potentially take advantage of
these differing phases by investing in both domestic and foreign stock issuers.
DIVERSIFIED INCOME FUND
The Fund's investment objective is to seek to achieve a high level of
current income. The Fund will seek to achieve its investment objective by
investing primarily in: (i) domestic and foreign corporate debt securities, (ii)
U.S. Government securities, including U.S. Government Agency Mortgage-Backed
Securities,
14
<PAGE> 19
(iii) foreign government securities and (iv) lower-rated or unrated high yield
debt securities (commonly known as "junk bonds") of U.S. and foreign companies.
Under normal circumstances, the Fund's assets will be invested in each of these
four sectors. The Fund may invest up to 10% of its total assets in common
stocks, preferred stocks, similar equity securities and convertible securities
of U.S. and foreign companies. The Fund does not intend to invest more than 50%
of its total assets in lower-rated or unrated high yield securities or more than
50% of its total assets in foreign debt securities. (For a description of the
various rating categories of corporate debt securities in which the Fund may
invest, see Appendix A to this Statement of Additional Information. For a
description of U.S. Government Agency Mortgage-Backed Securities, see Appendix B
to this Statement of Additional Information.) However, the Fund may from time to
time invest up to 100% of its total assets in U.S. Government securities and, as
a defensive measure, may invest up to 100% of its total assets in money market
securities. For a discussion of the investment risks associated with investments
in high yield securities and foreign securities, see "Risk Factors" in this
Statement of Additional Information.
GLOBAL GROWTH AND INCOME FUND
The Fund's investment objective is long-term growth of capital together
with current income. In seeking those objectives, the Fund normally invests at
least 65% of its total assets in a combination of blue-chip equity securities
and high quality government bonds. The Fund considers an equity security to be
"blue chip" if: (i) during the issuer's most recent fiscal year the security
offered an above average dividend yield relative to the latest reported dividend
yield on the Morgan Stanley Capital International World Index; and (ii) the
total equity market capitalization of the issuer is at least $1 billion.
Government bonds are deemed to be high quality if at the time of the Fund's
investment they are rated within one of the two highest ratings categories of
Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's, a division of
The McGraw-Hill Companies, Inc. ("S&P"), i.e., rated Aaa or Aa by Moody's or AAA
or AA by S&P (or a comparable rating of any other nationally recognized
statistical rating organizations "NRSROs") or, if unrated, are determined by AIM
and INVESCO Asset Management Limited ("INVESCO") to be of comparable quality.
(For a description of the various rating categories of corporate debt securities
in which the Fund may invest, see Appendix A to this Statement of Additional
Information.)
Up to 35% of the Fund's assets may be invested in other equity
securities, convertible securities and investment grade government and corporate
debt obligations which AIM/INVESCO believes will assist the Fund in achieving
its objectives.
Equity securities that the Fund may purchase include common stocks,
preferred stocks, and warrants to acquire such stocks and other equity
securities. Government bonds that the Fund may purchase include debt obligations
issued or guaranteed by the U.S. or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Fund may include debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities.
Under normal market conditions, the Fund invests in the securities of
issuers located in at least three different countries. Investments in securities
of issuers in any one country other than the United States, will represent no
more than 40% of the Fund's total assets. The Fund may purchase securities of an
issuer located in one country but denominated in the currency of another country
(or a multinational currency unit).
AIM/INVESCO allocates the Fund's assets among securities of issuers
located in countries where opportunities for meeting the Fund's investment
objectives are expected to be the most attractive. The relative proportions of
equity and debt securities held by the Fund at any one time will vary, and will
depend upon AIM/INVESCO's assessment of global political and economic conditions
and the relative strengths and weaknesses of the world equity and debt markets.
To enable the Fund to respond to general economic changes and market conditions
around the world, the Fund is authorized to invest up to 100% of its assets in
either equity securities or debt securities.
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GLOBAL UTILITIES FUND
The Fund's investment objective is to achieve a high level of current
income and secondarily, growth of capital, by investing primarily in the common
and preferred stocks of public utility companies (either domestic or foreign).
Under normal circumstances, at least 65% of the Fund's total assets will be
invested in securities of public utility companies (either domestic or foreign).
Public utility companies include companies that provide electricity, natural gas
or water and other sanitary services to the public, and telephone or telegraph
companies and other companies providing public communications services. The Fund
may also invest in developing utility technology companies and in holding
companies which derive a substantial portion of their revenues from
utility-related activities. Generally, a holding company will be considered to
derive a substantial portion of its revenues from utility-related activities if
such activities account for at least 40% of its revenues. The Fund may invest up
to 25% of its total assets in convertible securities. When AIM deems it
appropriate, the Fund may also purchase the bonds of such companies. Investments
in non-convertible bonds, however, will not exceed 25% of the Fund's total
assets. The Fund may invest up to 10% of its total assets in lower-rated or
unrated high yield securities. (For a description of the various rating
categories of corporate debt securities in which the Fund may invest, see
Appendix A to this Statement of Additional Information.) During the fiscal year
ended December 31, 1999, the Fund invested less than 5% of its net assets in
below investment grade debt securities. The Fund may also invest up to 80% of
its total assets in securities of foreign companies, including investments in
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
underlying securities of foreign issuers. For a discussion of the investment
risks associated with investments in non-investment grade debt securities and
foreign securities, see "Risk Factors" in this Statement of Additional
Information.
A portfolio of utility company securities is subject to a different
degree of volatility than a more broadly diversified portfolio. Economic,
operational or regulatory changes that affect utility companies will have a
material impact upon the value of the securities that the Fund owns. Events,
such as changing weather patterns, emergencies involving nuclear power plants,
or rapidly changing fuel prices that have no direct connection with companies
whose securities are owned by the Fund may affect the prices of those
securities.
Moreover, a portfolio of utilities industry securities is subject to
the risks unique to that industry, such as inflationary or other increases in
fuel and operating expenses, possible increases in the interest costs of loans
needed for capital construction programs, compliance with environmental
regulations, possible adverse changes in the regulatory climate and availability
of fuel sources.
GOVERNMENT SECURITIES FUND
The Fund's investment objective is to achieve a high level of current
income consistent with reasonable concern for safety of principal by investing
in debt securities issued, guaranteed or otherwise backed by the United States
Government. The government securities which may be purchased by the Fund include
but are not limited to (1) U.S. Treasury obligations such as Treasury Bills
(maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuers to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not required by law to support the agencies and instrumentalities listed in (b)
and (c), above. Accordingly, such securities may involve risk of loss of
principal and interest; however, historically there have not been any defaults
of such issues. For a listing of some of the types of Agency Securities in which
the Fund may invest, see Appendix B to this Statement of Additional Information.
The Fund's investments include high coupon U.S. Government Agency
Mortgage-Backed Securities, which provide a higher coupon at the time of
purchase than the prevailing market rate yield. The prices of high coupon U.S.
Government Agency Mortgage-Backed Securities do not tend to rise as rapidly as
those of traditional fixed rate securities at times when interest rates are
decreasing, and tend to decline more slowly at times when interest rates are
increasing. The Fund may purchase such securities at a premium, which
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<PAGE> 21
means that a faster principal prepayment rate than expected will reduce the
market value of and income from such securities, while a slower prepayment rate
will tend to increase the market value of and income from such securities.
The composition and weighted average maturity of the Fund's portfolio
will vary from time to time, based upon the determination of AIM and how best to
further the Fund's investment objective. The Fund may invest in government
securities of all maturities, short-term, intermediate-term and long-term. The
Fund intends to maintain a dollar-weighted average portfolio maturity of between
three and ten years. This policy regarding portfolio maturity is a
non-fundamental policy of the Fund.
GROWTH FUND
The Fund's investment objective is to seek growth of capital
principally by investing in seasoned and better capitalized companies considered
to have strong earnings momentum. Current income will not be an important
criterion of investment selection, and any such income should be considered
incidental. It is anticipated that common stocks will be the principal form of
investment by the Fund. The Fund's portfolio is primarily comprised of
securities of two basic categories of companies: (1) "core" companies, which AIM
considers to have experienced above-average and consistent long-term growth in
earnings and to have excellent prospects for outstanding future growth, and (2)
"earnings acceleration" companies which Fund management believes are currently
enjoying a dramatic increase in profits.
GROWTH AND INCOME FUND
The Fund's primary investment objective is growth of capital, with a
secondary objective of current income. The Fund seeks to meet these objectives
by investing at least 65% of its total assets in securities of established
companies that have long-term above-average growth in earnings and dividends,
and growth companies that the portfolio managers believe have the potential for
above-average growth in earnings and dividends. The Fund's portfolio managers
consider whether to sell a particular security when they believe the security no
longer has that potential.
HIGH YIELD FUND
The Fund's objective is to achieve a high level of current income. The
Fund seeks to achieve its objective by investing principally in publicly traded
non-investment grade debt securities. The Fund will also consider the
possibility of capital growth when it purchases and sells securities. Debt
securities of less than investment grade are considered "high risk" securities
(commonly referred to as junk bonds). The Fund seeks high income principally by
purchasing (i.e. at least 51% of the value of its total assets) securities that
are rated Baa, Ba or B by Moody's or BBB, BB, or B by S&P, or securities of
comparable quality in the opinion of the fund's portfolio managers, that are
either unrated or rated by other NRSROs. (For a description of the various
rating categories, see Appendix A to this Statement of Additional Information.)
The Fund may also hold, from time to time, securities rated Caa by Moody's or
CCC by S&P, or if unrated or rated by other NRSROs, securities of comparable
quality as determined by AIM. It should be noted, however, that achieving the
Fund's investment objective may be more dependent on the credit analysis of AIM,
and less on that of credit rating agencies, than may be the case for funds that
invest in more highly rated bonds. At least 80% of the value of the Fund's total
assets will be invested in debt securities, including convertible debt
securities, and/or cash and cash equivalents. At least 65% of the value of the
Fund's assets will be invested in high yield debt securities. The Fund may also
invest in preferred stocks.
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While the securities held by the Fund are expected to provide greater
income and, possibly, opportunity for greater gain than investments in more
highly rated securities, they may be subject to greater risk of loss of income
and principal and are more speculative in nature. The Fund's yield and the net
asset value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Risk Factors --
Non-Investment Grade Debt Securities."
The Fund may invest in both illiquid securities and securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933. See "Illiquid Securities" for further
information regarding such investments.
INTERNATIONAL EQUITY FUND
The Fund's investment objective is to provide long-term growth of
capital by investing in a diversified portfolio of international equity
securities whose issuers are considered to have strong earnings momentum. Any
income realized by the Fund will be incidental and will not be an important
criterion in the selection of portfolio securities.
In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to the Growth Fund with respect to that Fund's investment in United
States equities markets. The Fund will utilize to the extent practicable a fully
managed investment policy providing for the selection of securities which meet
certain quantitative standards determined by AIM. AIM will review carefully the
earnings history and prospects for growth of each company considered for
investment by the Fund. It is expected that the Fund's portfolio, when fully
invested, will generally be comprised of two basic categories of foreign
companies: (1) "core" companies, which AIM considers to have experienced
consistent long-term growth in earnings and to have strong prospects for
outstanding future growth, and (2) companies that AIM believes are currently
experiencing a greater than anticipated increase in earnings. If a particular
foreign company meets the quantitative standards determined by AIM, its
securities may be acquired by the Fund regardless of the location of the company
or the percentage of the Fund's investments in the company's country or region.
However, AIM will also consider other factors in making investment decisions for
the Fund, including such factors as the prospects for relative economic growth
among countries or regions, economic and political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. For
a discussion of the investment risks associated with investments in foreign
securities, see "Risk Factors" in this Statement of Additional Information.
MONEY MARKET FUND
The Fund's investment objective is to provide as high a level of
current income as is consistent with the preservation of capital and liquidity.
The Fund seeks to achieve its objective by investing in a diversified portfolio
of high quality U.S. dollar denominated money market instruments and other
similar instruments with maturities of 397 days or less from the date of
purchase, and will maintain a dollar weighted-average portfolio maturity of 90
days or less. Securities subject to repurchase agreements may bear longer
maturities.
The Fund invests in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements secured by such obligations. The Money
Market Fund intends to invest in bankers' acceptances, certificates of deposit,
repurchase agreements, time deposits, variable rate master demand notes, taxable
municipal securities and commercial paper, and U.S. Government direct
obligations and U.S. Government agencies' securities. Bankers acceptances,
certificates of deposit and time deposits may be purchased from U.S. or foreign
banks. All of these instruments, which are collectively referred to as "Money
Market Obligations," are briefly described in Appendix C to this Statement of
Additional Information.
The Fund will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule
may be amended from time to time. Generally "First Tier" securities are
securities that are
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rated in the highest rating category by two NRSROs, or, if only rated by one
NRSRO, are rated in the highest rating category by that NRSRO, or, if unrated,
are determined by AIM (under the supervision of and pursuant to guidelines
established by the Board of Directors) to be comparable quality to a rated
security that meets the foregoing quality standards. For a more complete
definition of a "First Tier" security, see "Money Market Obligations" in this
Statement of Additional Information.
The Money Market Fund may invest up to 100% of its total assets in
obligations issued by banks. While the Fund will limit its investments in bank
instruments to U.S. dollar denominated obligations, it may invest in Eurodollar
obligations (i.e., U.S. dollar-denominated obligations issued by a foreign
branch of a domestic bank), Yankee dollar obligations (i.e., U.S.
dollar-denominated obligations issued by a domestic branch of a foreign bank)
and obligations of foreign branches of foreign banks. The Money Market Fund will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets
at the time of purchase, provided that there is no limitation upon the Fund's
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligation is unconditionally liable in the event that the
foreign branch for any reason fails to pay on the Eurodollar obligation; and (b)
Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to
the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign
bank obligations include time deposits, which are non-negotiable deposits
maintained in a bank for a specified period of time at a stated interest rate.
For a discussion of the risks pertaining to investments in foreign securities,
see "Risk Factors" in this Statement of Additional Information.
TELECOMMUNICATIONS FUND
The Fund's investment objective is long-term growth of capital. It
seeks its objective by investing primarily in equity securities of companies
throughout the world engaged in the development, manufacture or sale of
telecommunications services or equipment.
At least 65% of the Fund's total assets normally will be invested in
common and preferred stocks and warrants to acquire such stocks issued by
telecommunications companies. A "telecommunications company" is an entity in
which (i) at least 50% of either its revenues or earnings was derived from
telecommunications activities, or (ii) at least 50% of its assets was devoted to
telecommunications activities, based on the issuer's most recent fiscal year.
The remainder of the assets of the Fund may be invested in debt securities
issued by telecommunications companies and/or equity and debt securities of
companies outside of the telecommunications industry which, in the opinion of
AIM, stand to benefit from developments in the telecommunications industries.
(For a description of the various rating categories of corporate debt securities
in which the Fund may invest, see Appendix A to this Statement of Additional
Information). The Fund may, in pursuit of its objective, invest up to 5% of its
total assets in below investment grade debt securities. See "Risk Factors --
Non-Investment Grade Debt Securities" for more information concerning the risk
factors associated with investing in such securities.
The Fund may invest substantially in securities denominated in one or
more currencies. Under normal conditions, the Fund invests in the equity
securities of issuers located in at least three different countries, including
the United States. No more than 40% of the Fund's total assets will be invested
in securities of issuers in any one country other than the United States.
Telecommunications companies cover a variety of sectors, ranging from
companies concentrating on established technologies to those primarily engaged
in emerging or developing technologies. The characteristics of companies
focusing on the same technology will vary among countries depending upon the
extent to which the technology is established in the particular country. AIM
will allocate the Fund's investments among these sectors depending upon its
assessment of their relative long-term growth potentials.
The Fund will invest primarily in issuers engaged in designing,
developing or providing the following products and services: communications
equipment and services (including equipment and services for both data and voice
transmission); electronic components and equipment; broadcasting (including
television and radio, satellite, microwave and cable television and
narrowcasting); computer equipment, mobile communications and cellular
radio/paging; electronic mail; local and wide area networking and linkage of
word
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and data processing systems; publishing and information systems; videotext and
teletext; and emerging technologies combining telephone, television and/or
computer systems.
Telecommunications is a global industry with significant, growing
markets outside of the United States. A sizeable proportion of the companies
that comprise the telecommunications industry are headquartered outside of the
United States. From time to time, however, a significant portion of the Fund's
assets may be invested in the securities of domestic issuers.
AIM uses its financial expertise in markets located throughout the
world in attempting to identify those countries and telecommunications companies
then providing the greatest potential for long-term capital appreciation. In
this fashion, AIM and the Fund seek to enable shareholders to capitalize on the
substantial investment opportunities and the potential for long-term growth of
capital presented by the global telecommunications industry. AIM will allocate
the Fund's assets among securities of countries and in currency denominations
and industry sectors where opportunities for meeting the Fund's investment
objective are expected to be the most attractive.
AIM believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications systems. Accordingly, companies
engage in the production of methods for using electronic and, potentially, video
technology to communicate information are expected to be important in the Fund's
portfolio. Older technologies, such as photography and print, also may be
represented, however.
VALUE FUND
The Fund's investment objective is to achieve long-term growth of
capital by investing primarily in equity securities judged by AIM to be
undervalued relative to the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity market generally.
Income is a secondary objective. This secondary objective would be satisfied
principally from the income (interest and dividends) generated by the common
stocks, convertible bonds and convertible preferred stocks that make up the
Fund's portfolio. The Fund should not be purchased by those who seek income as
their primary investment objective.
In addition to the securities described above, the Fund may also
acquire preferred stocks and debt instruments having prospects for growth of
capital. Although these different types of securities can be expected to
generate amounts of income to satisfy the Fund's secondary objective, they will
be purchased for their potential for growth of capital.
The primary thrust of AIM's search for undervalued equity securities is
in four categories: (1) out-of-favor cyclical growth companies; (2) established
growth companies that are undervalued compared to historical relative valuation
parameters; (3) companies where there is early but tangible evidence of
improving prospects which are not yet reflected in the price of the company's
equity securities; and (4) companies whose equity securities are selling at
prices that do not reflect the current market value of its assets and where
there is reason to expect realization of this potential in the form of increased
equity values.
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CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES
Each of the Funds has the flexibility to invest, to the extent
described below, in a variety of instruments designed to enhance its investment
capabilities. Each of the Funds may invest in money market obligations, foreign
securities (including ADRs and EDRs), repurchase agreements, reverse repurchase
agreements, taxable municipal securities, illiquid securities and Rule 144A
securities; the Diversified Income Fund and the Government Fund may invest in
U.S. Government Agency Mortgage-Backed Securities; each of the Funds may
purchase or sell securities on a delayed delivery or when-issued basis and may
borrow money; each of the Funds, other than the Money Market Fund, may lend
portfolio securities and make short sales "against the box." A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the
right to obtain securities identical to those sold short without payment of any
further consideration.
Each of the Funds, other than the Money Market Fund, may write (i.e.,
sell) "covered" put and call options and buy put and call options on domestic
and foreign securities, securities indices and currencies. Each of the Funds,
other than the Money Market Fund, may use exchange-traded financial futures
contracts, options thereon, and forward contracts as a hedge to protect against
possible changes in market values. A brief description of these investment
instruments and their risks appears below. See "Hedging and Other Investment
Techniques" in this Statement of Additional Information for more detailed
information.
MONEY MARKET OBLIGATIONS
When deemed appropriate for temporary or defensive purposes, each of
the Funds may hold cash or cash equivalent Money Market Obligations. Of course,
the Money Market Fund invests exclusively in Money Market Obligations. While
none of the Funds other than the Money Market Fund is required by regulation or
fundamental policy to limit such investments to those which, at the date of
purchase, are "First Tier" securities as that term is defined in Rule 2a-7 under
the 1940 Act, it is the current intention of AIM to limit such investments to
those securities which, at the time of purchase, are considered "First Tier"
securities or securities which AIM has determined to be of comparable credit
quality. To the extent that a Fund invests to a significant degree in these
instruments, its ability to achieve its investment objective may be adversely
affected.
In addition to the Money Market Obligations described above, as a
temporary or defensive measure, and without regard to their respective
investment objectives, AIM, or AIM/INVESCO for the Global Growth and Income
Fund, may invest all or substantially all of the assets of the Aggressive Growth
Fund, the Balanced Fund, the Dent Demographic Trends Fund, the Diversified
Income Fund, the Global Growth and Income Fund, the Global Utilities Fund, the
High Yield Fund, the International Fund and the Telecommunications Fund in cash
or Money Market Obligations, including repurchase agreements, denominated in
foreign currencies.
As set forth in the Prospectus, the Money Market Fund will limit its
purchases of Money Market Obligations to U.S. dollar denominated securities
which are "First Tier" securities, as such term is defined from time to time in
Rule 2a-7 under the 1940 Act. A First Tier Security is generally a security
that: (i) has received a short-term rating, or is subject to a guarantee that
has received a short-term rating, or, in either case, is issued by an issuer
with a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that the
Fund's investment adviser has determined are of comparable quality to a rated
security described in (i); (iii) is a security issued by a registered investment
company that is a money market fund; or (iv) is a Government Security.
Subsequent to its purchase by the Fund, an issue of Money Market
Obligations may cease to be a First Tier security. Subject to certain exceptions
set forth in Rule 2a-7, such an event will not require the elimination of the
security from the Fund, but AIM will consider such an event to be relevant in
its determination of whether the Fund should continue to hold the security.
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REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with
institutions believed by the Company's Board of Directors to present minimal
credit risk. A repurchase agreement is an instrument under which the Fund
acquires ownership of a debt security and the seller agrees, at the time of the
sale, to repurchase the obligation at a mutually agreed upon time and price,
thereby determining the yield during the Fund's holding period. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the sellers' failure to repurchase the
obligation in accordance with the terms of the agreement), a Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act. Repurchase agreements will be secured by
U.S. Treasury securities, U.S. Government agency securities (including, but not
limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper.
Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, the Funds will not enter into repurchase
agreements expiring in more than seven days. The Fund may, however, enter into a
"continuing contract" or "open" repurchase agreement under which the seller is
under a continuing obligation to repurchase the underlying obligation from the
Fund on demand and the effective interest rate is negotiated on a daily basis.
Repurchase agreements are considered to be loans by the Fund under the 1940 Act.
Securities subject to repurchase agreements will be held in the custodian's
account with the Federal Book-Entry System on behalf of the Fund.
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES
The Diversified Income Fund and the Government Fund may invest in U.S.
Government Agency Mortgage-Backed Securities. These securities are obligations
issued or guaranteed by the United States Government or by one of its agencies
or instrumentalities, including but not limited to GNMA, FNMA, or FHLMC. U.S.
Government Agency Mortgage-Backed Certificates provide for the pass-through to
investors of their pro-rata share of monthly payments (including any principal
prepayments) made by the individual borrowers on the pooled mortgage loans, net
of any fees paid to the guarantor of such securities and servicers of the
underlying mortgage loans. GNMA, FNMA and FHLMC each guarantee timely
distributions of interest to certificate holders. GNMA and FNMA guarantee timely
distributions of scheduled principal. FHLMC has in the past guaranteed only the
ultimate collection of principal of the underlying mortgage loan; however, FHLMC
Gold Participation Certificates now guarantee timely payment of monthly
principal reductions. Although their close relationship with the U.S. Government
is believed to make them high-quality securities with minimal credit risks, the
U.S. Government is not obligated by law to support either FNMA or FHLMC.
However, historically there have not been any defaults of FNMA or FHLMC issues.
See Appendix B for a more complete description of GNMA securities.
Mortgage-backed securities consist of interests in underlying mortgages
generally with maturities of up to thirty years. However, due to early
unscheduled payments of principal of the underlying mortgages, the securities
have a shorter average life and, therefore, less volatility than a comparable
thirty-year bond. The value of U.S. Government Agency Mortgage-Backed
Securities, like other traditional debt instruments, will tend to move in the
opposite direction compared to interest rates.
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CONVERTIBLE SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds (except the Money Market Fund) may invest in convertible
securities. Convertible securities usually consist of corporate debt securities
or preferred stock that may in certain circumstances be converted into a
predetermined number of shares of another form of that issuer's equity, usually
common stock. Convertible securities consequently often involve attributes of
both debt and equity instruments, and investment in such securities requires
analysis of both credit and stock market risks. Convertible securities rank
senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. Convertible securities may
be subject to redemption at the option of the issuer at a price established in
the convertible security's governing instrument. Although the Funds will only
purchase convertible securities that AIM considers to have adequate protection
parameters, including an adequate capacity to pay interest and repay principal
in a timely manner, each applicable Fund invests in such securities without
regard to corporate bond ratings.
REAL ESTATE INVESTMENT TRUSTS ("REITs")
To the extent consistent with their respective investment objectives
and policies, each of the Funds (except the Government Fund and the Money Market
Fund) may invest in equity and/or debt securities issued by REITs. Such
investments will not exceed (i) 25% of the total assets of the Aggressive Growth
Fund, the Balanced Fund, the Blue Chip Fund, the Capital Appreciation Fund, the
Capital Development Fund, the Dent Demographic Trends Fund, the Global Growth
and Income Fund, the Global Utilities Fund, the Growth Fund, the Growth and
Income Fund, the International Fund, the Telecommunications Fund and the Value
Fund; and (ii) 10% of the total assets of the Diversified Income Fund and the
High Yield Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interest therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the Southeastern United States, or both.
To the extent that the Fund has the ability to invest in REITs, the
Fund could conceivably own real estate directly as a result of a default on the
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, increases in property taxes and operating expenses, changes in
zoning laws, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and increases in
interest rates.
In addition to the risks described above, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
FOREIGN SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds may invest in foreign securities. It is not anticipated that
such foreign securities will constitute more than: (i) 20% of the value of the
total assets of the Balanced Fund, the Capital Appreciation Fund, the Government
Fund, the Growth Fund and the Growth and Income Fund; (ii) 25% of the value of
the total assets of the Aggressive Growth Fund, the Blue Chip Fund, the Capital
Development Fund, the Dent Demographic Trends Fund, the High Yield Fund and the
Value Fund; (iii) 50% of the value of the total assets of the Diversified Income
Fund and the Money Market Fund (however, the Money Market Fund may only invest
in foreign securities denominated in U.S. dollars); (iv) 75% of the value of the
total assets of the Telecommunications Fund; (v) 80% of the value of the total
assets of the Global Utilities Fund; and (vi) 90% of the value of the total
assets
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of the Global Growth and Income Fund. The International Fund will invest at
least 70% of its total assets in foreign securities.
The Diversified Income Fund may invest in debt obligations which may be
denominated in the U.S. dollar or in other currencies issued or guaranteed by
foreign corporations, certain supranational entities (such as the World Bank,
Asian Development Bank and European Economic Community), and foreign governments
(including political subdivisions having taxing authority) or their agencies or
instrumentalities. The Diversified Income Fund may also invest in debt
obligations issued by corporations denominated in non-U.S. dollar currencies. No
more than 25% of the Diversified Income Fund's total assets, at the time of
purchase, will be invested in government securities of any one foreign country.
At the present time, AIM does not intend to invest more than 10% of the
Diversified Income Fund's total assets in securities issued by foreign
governments or foreign companies located in developing countries in various
regions of the world. A "developing country" is a country in the initial stages
of its industrial cycle. Investments in emerging markets or developing countries
involve exposure to economic structures that are generally less diverse and
mature and to political systems which can be expected to have less stability
than those of more developed countries. Such countries may have relatively
unstable governments, economies based on only a few industries, and securities
markets which trade only a small number of securities. Historical experience
indicates that emerging markets have been more volatile than the markets of more
mature economies; such markets have also from time to time provided higher rates
of return and greater risks to investors. AIM believes that these
characteristics of emerging markets can be expected to continue in the future.
The Global Growth and Income Fund may invest up to 90% of its total
assets in securities of foreign companies. Under normal market conditions, the
Global Growth and Income Fund will be invested in securities of issuers located
in at least three different countries. Investments in securities of issuers in
any one country other than the United States, will represent no more than 40% of
the Fund's total assets. The Fund may purchase securities of an issuer located
in one country but denominated in the currency of another country (or a
multinational currency unit).
The Global Utilities Fund may invest up to 80% of its total assets in
securities of foreign companies, including investments in ADRs, EDRs and other
securities representing underlying securities of foreign issuers. Under normal
market conditions, the Global Utilities Fund will be invested in securities of
issuers located in at least four countries, one of which will be the United
States, although for defensive purposes, it may invest 100% of its total assets
in securities of U.S. issuers. In some foreign countries, utility companies are
partially owned by government agencies. In some cases, foreign government
agencies may have significant investments in businesses other than utility
companies. Also, investments in securities of foreign issuers may involve other
risks which are not ordinarily associated with investments in domestic issuers.
In addition, investors should also be aware that the Global Utilities Fund may
invest in companies located within emerging or developing countries.
Under normal market conditions the International Fund will invest at
least 70% of its total assets in marketable equity securities (including common
and preferred stock and depositary receipts for stock) and may invest up to 20%
of its total assets in securities exchangeable for or convertible into stock of
foreign companies.
Under normal market conditions, the International Fund intends to
invest in the securities of foreign companies located in at least four countries
outside the United States. The International Fund will emphasize investment in
foreign companies in the developed countries of Western Europe and the Pacific
Basin, but the Fund may also invest to a lesser extent in the securities of
companies located in developing countries in various regions of the world. At
the present time, AIM does not intend to invest more than 20% of the
International Fund's total assets in securities issued by foreign governments or
foreign companies located in developing countries.
For a discussion of the risks pertaining to investments in foreign
obligations, see "Risk Factors" in this Statement of Additional Information.
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FOREIGN EXCHANGE TRANSACTIONS
Purchases and sales of foreign securities are usually made with foreign
currencies, and consequently the Funds (except the Money Market Fund) may from
time to time hold cash balances in the form of foreign currencies and
multinational currency units. Such foreign currencies and multinational currency
units will usually be acquired on a spot (i.e. cash) basis at the spot rate
prevailing in foreign exchange markets and will result in currency conversion
costs to the Fund. A Fund attempts to purchase and sell foreign currencies on as
favorable a basis as practicable; however, some price spread on foreign exchange
transactions (to cover service charges) may be incurred, particularly when the
Fund changes investments from one country to another, or when U.S. Dollars are
used to purchase foreign securities. Certain countries could adopt policies
which would prevent the Fund from transferring cash out of such countries, and
the Fund may be affected either favorably or unfavorably by fluctuations in
relative exchange rates while the Fund holds foreign currencies.
ADRs AND EDRs
To the extent consistent with their respective investment objectives
each of the Funds (except the International Fund which is discussed separately
above) may also invest in securities which are in the form of ADRs, EDRs or
other securities representing underlying securities of foreign issuers. ADRs are
receipts typically issued by a United States bank or trust company which
evidence ownership of underlying securities issued by a foreign corporation.
EDRs are receipts issued in Europe which evidence a similar ownership
arrangement. ADRs, EDRs and other securities representing underlying securities
of foreign issuers are treated as foreign securities for purposes of determining
the applicable limitation on investment in foreign securities.
LENDING OF PORTFOLIO SECURITIES
Each Fund (except the Money Market Fund) may, from time to time, lend
securities from their respective portfolios, with a value not exceeding 33 1/3%
of their respective total assets, to banks, brokers and other financial
institutions, and receive in return collateral in the form of liquid assets
which will be maintained at all times in an amount equal to at least 100% of the
current market value of the loaned securities. The collateral received will
consist of cash, U.S. Government securities, letters of credit or such other
collateral as may be permitted under each such Fund's investment program. While
the securities are being lent, a Fund will continue to receive the equivalent of
the interest or dividends paid by the issuer on the securities, as well as
interest on the investment of the collateral or a fee from the borrower. A Fund
has a right to call each loan and obtain the securities on five business days'
notice or, in connection with securities trading on foreign markets, within such
longer period of time which coincides with the normal settlement period for
purchases and sales of such securities in such foreign markets. A Fund will not
have the right to vote securities while they are being lent, but it will call a
loan in anticipation of any important vote. During the period of the loan, the
applicable Fund receives the income on both the loaned securities and the
collateral (or a fee) and thereby increases its yield. In the event that the
borrower defaults on its obligation to return loaned securities because of
insolvency or otherwise, the Fund could experience delays and costs in gaining
access to the collateral and could suffer a loss to the extent that the value of
the collateral falls below the market value of the loaned securities. Loans will
only be made to persons deemed by AIM to be of good standing and will not be
made unless, in the judgment of AIM, the consideration to be earned from such
loans would justify the risk.
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REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements involve the sale by the Fund of portfolio
securities, with an agreement that the Fund will repurchase the securities at an
agreed upon price, date and interest payment. Each Fund may employ reverse
repurchase agreements (i) for temporary emergency purposes, such as to meet
unanticipated net redemptions so as to avoid liquidating other portfolio
securities during unfavorable market conditions; (ii) to cover short-term cash
requirements resulting from the timing of trade settlements; (iii) to take
advantage of market situations where the interest income to be earned from the
investment of the proceeds of the transaction is greater than the interest
expense of the transaction. At the time it enters into a reverse repurchase
agreement, a Fund will segregate liquid assets having a dollar value equal to
the repurchase price. Each of the Funds may enter into reverse repurchase
agreements in amounts not exceeding 33 1/3% of the value of their respective
total assets. Reverse repurchase agreements involve the risk that the market
value of securities retained by a Fund in lieu of liquidating may decline below
the repurchase price of the securities sold by the Fund which is obligated to
repurchase. This risk, if encountered, could cause a reduction in the net asset
value of the Fund's shares. Reverse repurchase agreements are considered to be
borrowings under the 1940 Act. See "Borrowing" in this Statement of Additional
Information for percentage limitations on borrowings.
DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES
Each Fund may enter into delayed delivery agreements and may purchase
securities on a "when-issued" basis.
Delayed delivery agreements involve commitments by each such Fund to
dealers or issuers to acquire securities or instruments at a specified future
date beyond the customary settlement date for such securities. These commitments
fix the payment price and interest rate to be received on the investment.
Delayed delivery agreements will not be used as a speculative or leverage
technique. Rather, from time to time, AIM can anticipate that cash for
investment purposes will result from scheduled maturities of existing portfolio
instruments or from net sales of shares of the Fund and may enter into delayed
delivery agreements to assure that the Fund will be as fully invested as
possible in instruments meeting its investment objective. Until the settlement
date, the Fund will segregate cash or other liquid assets of a dollar value
sufficient at all times to make payment for the delayed delivery securities. The
delayed delivery securities, which will not begin to accrue interest until the
settlement date, will be recorded as an asset of the Fund and will be subject to
the risks of market fluctuation. The purchase price of the delayed delivery
securities is a liability of the Fund until settlement. If cash is not available
to the Fund at the time of settlement, the Fund may be required to dispose of
portfolio securities that it would otherwise hold to maturity in order to meet
its obligation to accept delivery under a delayed delivery agreement. The Board
of Directors has determined that entering into delayed delivery agreements does
not present a materially increased risk of loss to shareholders, but the Board
of Directors may restrict the use of delayed delivery agreements if the risk of
loss is determined to be material or if it affects the constant net asset value
of the Money Market Fund.
Many new issues of debt securities are offered on a "when-issued"
basis, that is, the date for delivery of and payment for the securities is not
fixed at the date of purchase, but is set after the securities are issued
(normally within forty-five days after the date of the transaction). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. The Funds will only make
commitments to purchase such debt securities with the intention of actually
acquiring such securities, but the Funds may each sell these securities before
the settlement date if it is deemed advisable. The Fund holds, and maintains
until the settlement date segregated liquid assets of a dollar value sufficient
at all times to make payment for the when-issued securities. The securities will
be marked-to-market and additional assets will be segregated if necessary to
maintain adequate coverage of the when-issued commitments.
Securities purchased on a when-issued basis and the securities held in
the Funds' portfolios are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates rise). Therefore, if, in order to achieve
higher interest income, a Fund is to remain substantially fully invested at the
same time that it has purchased securities on a when-issued basis, there will be
a possibility that the market value of the
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Fund's assets will fluctuate to a greater degree. Furthermore, when the time
comes for the Fund to meet its obligations under when-issued commitments, the
Fund will do so by using then-available cash flow, by sale of the segregated
securities, by the sale of other securities or, although it would not normally
expect to do so, by directing the sale of the when-issued securities themselves
(which may have a market value greater or less than the applicable Fund's
payment obligation).
A sale of securities to meet such obligations carries with it a greater
potential for the realization of net short-term capital gains, which are not
exempt from federal income taxes. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
If a Fund enters into a delayed delivery agreement or purchases a
when-issued security, the Fund will direct its custodian bank to segregate
liquid assets in an amount equal to its delayed delivery agreements or
when-issued commitments. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the account will equal the amount of such Fund's delayed
delivery agreements and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Fund's exposure to market fluctuation, or
may increase the possibility that the Fund will incur a short-term loss, if the
Fund must engage in portfolio transactions in order to honor a when-issued
commitment or accept delivery of a security under a delayed delivery agreement.
The Fund may employ techniques designed to minimize these risks. No additional
delayed delivery agreements or when-issued commitments will be made by a Fund
if, as a result, more than 25% of the Fund's net assets would become so
committed.
The Government Fund may engage in buy/sell back transactions (a form of
delayed delivery agreement). In a buy/sell back transaction, the Fund enters a
trade to sell securities at one price and simultaneously enters a trade to buy
the same securities at another price for settlement at a future date.
DOLLAR ROLL TRANSACTIONS
In order to enhance portfolio returns and manage prepayment risk, the
Diversified Income Fund and the Government Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayments histories. During the period between the
sale and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for the
Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. See "Borrowing," below for the applicable limitation on dollar
roll transactions.
BORROWING
Each of the Funds may borrow money to a limited extent from banks
(including the Funds' custodian bank) for temporary or emergency purposes
subject to the limitations under the 1940 Act. Each Fund will restrict
borrowings, reverse repurchase agreements and dollar roll transactions to an
aggregate of 33 1/3% of the Fund's total assets at the time of the transaction.
No Fund will purchase additional securities when any borrowings from banks
exceed 5% of the Fund's total assets.
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ILLIQUID SECURITIES
None of the Funds will invest more than 15% of their respective net
assets in illiquid securities, including restricted securities which are
illiquid. The Money Market Fund will not invest more than 10% of its net assets
in illiquid securities.
SPECIAL SITUATIONS
Although the Capital Appreciation Fund does not currently intend to do
so, it may invest in "special situations." A special situation arises when, in
the opinion of the Fund's management, the securities of a particular company
will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development applicable
to that company, and regardless of general business conditions or movements of
the market as a whole. Developments creating special situations might include,
among others: liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical breakthroughs and new management or management
policies. Although large and well known companies may be involved, special
situations more often involve comparatively small or unseasoned companies.
Investments in unseasoned companies and special situations often involve much
greater risk than is inherent in ordinary investment securities.
WARRANTS
The Aggressive Growth Fund, the Blue Chip Fund, the Capital Development
Fund, the Dent Demographic Trends Fund, the Global Growth and Income Fund, the
Growth and Income Fund, the High Yield Fund and the Telecommunications Fund may,
from time to time, invest in warrants. Warrants are, in effect, longer-term call
options. They give the holder the right to purchase a given number of shares of
a particular company at specified prices within certain periods of time. The
purchaser of a warrant expects that the market price of the security will exceed
the purchase price of the warrant plus the exercise price of the warrant, thus
giving him a profit. Of course, since the market price may never exceed the
exercise price before the expiration date of the warrant, the purchaser of the
warrant risks the loss of the entire purchase price of the warrant. Warrants
generally trade in the open market and may be sold rather than exercised.
Warrants are sometimes sold in unit form with other securities of an issuer.
Units of warrants and common stock may be employed in financing young,
unseasoned companies. The purchase price of a warrant varies with the exercise
price of a warrant, the current market value of the underlying security, the
life of the warrant and various other investment factors.
SHORT SALES
Each of the Funds (except the Money Market Fund) may enter into short
sales transactions from time to time. None of these Funds will make short sales
of securities nor maintain a short position unless at all times when a short
position is open, the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short. This is a technique known as selling short "against the box." Such short
sales will be used by each of the Funds for the purpose of deferring recognition
of gain or loss for federal income tax purposes. In no event may more than 10%
of the value of any such Fund's total assets be deposited or pledged as
collateral for such sales at any time.
RULE 144A SECURITIES
Each of the Funds may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred
to as private placements. Although securities which may be resold only to
"qualified institutional buyers" in accordance with the provisions of Rule 144A
under the 1933 Act are technically considered "restricted securities," the Funds
may each purchase Rule 144A securities without regard to the limitation on
investments in illiquid securities described above under "Illiquid Securities,"
provided that a determination is made that such securities have a readily
available trading market. AIM will determine the liquidity of Rule 144A
securities under the supervision of the Company's Board of Directors.
Determination of whether a Rule 144A security is liquid or not is a question of
fact. In making this determination AIM will consider the trading
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markets for the specific security taking into account the unregistered nature of
a Rule 144A security. In addition, AIM could consider the (i) frequency of
trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer
undertakings to make a market, and (iv) nature of the security and of market
place trades (for example, the time needed to dispose of the security, the
method of soliciting offers and the mechanics of transfer). The liquidity of
Rule 144A securities will be monitored by AIM and, if as a result of changed
conditions, it is determined that a Rule 144A security is no longer liquid, the
Fund's holdings of illiquid securities will be reviewed to determine what, if
any, action is required to assure that the Fund does not exceed its applicable
percentage limitation for investments in illiquid securities.
EQUITY-LINKED DERIVATIVES
Aggressive Growth Fund, Balanced Fund, Blue Chip Fund, Capital
Appreciation Fund, Capital Development Fund, Dent Demographic Trends Fund,
Global Growth and Income Fund, Global Utilities Fund, Growth and Income Fund,
Growth Fund, International Equity Fund, Telecommunications Fund and Value Fund
may invest in equity-linked derivative products designed to replicate the
composition and performance of particular indices. Examples of such products
include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark Series
("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial Average
Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities included in the
indices such products are designed to track. There can be no assurance that the
trading price of the equity-linked derivatives will equal the underlying value
of the basket of securities purchased to replicate a particular index or that
such basket will replicate the index. Investments in equity-linked derivatives
may constitute investment in other investment companies. See "Investment in
Other Investment Companies."
INVESTMENT IN OTHER INVESTMENT COMPANIES
Each of the Funds may invest in other investment companies to the
extent permitted by the 1940 Act, and rules and regulations thereunder, and if
applicable, exemptive orders granted by the SEC. The following restrictions
apply to investments in other investment companies other than Affiliated Money
Market Funds (defined below): (i) a Fund may not purchase more than 3% of the
total outstanding voting stock of another investment company; (ii) a Fund may
not invest more than 5% of its total assets in securities issued by another
investment company; and (iii) a Fund may not invest more than 10% of its total
assets in securities issued by other investment companies other than Affiliated
Money Market Funds. With respect to a Fund's purchase of shares of another
investment company, including Affiliated Money Market Funds, the Fund will
indirectly bear its proportionate share of the advisory fees and other operating
expenses of such investment company. The Funds have obtained an exemptive order
from the SEC allowing them to invest in money market funds that have AIM or an
affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"),
provided that investments in Affiliated Money Market Funds do not exceed 25% of
the total assets of such Fund. With respect to a Fund's purchase of shares of
the Affiliated Money Market Funds, the Fund will indirectly pay the advisory
fees and other operating expenses of the Affiliated Money Market Funds.
TEMPORARY DEFENSIVE INVESTMENTS
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, each of the Funds (except
Money Market Fund) may temporarily hold all or a portion of its assets in cash,
money market instruments, bonds, or other debt securities. The Funds may also
invest up to 25% of their respective total assets in Affiliated Money Market
Funds for these purposes. For a description of the various rating categories of
corporate bonds and commercial paper in which the Funds may invest, see the
Appendix to this Statement of Additional Information.
In anticipation of or in response to adverse market conditions, for
cash management purposes, or for defensive purposes, Money Market Fund may
temporarily hold all or a portion of its assets in cash, and may invest up to
25% of its total assets in Affiliated Money Market Funds.
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ASSET ALLOCATION AMONG COUNTRIES
The Global Growth and Income Fund currently contemplates that it will
invest principally in securities of issuers in the United States, Canada, Japan,
the Western European nations, New Zealand and Australia, and it may invest in
securities denominated in more than one currency.
UTILITIES INDUSTRY
The following is a general description of the particular types of
utilities industries in which the Global Utilities Fund may invest.
Electric Utility Industry. Electric utilities are heavily regulated.
Local rates are subject to the review of state commissions, and sales either
between companies or that cross state lines are subject to review by the Federal
Energy Regulatory Commission. The industry is also subject to regulation by the
SEC under the Public Utility Holding Company Act of 1935. In addition, companies
constructing or operating nuclear powered generating stations are subject to
extensive regulation by the Nuclear Regulatory Commission.
Electric utility companies are also subject to extensive local
regulation in environmental and site location matters. Future legislation with
regard to the issues of acid rain and toxic and radioactive wastes could have a
significant impact on the manner in which utility companies conduct their
business, and the costs that they incur. Since the late 1970s, investor-owned
utilities have experienced a number of unfavorable regulatory trends, including
increased regulatory resistance to price increases and new legislation
encouraging competition.
Electric utilities have recently become subject to competition in
varying degrees. This competition can have the effect of decreasing revenues and
profit margins.
Natural Gas Industry. The natural gas industry is comprised primarily
of many small distribution companies and a few large interstate pipeline
companies. The Public Utility Holding Company Act of 1935 has generally acted as
a bar to the consolidation of pipeline and distribution companies. Regulation of
these companies is similar to that of electric companies. The performance of
natural gas utilities may also be substantially affected by fluctuations in
energy prices. Competition in the natural gas industry has resulted in the
consolidation of the industry.
Communications Industry. Most of the communications industry capacity
is concentrated in the hands of a few very large publicly-held companies, unlike
the situation in the electric and gas industries. Significant risks for the
investor to overcome still exist, however, including risk relating to pricing at
marginal versus embedded cost. New entrants may have lower costs of material due
to newer technologies or lower standards of reliability than those heretofore
imposed by American Telephone & Telegraph ("AT&T") on the industry. Accordingly,
the marginal cost of incremental service is much lower than the costs embedded
in an existing network. Communications companies are not subject to the Public
Utility Holding Company Act of 1935.
Interstate communications service may be subject to Federal
Communications Commission regulation. Local service may be regulated by the
states. In addition, AT&T and its former subsidiaries are still subject to
judicial review pursuant to the settlement of the antitrust case brought against
them by the Department of Justice.
Water Utility Industry. The water utility industry is composed of
regulated public utilities that are involved in the distribution of drinking
water to densely populated areas. The industry is geographically diverse and
subject to the same rate base and rate of return regulations as are other public
utilities. Demand for water is most heavily influenced by the local weather,
population growth in the service area and new construction. Supplies of clean,
drinkable water are limited and are primarily a function of the amount of past
rainfall.
Other. In addition to the particular types of utilities industries
described above, the Fund may invest in developing utility technology companies
(such as cellular telephone, fiber optics and satellite communications firms)
and in holding companies which derive a substantial portion of their revenues
from utility-related activities.
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OPTIONS, FUTURES AND CURRENCY STRATEGIES
INTRODUCTION
Each of the Funds (except the Money Market Fund) may use forward
contracts, futures contracts, options on securities, options on indices, options
on currencies, and options on futures contracts to attempt to hedge against the
overall level of investment and currency risk normally associated with each
Fund's investments. These instruments are often referred to as "derivatives,"
which may be defined as financial instruments whose performance is derived, at
least in part, from the performance of another asset (such as a security,
currency or an index of securities).
GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES
The use by the Funds of options, futures contracts and forward currency
contracts involves special considerations and risks, as described below. Risks
pertaining to particular strategies are described in the sections that follow.
(1) Successful use of hedging transactions depends upon AIM's ability
to correctly predict the direction of changes in the value of the applicable
markets and securities, contracts and/or currencies. While AIM is experienced in
the use of these instruments, there can be no assurance that any particular
hedging strategy will succeed.
(2) There might be imperfect correlation, or even no correlation,
between the price movements of an instrument (such as an option contract) and
the price movements of the investments being hedged. For example, if a
"protective put" is used to hedge a potential decline in a security and the
security does decline in price, the put option's increased value may not
completely offset the loss in the underlying security. Such a lack of
correlation might occur due to factors unrelated to the value of the investments
being hedged, such as changing interest rates, market liquidity, and speculative
or other pressures on the markets in which the hedging instrument is traded.
(3) Hedging strategies, if successful, can reduce risk of loss by
wholly or partially offsetting the negative effect of unfavorable price
movements in the investments being hedged. However, hedging strategies can also
reduce opportunity for gain by offsetting the positive effect of favorable price
movements in the hedged investments.
(4) There is no assurance that a liquid secondary market will exist for
any particular option, futures contract, forward contract or option thereon at
any particular time.
(5) As described below, a Fund might be required to maintain assets as
"cover," maintain segregated accounts or make margin payments when it takes
positions in instruments involving obligations to third parties. If a Fund were
unable to close out its positions in such instruments, it might be required to
continue to maintain such assets or accounts or make such payments until the
position expired or matured. The requirements might impair the Fund's ability to
sell a portfolio security or make an investment at a time when it would
otherwise be favorable to do so, or require that the Fund sell a portfolio
security at a disadvantageous time.
(6) There is no assurance that a Fund will use hedging transactions.
For example, if a Fund determines that the cost of hedging will exceed the
potential benefit to the Fund, the Fund will not enter into such transaction.
COVER
Transactions using forward contracts, futures contracts and options
(other than options purchased by a Fund) expose a Fund to an obligation to
another party. A Fund will not enter into any such transactions unless it owns
either (1) an offsetting ("covered") position in securities, currencies, or
other options, forward contracts or futures contracts or (2) cash, liquid assets
and/or short-term debt securities with a value sufficient
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at all times to cover its potential obligations not covered as provided in (1)
above. Each Fund will comply with SEC guidelines regarding cover for these
instruments and, if the guidelines so require, set aside cash or liquid
securities. To the extent that a futures contract, forward contract or option is
deemed to be illiquid, the assets used to "cover" the Fund's obligation will
also be treated as illiquid for purposes of determining the Fund's maximum
allowable investment in illiquid securities.
Even though options purchased by the Funds do not expose the Funds to
an obligation to another party, but rather provide the Funds with a right to
exercise, the Funds intend to "cover" the cost of any such exercise. To the
extent that a purchased option is deemed illiquid, the Fund will treat the
market value of the option (i.e., the amount at risk to the Fund) as illiquid,
but will not treat the assets used as cover on such transactions as illiquid.
Assets used as cover cannot be sold while the position in the
corresponding forward contract, futures contract or option is open, unless they
are replaced with other appropriate assets. If a large portion of a Fund's
assets is used for cover or otherwise set aside, it could affect portfolio
management or the Fund's ability to meet redemption requests or other current
obligations.
WRITING CALL OPTIONS
Each of the Funds may write (sell) covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
call option, a Fund would have the obligation to deliver the underlying
security, cash or currency (depending on the type of derivative) to the holder
(buyer) at a specified price (the exercise price) at any time until (American
style) or on (European style) a certain date (the expiration date). So long as
the obligation of a Fund continues, it may be assigned an exercise notice,
requiring it to deliver the underlying security, cash or currency against
payment of the exercise price. This obligation terminates upon the expiration of
the call option, or such earlier time at which a Fund effects a closing purchase
transaction by purchasing an option identical to that previously sold.
When writing a call option a Fund, in return for the premium, gives up
the opportunity for profit from a price increase in the underlying security,
contract or currency above the exercise price, and retains the risk of loss
should the price of the security, contract or currency decline. Unlike one who
owns securities, contracts or currencies not subject to an option, a Fund has no
control over when it may be required to sell the underlying securities,
contracts or currencies, since most options may be exercised at any time prior
to the option's expiration. If a call option that a Fund has written expires, it
will realize a gain in the amount of the premium; however, such gain may be
offset by a decline in the market value of the underlying security, contract or
currency during the option period. If the call option is exercised, a Fund will
realize a gain or loss from the sale of the underlying security, contract or
currency, which will be increased or offset by the premium received.
Writing call options can serve as a limited hedge because declines in
the value of the hedged investment would be offset to the extent of the premium
received for writing the option.
Closing transactions may be effected in order to realize a profit on an
outstanding call option, to prevent an underlying security, contract or currency
from being called or to permit the sale of the underlying security, contract or
currency. Furthermore, effecting a closing transaction will permit the Fund to
write another call option on the underlying security, contract or currency with
either a different exercise price or expiration date, or both.
WRITING PUT OPTIONS
Each of the Funds may write (sell) covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the writer of a
put option, a Fund would have the obligation to buy the underlying security,
contract or currency (depending on the type of derivative) at the exercise price
at any time until (American style) or on (European style) the expiration date.
This obligation terminates upon the expiration of the put option, or such
earlier time at which a Fund effects a closing purchase transaction by
purchasing an option identical to that previously sold.
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A Fund would write a put option at an exercise price that, reduced by
the premium received on the option, reflects the lower price it is willing to
pay for the underlying security, contract or currency. The risk in such a
transaction would be that the market price of the underlying security, contract
or currency would decline below the exercise price less the premium received.
PURCHASING PUT OPTIONS
Each of the Funds may purchase covered put options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
put option, a Fund would have the right to sell the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such option or permit such
option to expire.
A Fund may purchase a put option on an underlying security, contract or
currency ("protective put") owned by the Fund in order to protect against an
anticipated decline in the value of the security, contract or currency. Such
hedge protection is provided only during the life of the put option. The premium
paid for the put option and any transaction costs would reduce any profit
realized when the security, contract or currency is delivered upon exercise of
said option. Conversely, if the underlying security, contract or currency does
not decline in value, the option may expire worthless and the premium paid for
the protective put would be lost.
A Fund may also purchase put options on underlying securities,
contracts or currencies against which it has written other put options. For
example, where a Fund has written a put option on an underlying security, rather
than entering a closing transaction of the written option, it may purchase a put
option with a different exercise price and/or expiration date that would
eliminate some or all of the risk associated with the written put. Used in
combinations, these strategies are commonly referred to as "put spreads."
Likewise, a Fund may write call options on underlying securities, contracts or
currencies against which it has purchased protective put options. This strategy
is commonly referred to as a "collar."
PURCHASING CALL OPTIONS
Each of the Funds may purchase covered call options on securities,
futures contracts, forward contracts, indices and currencies. As the holder of a
call option, a Fund would have the right to purchase the underlying security,
contract or currency at the exercise price at any time until (American style) or
on (European style) the expiration date. A Fund may enter into closing sale
transactions with respect to such options, exercise such options or permit such
options to expire.
Call options may be purchased by a Fund for the purpose of acquiring
the underlying security, contract or currency for its portfolio. Utilized in
this fashion, the purchase of call options would enable a Fund to acquire the
security, contract or currency at the exercise price of the call option plus the
premium paid. So long as it holds such a call option, rather than the underlying
security or currency itself, the Fund is partially protected from any unexpected
decline in the market price of the underlying security, contract or currency
and, in such event, could allow the call option to expire, incurring a loss only
to the extent of the premium paid for the option.
Each of the Funds may also purchase call options on underlying
securities, contracts or currencies against which it has written other call
options. For example, where a Fund has written a call option on an underlying
security, rather than entering a closing transaction of the written option, it
may purchase a call option with a different exercise price and/or expiration
date that would eliminate some or all of the risk associated with the written
call. Used in combinations, these strategies are commonly referred to as "call
spreads."
OVER-THE-COUNTER OPTIONS
Options may be either listed on an exchange or traded in
over-the-counter ("OTC") markets. Listed options are third-party contracts
(i.e., performance of the obligations of the purchaser and seller is guaranteed
by the exchange or clearing corporation) and have standardized strike prices and
expiration dates. OTC options are two-party contracts with negotiated strike
prices and expiration dates. A Fund will not purchase
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an OTC option unless it believes that daily valuations for such options are
readily obtainable. OTC options differ from exchange-traded options in that OTC
options are transacted with dealers directly and not through a clearing
corporation (which guarantees performance). Consequently, there is a risk of
non-performance by the dealer. Since no exchange is involved, OTC options are
valued on the basis of an average of the last bid prices obtained from dealers,
unless a quotation from only one dealer is available, in which case only that
dealer's price will be used. In the case of OTC options, there can be no
assurance that a liquid secondary market will exist for any particular option at
any specific time. Although a Fund will enter into OTC options only with dealers
that are expected to be capable of entering into closing transactions with it,
there is no assurance that the Fund will in fact be able to close out an OTC
option position at a favorable price prior to expiration. In the event of
insolvency of the dealer, a Fund might be unable to close out an OTC option
position at any time prior to its expiration.
The staff of the SEC considers purchased OTC options (i.e., the market
value of the option) to be illiquid securities. A Fund may also sell OTC options
and, in connection therewith, segregate assets or cover its obligations with
respect to OTC options written by it. The assets used as cover for OTC options
written by the Fund will be considered illiquid unless the OTC options are sold
to qualified dealers who agree that the Fund may repurchase any OTC option it
writes at a maximum price to be calculated by a formula set forth in the option
agreement. The cover for an OTC option written subject to this procedure would
be considered illiquid only to the extent that the maximum repurchase price
under the formula exceeds the intrinsic value of the option.
INDEX OPTIONS
Puts and calls on indices are similar to puts and calls on securities
or futures contracts except that all settlements are in cash and gain or loss
depends on changes in the index in question (and thus on price movements in the
securities market or a particular market sector generally) rather than on price
movements in individual securities or futures contracts. The amount of cash is
equal to the difference between the closing price of the index and the exercise
price of the call or put times a specified multiple (the "multiplier"), which
determines the total dollar value for each point of such difference.
The risks of investment in index options may be greater than options on
securities. Because index options are settled in cash, when a Fund writes a call
on an index it cannot provide in advance for its potential settlement
obligations by acquiring and holding the underlying securities. A Fund can
offset some of the risk of writing a call index option position by holding a
diversified portfolio of securities similar to those on which the underlying
index is based. However, the Fund cannot, as a practical matter, acquire and
hold a portfolio containing exactly the same securities as underlie the index
and, as a result, bears a risk that the value of the securities held will not be
perfectly correlated with the value of the index.
LIMITATIONS ON OPTIONS
A Fund will not write options if, immediately after such sale, the
aggregate value of securities or obligations underlying the outstanding options
exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at
the time of the investment, the aggregate premiums paid for the options will
exceed 5% of the Fund's total assets.
INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS
Each of the Funds may enter into interest rate, currency or stock index
futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge
against changes in prevailing levels of interest rates, currency exchange rates
or stock price levels, respectively, in order to establish more definitely the
effective return on securities or currencies held or intended to be acquired by
it. A Fund's hedging may include sales of Futures as an offset against the
effect of expected increases in interest rates, and decreases in currency
exchange rates and stock prices, and purchases of Futures as an offset against
the effect of expected declines in interest rates, and increases in currency
exchange rates or stock prices.
A Futures Contract is a two party agreement to buy or sell a specified
amount of a specified security or currency (or delivery of a cash settlement
price, in the case of an index future) for a specified price at a
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designated date, time and place. A stock index future provides for the delivery,
at a designated date, time and place, of an amount of cash equal to a specified
dollar amount times the difference between the stock index value at the close of
trading on the contract and the price agreed upon in the Futures Contract; no
physical delivery of stocks comprising the index is made. Brokerage fees are
incurred when a Futures Contract is bought or sold, and margin deposits must be
maintained at all times the Future is outstanding.
The Funds will only enter into Futures Contracts that are traded
(either domestically or internationally) on futures exchanges and are
standardized as to maturity date and underlying financial instrument. Futures
exchanges and trading thereon in the United States are regulated under the
Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC").
Foreign futures exchanges and trading thereon are not regulated by the CFTC and
are not subject to the same regulatory controls. For a further discussion of the
risks associated with investments in foreign securities, see "Foreign
Securities" in this Statement of Additional Information.
Closing out an open Future is effected by entering into an offsetting
Future for the same aggregate amount of the identical financial instrument or
currency and the same delivery date. There can be no assurance, however, that a
Fund will be able to enter into an offsetting transaction with respect to a
particular Future at a particular time. If a Fund is not able to enter into an
offsetting transaction, it will continue to be required to maintain the margin
deposits on the Future.
A Fund's Futures transactions will be entered into for hedging purposes
only; that is, Futures will be sold to protect against a decline in the price of
securities or currencies that the Fund owns, or Futures will be purchased to
protect the Fund against an increase in the price of securities or currencies it
has committed to purchase or expects to purchase.
"Margin" with respect to Futures is the amount of funds that must be
deposited by a Fund in order to initiate Futures trading and maintain its open
positions in Futures. A margin deposit made when the Futures Contract is entered
("initial margin") is intended to ensure the Fund's performance under the
Futures Contract. The margin required for a particular Future is set by the
exchange on which the Future is traded and may be significantly modified from
time to time by the exchange during the term of the Futures Contract.
Subsequent payments, called "variation margin," to and from the futures
commission merchant through which a Fund entered into the Futures Contract will
be made on a daily basis as the price of the underlying security, currency or
index fluctuates making the Futures more or less valuable, a process known as
marking-to-market.
If a Fund were unable to liquidate a Future or an option on a Futures
position due to the absence of a liquid secondary market or the imposition of
price limits, it could incur substantial losses. The Fund would continue to be
subject to market risk with respect to the position. In addition, except in the
case of purchased options, the Fund would continue to be required to make daily
variation margin payments and might be required to maintain the position being
hedged by the Future or option or to maintain cash or securities in a segregated
account.
OPTIONS ON FUTURES CONTRACTS
Options on Futures Contracts are similar to options on securities or
currencies except that options on Futures Contracts give the purchaser the
right, in return for the premium paid, to assume a position in a Futures
Contract (a long position if the option is a call and a short position if the
option is a put) at a specified exercise price at any time during the period of
the option. Upon exercise of the option, the delivery of the Futures position by
the writer of the option to the holder of the option will be accompanied by
delivery of the accumulated balance in the writer's Futures margin account.
FORWARD CONTRACTS
A forward contract is an obligation, usually arranged with a commercial
bank or other currency dealer, to purchase or sell a currency against another
currency at a future date and price as agreed upon by the parties. A Fund either
may accept or make delivery of the currency at the maturity of the forward
contract. A Fund may also, if its contra party agrees prior to maturity, enter
into a closing transaction involving the
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purchase or sale of an offsetting contract. Forward contracts are traded
over-the-counter, and not on organized commodities or securities exchanges. As a
result, it may be more difficult to value such contracts, and it may be
difficult to enter into closing transactions.
Each of the Funds may engage in forward currency transactions in
anticipation of, or to protect itself against, fluctuations in exchange rates. A
Fund may enter into forward contracts with respect to a specific purchase or
sale of a security, or with respect to its portfolio positions generally. When a
Fund purchases a security denominated in a foreign currency for settlement in
the near future, it may immediately purchase in the forward market the currency
needed to pay for and settle the purchase. By entering into a forward contract
with respect to the specific purchase or sale of a security denominated in a
foreign currency, the Fund can secure an exchange rate between the trade and
settlement dates for that purchase or sale transaction. This practice is
sometimes referred to as "transaction hedging." Position hedging is the purchase
or sale of foreign currency with respect to portfolio security positions
denominated or quoted in a foreign currency.
The cost to a Fund of engaging in forward contracts varies with factors
such as the currencies involved, the length of the contract period and the
market conditions then prevailing. Because forward contracts are usually entered
into on a principal basis, no fees or commissions are involved. The use of
forward contracts does not eliminate fluctuations in the prices of the
underlying securities a Fund owns or intends to acquire, but it does establish a
rate of exchange in advance. In addition, while forward contract sales limit the
risk of loss due to a decline in the value of the hedged currencies, they also
limit any potential gain that might result should the value of the currencies
increase.
LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON
CURRENCIES
To the extent that a Fund enters into Futures Contracts, options on
Futures Contracts and options on foreign currencies traded on a CFTC-regulated
exchange, in each case other than for bona fide hedging purposes (as defined by
the CFTC), the aggregate initial margin and premiums required to establish those
positions (excluding the amount by which options are "in-the-money") will not
exceed 5% of the total assets of the Fund, after taking into account unrealized
profits and unrealized losses on any contracts it has entered into. This
guideline may be modified by the Board, without a shareholder vote. This
limitation does not limit the percentage of the Fund's assets at risk to 5%.
RISK FACTORS
Investors should consider carefully the following special factors
before investing in any of the Funds.
SMALL CAPITALIZATION COMPANIES
Investors should realize that equity securities of small to
medium-sized companies may involve greater risk than is associated with
investing in more established companies. Small to medium-sized companies often
have limited product and market diversification, fewer financial resources or
may be dependent on a few key managers. Any one of the foregoing may change
suddenly and have an immediate impact on the value of the company's securities.
Furthermore, whenever the securities markets are experiencing rapid price
changes due to national economic trends, secondary growth securities have
historically been subject to exaggerated price changes.
NON-INVESTMENT GRADE DEBT SECURITIES
The Balanced Fund, the Diversified Income Fund, the High Yield Fund,
and to a lesser extent the Dent Demographic Trends Fund, the Global Utilities
Fund, and the Telecommunications Fund may seek to meet their respective
investment objectives by investing in non-investment grade debt securities,
commonly known as "junk bonds." While generally providing greater income and
opportunity for gain, non-investment grade debt securities may be subject to
greater risks than higher-rated securities. Economic downturns tend to disrupt
the market for junk bonds and adversely affect their values. Such economic
downturns may be expected to result in increased price volatility for junk bonds
and of the value of shares of the above-named Funds, and increased issuer
defaults on junk bonds.
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In addition, many issuers of junk bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, junk
bonds are subordinated to the prior payment of senior indebtedness, which
potentially limits a Fund's ability to fully recover principal or to receive
payments when senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its
market value risk, and ratings may from time to time change to reflect
developments regarding the issuer's financial condition. Junk bonds have
speculative characteristics which are likely to increase in number and
significance with each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in
the absence of readily available market quotations for such securities, the
relative lack of reliable objective data makes it more difficult for the
Company's directors to value a Fund's securities, and judgment plays a more
important role in determining such valuations. Increased illiquidity in the junk
bond market also may affect a Fund's ability to dispose of such securities at
desirable prices.
In the event a Fund experiences an unexpected level of net redemptions,
the Fund could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset based upon which the Fund's
expenses can be spread and possibly reducing the Fund's rate of return. Prices
of junk bonds have been found to be less sensitive to fluctuations in interest
rates, and more sensitive to adverse economic changes and individual corporate
developments, than those of higher-rated debt securities.
FOREIGN SECURITIES
Investments by a Fund in foreign securities whether denominated in U.S.
dollars or foreign currencies, may entail the following risks set forth below.
Investments by a Fund in ADRs, EDRs or similar securities also may entail some
or all of the risks described below.
CURRENCY RISK. The value of the Fund's foreign investments (except for
Money Market Fund, which may only invest in U.S. dollar denominated securities)
may be affected by changes in currency exchange rates. The U.S. dollar value
of a foreign security generally decreases when the value of the U.S. dollar
rises against the foreign currency in which the security is denominated, and
tends to increase when the value of the U.S. dollar falls against such currency.
On January 1, 1999, certain members of the European Economic and
Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain established a
common European currency known as the "euro" and each member's local currency
became a denomination of the euro. It is anticipated that each participating
country will replace its local currency with the euro on July 1, 2002. Any other
European country that is a member of the European Union and satisfies the
criteria for participation in the EMU may elect to participate in the EMU and
may supplement its existing currency with the euro. The anticipated replacement
of existing currencies with the euro on July 1, 2002 could cause market
disruptions before or after July 1, 2002 and could adversely affect the value of
securities held by the Fund.
POLITICAL AND ECONOMIC RISK. The economies of many of the countries in
which the Fund may invest are not as developed as the United States economy and
may be subject to significantly different forces. Political or social
instability, expropriation or confiscatory taxation, and limitations on the
removal of funds or other assets could also adversely affect the value of the
Fund's investments.
REGULATORY RISK. Foreign companies are generally not subject to the
regulatory controls imposed on United States issuers and, as a consequence,
there is generally less publicly available information about foreign securities
than is available about domestic securities. Foreign companies are not subject
to uniform accounting, auditing and financial reporting standards, practices and
requirements comparable to those applicable to domestic companies. Income from
foreign securities owned by the Fund may be reduced by a withholding tax at the
source, which tax would reduce dividend income payable to the Fund's
shareholders.
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MARKET RISK. The securities markets in many of the countries in which
the Fund invests will have substantially less trading volume than the major
United States markets. As a result, the securities of some foreign companies and
governments may be less liquid and experience more price volatility than
comparable domestic securities. Increased custodian costs as well as
administrative difficulties (such as the need to use foreign custodians) may be
associated with the maintenance of assets in foreign jurisdictions. There is
generally less government regulation and supervision of foreign stock exchanges,
brokers and issuers which may make it difficult to enforce contractual
obligations. In addition, transaction costs in foreign securities markets are
likely to be higher, since brokerage commission rates in foreign countries are
likely to be higher than in the United States.
In addition, there are risks associated with certain investment
strategies employed by the Funds as discussed in the previous section.
NON-DIVERSIFIED PORTFOLIO (GLOBAL UTILITIES FUND ONLY)
The Global Utilities Fund is a non-diversified portfolio, which means
that it may invest a greater proportion of its assets in the securities of a
smaller number of issuers and therefore may be subject to greater market and
credit risk than a more broadly diversified portfolio. (A diversified portfolio
may not invest more than 5% of its assets in obligations of one issuer, with
respect to 75% of its total assets.)
INVESTMENT RESTRICTIONS
For a discussion of the proposed changes to the investment
restrictions, see "Submission of Matters to Shareholders" in this Statement of
Additional Information.
FUNDAMENTAL RESTRICTIONS
The following restrictions apply to all of the Funds and are
fundamental. Unless permitted by law, they will not be changed for any Fund
without approval of that Fund's voting securities.
None of the Funds will:
(1) invest for the purpose of exercising control over or management
over a company except that each Fund may purchase securities of other investment
companies to the extent permitted by applicable law or exemptive order;
(2) act as an underwriter, except to the extent that, in connection
with the disposition of portfolio securities, the Fund may be deemed to be an
underwriter for purposes of the 1933 Act;
(3) purchase or sell real estate or any interest therein, except that
each Fund may, as appropriate and consistent with its investment policies and
other investment restrictions, invest in securities of corporate or governmental
entities secured by real estate or marketable interests therein or securities of
issuers that engage in real estate operations or interests therein, and may hold
and sell real estate acquired as a result of ownership in such securities;
(4) purchase or sell commodity contracts, except that each Fund may, as
appropriate and consistent with its investment policies and other investment
restrictions, enter into futures contracts on securities, securities indices and
currency, options on such futures contracts, forward foreign currency exchange
contracts, forward commitments and repurchase agreements;
(5) make loans, except for collateralized loans of portfolio securities
in an amount not exceeding 33 1/3% of the applicable Fund's total assets. This
restriction does not prevent a Fund from purchasing government obligations,
short-term commercial paper, or publicly traded debt, including bonds, notes,
debentures, certificates of deposit, bankers acceptances and equipment trust
certificates, nor does this restriction apply to loans made under insurance
policies, or through entry into repurchase agreements, to the extent they may be
viewed as loans;
(6) purchase the securities of issuers conducting their principal
business activity in the same industry if, immediately after such purchase, the
value of its investments in such industry would exceed 25%
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of its total assets at market value at the time of each investment, except that
the Money Market Fund may invest up to 100% of its assets in obligations issued
by banks. This limitation does not apply to the Global Utilities Fund or to
investments in obligations of the U.S. Government or any of its agencies or
instrumentalities but will apply to foreign government obligations unless the
Securities and Exchange Commission permits their exclusion;
(7) issue senior securities, except to the extent permitted by the 1940
Act, including permitted borrowings;
(8) purchase securities of an issuer (other than investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities or except that each Fund may purchase securities of other
investment companies to the extent permitted by applicable law or exemptive
order), if as a result with respect to 75% of the value of the Fund's total
assets, taken at market value, (i) more than 5% of the Fund's total assets taken
at market value would be invested in the securities of such issuer, except that
up to 25% of the Fund's total assets may be invested in securities issued or
guaranteed by any foreign government or its agencies or instrumentalities, or
(ii) such purchase would at the time result in more than 10% of the outstanding
voting securities of such issuer being held by the Fund. As a matter of
operating policy, the Money Market Fund will invest no more than 5% of the value
of that Fund's total assets in securities, other than U.S. Government securities
of any one issuer, except that the Money Market Fund may invest up to 25% of its
total assets in First Tier Securities (as defined in Rule 2a-7 under the 1940
Act) of a single issuer for a period of up to three business days after the
purchase of such security. This restriction does not apply to the Global
Utilities Fund; and
(9) Each Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and limitations as that Fund.
NON-FUNDAMENTAL RESTRICTIONS
The following investment restrictions apply to all of the Funds but are
not fundamental. They may be changed for any Fund without approval of that
Fund's voting securities.
(1) None of the Funds will invest more than 15% (10% for the Money
Market Fund) of its assets in securities restricted as to disposition under
federal securities laws, or securities otherwise considered illiquid or not
readily marketable, including repurchase agreements having a maturity of more
than seven days.
(2) None of the Funds will purchase or retain the securities of any
issuer if, to the knowledge of AIM, those officers and Directors of the Company,
its adviser or distributor owning individually more than 1/2 of 1% of the
securities of such issuer together own more than 5% of the securities of such
issuer.
(3) The Company does not currently intend to invest all of the assets
of any Fund in the securities of a single open-end management investment company
with the same fundamental investment objectives, policies and limitations as
that Fund.
(4) The Fund may not invest in securities issued by other investment
companies except as part of a merger, reorganization or other acquisition and
except to the extent permitted by (i) the 1940 Act, as amended from time to
time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act,
as amended from time to time, or (iii) an exemption or other relief from the
provisions of the 1940 Act.
MANAGEMENT
DIRECTORS AND OFFICERS
The directors and officers of the Company and their principal
occupations during at least the last five years are set forth below. Unless
otherwise indicated, the address of each director and executive officer is 11
Greenway Plaza, Suite 100, Houston, Texas 77046.
39
<PAGE> 44
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (80) Director and Director and Chairman, A I M Management Group
Chairman Inc., A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company; and Executive Vice Chairman and
Director, AMVESCAP PLC.
BRUCE L. CROCKETT (55) Director Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (international
communications company).
OWEN DALY II (75) Director Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company) CF & I Steel Corp., Monumental Life Insurance
Baltimore, MD 21210 Company and Monumental General Insurance Company; and
Chairman of the Board of Equitable Bancorporation.
EDWARD K. DUNN, JR. (64) Director Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 8th Floor Mortgage Corp. Formerly, Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
JACK FIELDS (48) Director Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company) and Twenty First
Jetero Plaza, Suite E Century, Inc. (a governmental affairs company);
Humble, TX 77338 and Director, Telscape International and Administaff.
Formerly, Member of the U.S. House of
Representatives.
**CARL FRISCHLING (62) Director Partner, Kramer, Levin, Naftalis & Frankel (law
919 Third Avenue firm). Formerly Partner, Reid & Priest (law firm).
New York, NY 10022
</TABLE>
- ----------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
** A director who is an "interested person" of the Company as defined in
the 1940 Act.
40
<PAGE> 45
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
*ROBERT H. GRAHAM (53) Director and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director and CEO, Managed Products, AMVESCAP PLC.
PREMA MATHAI-DAVIS (49) Director Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
LOUIS S. SKLAR (60) Director Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
GARY T. CRUM (52) Senior Vice President Director and President, A I M Capital Management,
Inc.; Director and Executive Vice President,
A I M Management Group Inc.; Director and Senior
Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; General Counsel and Vice President,
A I M Fund Services, Inc.; and Vice President,
A I M Capital Management, Inc. and
A I M Distributors, Inc.
</TABLE>
- ----------
* A director who is an "interested person" of A I M Advisors, Inc. and
the Company as defined in the 1940 Act.
41
<PAGE> 46
<TABLE>
<CAPTION>
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------- --------------- ----------------------------------------
<S> <C> <C>
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President,
A I M Advisors, Inc.
STUART W. COCO (44) Vice President Senior Vice President, A I M Capital Management,
Inc. and Vice President, A I M Advisors, Inc.
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., and Fund Management Company.
KAREN DUNN KELLEY (39) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital
Management, Inc.
</TABLE>
The standing committees of the Board are the Audit Committee, the
Capitalization Committee, the Investments Committee and the Nominating and
Compensation Committee.
The members of the Audit Committee are Messrs. Crockett, Daly, Dunn
(Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The
Audit Committee is responsible for:
o considering management's recommendations of independent
accountants for each fund and evaluating such accountants'
performance, costs and financial stability;
o with AIM, reviewing and coordinating audit plans prepared by
the funds' independent accountants and management's internal
audit staff; and
o reviewing financial statements contained in periodic reports
to shareholders with the funds' independent accountants and
management.
The members of the Capitalization Committee are Messrs. Bauer, Graham
(Chairman) and Pennock. The Capitalization Committee is responsible for:
o increasing or decreasing the aggregate number of shares of any
class of the company's common stock by classifying and
reclassifying the company's authorized but unissued shares of
common stock, up to the company's authorized capital;
o fixing the terms of such classified or reclassified shares of
common stock; and
o issuing such classified or reclassified shares of common stock
upon the terms set forth in the applicable fund's prospectus,
up to the company's authorized capital.
42
<PAGE> 47
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investments Committee is responsible for:
o overseeing AIM's investment-related compliance systems and
procedures to ensure their continued adequacy; and
o considering and acting, on an interim basis between meetings
of the full Board, on investment-related matters requiring
Board consideration, including dividends and distributions,
brokerage policy and pricing matters.
The members of the Nominating and Compensation Committee are Messrs.
Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis.
The Nominating and Compensation Committee is responsible for:
o considering and nominating individuals to stand for election
as independent directors as long as the company maintains a
distribution plan pursuant to Rule 12b-1 under the 1940 Act;
o reviewing from time to time the compensation payable to the
independent directors; and
o making recommendations to the Board regarding matters related
to compensation, including deferred compensation plans and
retirement plans for the independent directors.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as directors, provided (i) that such
person was a shareholder of record at the time they submit such names and is
entitled to vote at the meeting, and (ii) that the Nominating and Compensation
Committee or the Board, as applicable, shall make the final determination of
persons to be nominated.
All of the Company's Directors also serve as directors or trustees of
some or all of the other investment companies managed or advised by AIM. All of
the Directors' executive officers hold similar offices with some or all of the
other investment companies managed or advised by AIM.
Remuneration of Directors
Each director is reimbursed for expenses incurred in connection with
each meeting of the Board of Directors or any Committee thereof. Each director
of the Company who is not also an officer of the Company is compensated for his
or her services according to a fee schedule which recognizes the fact that such
director also serves as a director or trustee of certain other investment
companies advised or managed by AIM. Each such director receives a fee,
allocated among the AIM Funds for which he or she serves as a director or
trustee, which consists of an annual retainer component and a meeting fee
component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1999 for each director of the Company:
<TABLE>
<CAPTION>
AGGREGATE RETIREMENT BENEFITS TOTAL
COMPENSATION ACCRUED BY COMPENSATION
DIRECTOR FROM COMPANY(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
-------- --------------- ------------------- ---------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
Bruce L. Crockett $ 14,751 $ 37,485 $103,500
Owen Daly II $ 14,751 $122,898 $103,500
Edward K. Dunn, Jr. $ 14,751 $ -0- $103,500
Jack Fields $ 14,473 $ 15,826 $101,500
Carl Frischling(4) $ 14,751 $ 97,791 $103,500
Robert H. Graham $ -0- $ -0- $ -0-
</TABLE>
43
<PAGE> 48
<TABLE>
<CAPTION>
AGGREGATE RETIREMENT BENEFITS TOTAL
COMPENSATION ACCRUED BY COMPENSATION
DIRECTOR FROM COMPANY(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
-------- --------------- ------------------- ---------------------
<S> <C> <C> <C>
Prema Mathai-Davis $ 14,443 $ -0- $101,500
Lewis F. Pennock $ 14,751 $ 45,766 $103,500
Ian W. Robinson(5) $ 3,464 $ 94,442 $ 25,000
Louis S. Sklar $ 14,443 $ 90,232 $101,500
</TABLE>
- ----------
(1) The total amount of compensation deferred by all Directors of the
Company during the fiscal year ended December 31, 1999, including
interest earned thereon, was $111,120.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the Company in respect of such retirement
benefits was $28,223. Data reflects compensation estimated for the
calendar year ended December 31, 1999.
(3) Each Director serves as a director or trustee of a total of 12
registered investment companies advised by AIM. Data reflects
compensation estimated for the calendar year ended December 31, 1999.
(4) The Company paid the law firm of Kramer, Levin, Naftalis & Frankel LLP
$54,485 in legal fees for services provided to the Funds during the
fiscal year ended December 31, 1999. Mr. Frischling, a Director of the
Company, is a partner in such firm.
(5) Mr. Robinson was a director until March 12, 1999, when he retired.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each director (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Directors.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible director has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible director is entitled to receive an annual benefit
from the Applicable AIM Funds commencing on the first day of the calendar
quarter coincident with or following his date of retirement equal to a maximum
of 75% of the annual retainer paid or accrued by the Applicable AIM Funds for
such director during the twelve-month period immediately preceding the
director's retirement (including amounts deferred under a separate agreement
between the Applicable AIM Funds and the director) and based on the number of
such director's years of service (not in excess of 10 years of service)
completed with respect to any of the Applicable AIM Funds. Such benefit is
payable to each eligible director in quarterly installments. If an eligible
director dies after attaining the normal retirement date but before receipt of
all benefits under the Plan, the director's surviving spouse (if any) shall
receive a quarterly survivor's benefit equal to 50% of the amount payable to the
deceased director, for no more than ten years beginning the first day of the
calendar quarter following the date of the director's death. Payments under the
Plan are not secured or funded by any AIM Fund.
Set forth below is a table that shows the estimated annual benefits
payable to an eligible director upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1
years, respectively.
44
<PAGE> 49
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
Number of
Years of
Service With Annual Retirement
the Applicable AIM Compensation Paid By All
Funds Applicable AIM Funds
------------------ ------------------------
<S> <C>
10 $67,500
9 $60,750
8 $54,000
7 $47,250
6 $40,500
5 $33,750
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(for purposes of this paragraph only, the "deferring directors") have each
executed a Deferred Compensation Agreement (collectively, the "Agreements").
Pursuant to the Agreements, the deferring directors elected to defer receipt of
100% of their compensation payable by the Company, and such amounts are placed
into a deferral account. Currently, the deferring directors may select various
AIM Funds in which all or part of their deferral account shall be deemed to be
invested. Distributions from the deferring directors' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring director's retirement benefits commence under the Plan. The Company's
Board of Directors, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring director's
termination of service as a director of the Company. If a deferring director
dies prior to the distribution of amounts in his or her deferral account, the
balance of the deferral account will be distributed to his or her designated
beneficiary in a single lump sum payment as soon as practicable after such
deferring director's death. The Agreements are not funded and, with respect to
the payments of amounts held in the deferral accounts, the deferring directors
have the status of unsecured creditors of the Company and of each other AIM Fund
from which they are deferring compensation.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
Each Fund has entered into a master investment advisory agreement (the
"Advisory Agreement") dated February 28, 1997, and a master administrative
services agreement (the "Administrative Services Agreement"), dated May 1, 1998,
with AIM. A prior investment advisory agreement with substantially identical
terms to the Advisory Agreement was in effect prior to February 28, 1997. A
prior master administrative services agreement ("Prior Administrative Services
Agreement") with substantially similar terms to the Administrative Services
Agreement, was in effect prior to May 1, 1998. In addition, AIM has entered into
a Sub-Advisory Agreement, dated December 14, 1998, (a "Sub-Advisory Agreement")
with INVESCO Asset Management Limited ("INVESCO"), an indirect wholly owned
subsidiary of AMVESCAP PLC, with respect to the Global Growth and Income Fund.
The address of INVESCO is 11 Devonshire Square, London, England EC2 M4YR (this
agreement will terminate March 20, 2000). AIM has also entered into a
Sub-Advisory Agreement, dated December 29, 1999 (also a "Sub-Advisory
Agreement") with H.S. Dent Advisors, Inc. ("Dent"), with respect to the Dent
Demographic Trends Fund. The address of Dent is 6515 Gwin Road, Oakland,
California 94611. See "Fund Management" in each Prospectus.
AIM was organized in 1976, and along with its subsidiaries, manages or
advises over 120 investment portfolios encompassing a broad range of investment
objectives. AIM is a wholly owned subsidiary of A I M Management Group Inc.
("AIM Management"), a holding company that has been engaged in the
45
<PAGE> 50
financial services business since 1976. The address of AIM is 11 Greenway Plaza,
Suite 100, Houston, Texas 77046-1173.
AIM and the Company have adopted a Code of Ethics (the "Code of
Ethics") which requires investment personnel and certain other employees (a) to
pre-clear all personal securities transactions subject to the Code of Ethics,
(b) to file reports or duplicate confirmations regarding such transactions, (c)
to refrain from personally engaging in (i) short-term trading of a security,
(ii) transactions involving a security within seven days of an AIM Fund
transaction involving the same security, and (iii) transactions involving
securities being considered for investment by an AIM Fund and (d) abide by
certain other provisions under the Code of Ethics. The Code of Ethics also
prohibits investment personnel and all other employees from purchasing
securities in an initial public offering. Personal trading reports are reviewed
periodically by AIM, and the Board of Directors reviews quarterly and annual
reports (including information on any substantial violations of the Code of
Ethics). Sanctions for violations of the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Advisory Agreement for the Funds provides that each Fund will pay
all expenses of the Fund, including, without limitation: brokerage commissions,
taxes, legal, auditing, or governmental fees, the cost of preparing share
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to directors and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Company on behalf of
the Funds in connection with membership in investment company organizations, the
cost of printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise explicitly provided.
The Advisory Agreement for the Funds and the Sub-Advisory Agreements
for the Global Growth and Income Fund and the Dent Demographic Trends Fund
provide that they will each remain in effect for the initial term and continue
in effect from year to year thereafter only if such continuance is specifically
approved at least annually (i) by the Company's Board of Directors or by the
vote of a majority of the outstanding voting securities of the Funds (as defined
in the 1940 Act); and (ii) by the affirmative vote of a majority of the
directors who are not parties to the agreement or "interested persons" of any
such party (the "Non-Interested Directors") by votes cast in person at a meeting
called for such purpose. The Advisory Agreement was initially approved by the
Company's Board of Directors (including the affirmative vote of all of the
Non-Interested Directors) on December 11, 1996 and was approved by the Funds'
shareholders on February 7, 1997. The Board of Directors of the Company approved
the continuance of the Agreement until June 30, 2000. The Advisory Agreement
became effective on February 28, 1997. The Sub-Advisory Agreement for the Global
Growth and Income Fund was initially approved by the Company's Board of
Directors (including the affirmative vote of all of the Non-Interested
Directors) on September 26, 1998, and was approved by the Fund's sole
shareholder and became effective December 14, 1998 (this agreement will
terminate March 20, 2000). The Sub-Advisory Agreement for the Dent Demographic
Trends Fund was initially approved by the Company's Board of Directors
(including the affirmative vote of all of the Non-Interested Directors) on
September 24, 1999, and became effective December 29, 1999.
The Advisory and Sub-Advisory Agreements provide that each company, AIM
(in the case of the Advisory Agreement), INVESCO (in the case of the Global
Growth and Income Sub-Advisory Agreement), and Dent (in the case of the Dent
Demographic Trends Fund Sub-Advisory Agreement), may terminate such agreement
with respect to any Fund(s) on sixty (60) days' written notice without penalty.
Each agreement terminates automatically in the event of its assignment.
As compensation for its services, AIM pays 0.40% of the Global Growth
and Income Fund's average daily net assets to INVESCO. As compensation for its
services, AIM pays Dent the following fees pursuant to the Sub-Advisory
Agreement with respect to the Dent Demographic Trends Fund:
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
First $1 billion ............................................... 0.13%
Over $1 billion, to and including $2 billion..................... 0.10%
</TABLE>
46
<PAGE> 51
<TABLE>
<CAPTION>
NET ASSETS ANNUAL RATE
- ---------- -----------
<S> <C>
Over $2 billion ............................................... 0.07%
</TABLE>
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Fund's detriment during the
period stated in the agreement between AIM and the Fund.
Pursuant to the Advisory Agreement, AIM receives a fee from each of the
AIM V.I. Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I. Blue
Chip Fund, the AIM V.I. Capital Appreciation Fund, the AIM V.I. Capital
Development Fund, the AIM V.I. Dent Demographic Trends Fund, the AIM V.I.
Diversified Income Fund, the AIM V.I. Global Growth and Income Fund, the AIM
V.I. Global Utilities Fund, the AIM V.I. Government Securities Fund, the AIM
V.I. Growth Fund, the AIM V.I. Growth and Income Fund, the AIM V.I. High Yield
Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund,
the AIM V.I. Telecommunications Fund and the AIM V.I. Value Fund calculated at
the following annual rate, based on the average daily net assets of the Fund
during the year:
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $250 million................................................... 0.65%
Over $250 million ................................................... 0.60%
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $150 million................................................... 0.80%
Over $150 million ................................................... 0.625%
</TABLE>
AIM V.I. BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $150 million................................................... 0.75%
Over $150 million ................................................... 0.50%
</TABLE>
AIM V.I. BLUE CHIP FUND
AIM V.I. CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $350 million................................................... 0.75%
Over $350 million ................................................... 0.625%
</TABLE>
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $2 billion ................................................... 0.85%
Over $2 billion ................................................... 0.80%
</TABLE>
47
<PAGE> 52
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $250 million................................................... 0.60%
Over $250 million ................................................... 0.55%
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
All ................................................................. 1.00%
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $250 million................................................... 0.50%
Over $250 million ................................................... 0.45%
</TABLE>
AIM V.I. HIGH YIELD FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $200 million................................................... 0.625%
Next $300 million ................................................... 0.55%
Next $500 million ................................................... 0.50%
Amount over $1 billion .............................................. 0.45%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $250 million .............................................. 0.75%
Over $250 million ................................................ 0.70%
</TABLE>
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
- ---------- ------
<S> <C>
First $250 million................................................... 0.40%
Over $250 million ................................................... 0.35%
</TABLE>
Each of the Funds (except the AIM V.I. Blue Chip Fund and the AIM V.I.
Dent Demographic Trends Fund) paid to AIM a management fee (net of fee waivers)
for the fiscal years ended December 31, 1999, December 31, 1998, and December
31, 1997, under the Advisory Agreement and a prior, substantially identical
advisory agreement, as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ -0- $ 1,609* N/A
AIM V.I. Balanced Fund $ 183,468 $ -0-* N/A
AIM V.I. Capital Appreciation Fund $4,830,846 $3,521,837 $3,083,708
AIM V.I. Capital Development Fund $ -0- $ -0-* N/A
AIM V.I. Diversified Income Fund $ 556,418 $ 580,119 $ 447,539
</TABLE>
48
<PAGE> 53
<TABLE>
<S> <C> <C> <C>
AIM V.I. Global Growth and Income Fund $ 424,938 N/A N/A
AIM V.I. Global Utilities Fund $ 202,137 $ 161,488 $ 106,309
AIM V.I. Government Securities Fund $ 315,598 $ 221,956 $ 138,550
AIM V.I. Growth Fund $ 3,026,404 $1,941,818 $1,453,488
AIM V.I. Growth and Income Fund $10,438,977 $5,556,833 $2,609,695
AIM V.I. High Yield Fund $ 58,392 $ -0-* N/A
AIM V.I. International Equity Fund $ 2,066,153 $1,744,127 $1,519,323
AIM V.I. Money Market Fund $ 317,031 $ 252,407 $ 254,546
AIM V.I. Telecommunications Fund $ 756,068 N/A N/A
AIM V.I. Value Fund $10,380,472 $5,570,566 $3,303,799
</TABLE>
* Fees paid were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
For the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997, AIM waived management fees for each Fund (except the AIM V.I.
Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 66,764 $11,445* N/A
AIM V.I. Balanced Fund $ 26,814 $21,238* N/A
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0-
AIM V.I. Capital Development Fund $ 35,726 $ 9,522* N/A
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0-
AIM V.I. Global Growth and Income Fund $ 11,500 N/A N/A
AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0-
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0-
AIM V.I. High Yield Fund $ 45,183 $20,728* N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ -0-
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications Fund $ -0- N/A N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fees waived were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
In addition to the management fees paid by each Fund (except the AIM
V.I. Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) for the
fiscal years ended December 31, 1999, December 31, 1998 and December 31, 1997,
AIM absorbed other expenses as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 36,238 $43,400 N/A
AIM V.I. Balanced Fund $ -0- $25,501 N/A
AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0-
AIM V.I. Capital Development Fund $ 68,305 $48,808 N/A
AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0-
</TABLE>
49
<PAGE> 54
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Global Growth and Income Fund $ -0- N/A N/A
AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0-
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ -0- $ -0- $ -0-
AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0-
AIM V.I. High Yield Fund $ -0- $24,798 N/A
AIM V.I. International Equity Fund $ -0- $ -0- $ -0-
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications Fund $ -0- N/A N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fee amounts are for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
The Administrative Services Agreement for the Funds provides that AIM
may perform certain accounting and other administrative services to each Fund
which are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM would be entitled to receive from each Fund reimbursement of
its expenses. In addition, AIM provides, or assures that Participating Insurance
Companies will provide, certain services implementing the Company's funding
arrangements with Participating Insurance Companies. These services include:
establishment of compliance procedures; negotiation of participation agreements;
preparation of prospectuses, financial reports and proxy statements for existing
Contractowners; maintenance of master accounts; facilitation of purchases and
redemptions requested by Contractowners; distribution to existing Contractowners
of copies of prospectuses, proxy materials, periodic Fund reports and other
materials; maintenance of records; and Contractowner services and communication.
Effective May 1, 1998, the Funds reimburse AIM for its costs in providing, or
assuring that Participating Insurance Companies provide, these services,
currently in an amount up to 0.25% of the average net asset value of each Fund
in excess of the net asset value of each Fund on April 30, 1998. AIM has agreed
to bear certain of these costs on the net assets of each fund as of
April 30, 1998.
The Administrative Services Agreement for the Funds provides that the
agreement will remain in effect for the initial term and continue in effect from
year to year thereafter only if such continuance is specifically approved at
least annually (i) by the Company's Board of Directors or by the vote of a
majority of the outstanding voting securities of the Funds (as defined in the
1940 Act); and (ii) by the affirmative vote of a majority of the Non-Interested
Directors, by votes cast in person at a meeting called for such purpose. The
agreement terminates automatically in the event of its assignment or in the
event of termination of the Master Investment Advisory Agreement.
For the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997, AIM received reimbursement of administrative services costs
from each of the Funds (except the AIM V.I. Blue Chip Fund, the AIM V.I. Dent
Demographic Trends Fund) pursuant to the Administrative Services Agreement and
the Prior Administrative Services Agreement as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 43,901 $ 26,658* N/A
AIM V.I. Balanced Fund $ 43,975 $ 26,649* N/A
AIM V.I. Capital Appreciation Fund $ 78,369 $ 62,063 $43,588
AIM V.I. Capital Development Fund $ 43,901 $ 26,658* N/A
AIM V.I. Diversified Income Fund $ 50,901 $ 47,528 $48,683
</TABLE>
50
<PAGE> 55
<TABLE>
<S> <C> <C> <C>
AIM V.I. Global Growth and Income Fund $ 32,370 N/A N/A
AIM V.I. Global Utilities Fund $ 51,234 $ 46,855 $47,128
AIM V.I. Government Securities Fund $ 44,501 $ 50,152 $37,872
AIM V.I. Growth Fund $ 73,728 $ 57,128 $44,692
AIM V.I. Growth and Income Fund $102,711 $296,138 $43,065
AIM V.I. High Yield Fund $ 43,433 $ 28,103* N/A
AIM V.I. International Equity Fund $ 64,730 $ 76,026 $59,724
AIM V.I. Money Market Fund $ 44,311 $ 36,480 $38,289
AIM V.I. Telecommunications Fund $ 34,698 N/A N/A
AIM V.I. Value Fund $107,813 $420,725 $53,632
</TABLE>
* Fees paid were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
THE DISTRIBUTION AGREEMENT
The Funds have entered into a master distribution agreement (the
"Distribution Agreement") with AIM Distributors, dated February 28, 1997.
Information concerning AIM Distributors and the continuous offering of the
Funds" shares is set forth in the Prospectus under the heading "Fund
Management." The Distribution Agreement provides that AIM Distributors will bear
the expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to the sale of Fund
shares. The Distribution Agreement provides that the Funds shall bear the
expenses of qualification of shares of the Fund for sale in connection with the
public offering in any jurisdictions where qualification is required by law. AIM
Distributors has not undertaken to sell any specified number of shares of the
Funds.
The Distribution Agreement for the Funds provides that it will continue
in effect for its initial term and from year to year thereafter only if such
continuance is specifically approved at least annually (i) by the Company's
Board of Directors or by the vote of a majority of the outstanding voting
securities of the Funds (as defined in the 1940 Act); and (ii) by the
affirmative vote of a majority of Non-Interested Directors by votes cast in
person at a meeting called for such purpose. The Company or AIM Distributors may
terminate its Distribution Agreement on sixty (60) days' written notice without
penalty. The Distribution Agreement will terminate automatically in the event of
its assignment.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each of the Funds
will be determined as of the close of regular trading of the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern Time) on each "business day of
the Fund." In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern
Time) on a particular day, the net asset value of a Fund share is determined as
of the close of the NYSE on such day. For purposes of determining net asset
value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. A "business day of a Fund" is
any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The net asset value per share of a Fund is determined by
subtracting the liabilities (e.g., the expenses) of the Fund from the assets of
the Fund and dividing the result by the total number of shares outstanding of
such Fund. The determination of a Fund's net asset value per share is made in
accordance with generally accepted accounting principles.
VALUATION OF INVESTMENTS OF ALL FUNDS EXCEPT THE MONEY MARKET FUND.
Among other items, a Fund's liabilities include accrued expenses and dividends
payable, and its total assets include portfolio securities valued at their
market value as well as income accrued but not received. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Company's officers
and in accordance with methods which are specifically authorized
51
<PAGE> 56
by the Board of Directors of the Company. Short-term obligations with maturities
of 60 days or less are valued at amortized cost as reflecting fair value.
VALUATION OF THE MONEY MARKET FUND'S INVESTMENTS. The Money Market Fund
uses the amortized cost method of valuing the securities held by the Fund and
rounds the Fund's per share net asset value to the nearest whole cent;
therefore, it is anticipated that the net asset value of the shares of the Fund
will remain constant at $1.00 per share. However, the Company can give no
assurance that the Fund can maintain a $1.00 net asset value per share.
FUTURES CONTRACTS. Initial margin deposits made upon entering into
futures contracts are recognized as assets due from the broker (the Fund's agent
in acquiring the futures position). During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are incurred.
When the contract is closed, the Fund that has entered into the futures contract
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
For the Money Market Fund: The net asset value per share of the Fund is
determined daily as of the close of trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund. In
the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a
particular day, the net asset value of a Fund share is determined as of the
close of the NYSE on such day. Net asset value per share is determined by
dividing the value of the Fund's securities, cash and other assets (including
interest accrued but not collected), less all its liabilities (including accrued
expenses and dividends payable), by the number of shares outstanding of the Fund
and rounding the resulting per share net asset value to the nearest one cent.
Determination of the Fund's net asset value per share is made in accordance with
generally accepted accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if the security were sold. During
such periods, the daily yield on shares of the Fund computed as described under
"Yield Information" may differ somewhat from an identical computation made by
another investment company with identical investments utilizing available
indications as to the market value of its portfolio securities.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. The Fund will
invest only in "Eligible Securities," as defined in Rule 2a-7 of the 1940 Act,
which the Fund's Board of Directors has determined present minimal credit risk.
Rule 2a-7 also requires, among other things, that the Fund maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase only
instruments having remaining maturities of 397 calendar days or less.
The Board of Directors is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share at
$1.00 for the Fund as computed for the purpose of sales and redemptions. Such
procedures include review of the Fund's holdings by the Board of Directors at
such intervals as they may deem appropriate, to determine whether the net asset
value calculated by using available market quotations or other reputable sources
for the Fund deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the Fund's shares. In the event the Board of Directors determines that such a
deviation exists for the Fund, it will take such corrective action as the Board
of Directors deems necessary and appropriate with respect to the Fund, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; the withholding of
dividends; redemption of shares in kind; or the establishment of a net asset
value per share by using available market quotations.
52
<PAGE> 57
The Fund intends to comply with any amendments made to Rule 2a-7 which
may require corresponding changes in the Fund's procedures which are designed to
stabilize the Fund's price per share at $1.00.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading on the NYSE (generally 4:00
p.m. Eastern time) on each business day of the Company. In the event the NYSE
closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net
asset value of a Fund share is determined as of the close of the NYSE on such
day. For purposes of determining net asset value per share, futures and options
contracts closing prices which are available 15 minutes after the close of
trading of the NYSE will generally be used. Net asset value per share is
determined by dividing the value of the Fund's securities, cash and other assets
(including interest accrued but not collected), less all its liabilities
(including accrued expenses and dividends payable), by the total number of
shares outstanding. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
Each equity security held by the Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the closing bid price on that
day. Each security traded in the over-the-counter market (but not including
securities reported on the NASDAQ National Market System) is valued at the mean
between the last bid and asked prices based upon quotes furnished by market
makers for such securities. Each security reported on the NASDAQ National Market
System is valued at the last sales price on the valuation date or absent a last
sales price, at the closing bid price on that day. Debt securities are valued on
the basis of prices provided by an independent pricing service. Prices provided
by the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the supervision of the Company's officers in a manner specifically
authorized by the Board of Directors of the Company. Short-term obligations
having 60 days or less to maturity are valued on the basis of amortized cost.
For purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of the
NYSE.
Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the NYSE. The values of such
foreign securities used in computing the net asset value of each Fund's shares
are determined at such times as trading is completed. Foreign currency exchange
rates are also generally determined prior the close of the NYSE. Occasionally,
events affecting the values of such foreign securities and such foreign
securities exchange rates may occur after the time at which such values are
determined and prior to the close of the NYSE that will not be reflected in the
computation of a Fund's net asset value. If events materially affecting the
value of such securities occur during such period, then these securities will be
valued at their fair value as determined in good faith by or under the
supervision of the Board of Directors.
PURCHASE AND REDEMPTION OF SHARES
The Company offers the shares of the Funds, on a continuous basis, to
both registered and unregistered separate accounts of affiliated and
unaffiliated Participating Insurance Companies to fund variable annuity
contracts (the "Contracts") and variable life insurance policies ("Policies").
Each separate account contains divisions, each of which corresponds to a Fund in
the Company. Net purchase payments under the Contracts are placed in one or more
of the divisions of the relevant separate account and the assets of each
division are invested in the shares of the Fund which corresponds to that
division. Each separate account purchases and redeems shares of these Funds for
its divisions at net asset value without sales or redemption charges. Currently
several insurance company separate accounts invest in the Funds.
The Company, in the future, may offer the shares of its Funds to
certain pension and retirement plans ("Plans") qualified under the Internal
Revenue Code. The relationships of Plans and Plan participants to the Fund would
be subject, in part, to the provisions of the individual plans and applicable
law. Accordingly, such
53
<PAGE> 58
relationships could be different from those described in this Prospectus for
separate accounts and owners of Contracts and Policies, in such areas, for
example, as tax matters and voting privileges.
The Board of Directors monitors for possible conflicts among separate
accounts (and will do so for plans) buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a separate account to comply with such laws
could cause a conflict. To eliminate a conflict, the Board of Directors may
require a separate account or Plan to withdraw its participation in a Fund. A
Fund's net asset value could decrease if it had to sell investment securities to
pay redemptions proceeds to a separate account (or plan) withdrawing because of
a conflict.
Each Fund ordinarily effects orders to purchase or redeem its shares
that are based on transactions under Policies or Contracts (e.g., purchase or
premium payments, surrender or withdrawal requests, etc.) at the Fund's net
asset value per share next computed on the day on which the separate account
processes such transactions. Each Fund effects orders to purchase or redeem its
shares that are not based on such transactions at the Fund's net asset value per
share next computed on the day on which the Fund receives the orders.
Please refer to the appropriate separate account prospectus related to
your Contract for more information regarding the Contract.
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS
DIVIDENDS AND DISTRIBUTIONS. The Funds declare and distribute dividends
representing substantially all net investment income as follows:
<TABLE>
<CAPTION>
DIVIDENDS DIVIDENDS
DECLARED PAID
--------- ---------
<S> <C> <C>
AIM V.I. Aggressive Growth Fund ................. annually annually
AIM V.I. Balanced Fund .......................... annually annually
AIM V.I. Blue Chip Fund ......................... annually annually
AIM V.I. Capital Appreciation Fund .............. annually annually
AIM V.I. Capital Development Fund ............... annually annually
AIM V.I. Dent Demographic Trends Fund............ annually annually
AIM V.I. Diversified Income Fund ................ annually annually
AIM V.I. Global Utilities Fund .................. annually annually
AIM V.I. Global Growth and Income Fund .......... annually annually
AIM V.I. Government Securities Fund ............. annually annually
AIM V.I. Growth Fund ............................ annually annually
AIM V.I. Growth and Income Fund ................. annually annually
AIM V.I. High Yield Fund ........................ annually annually
AIM V.I. International Equity Fund .............. annually annually
AIM V.I. Money Market Fund ...................... daily daily
AIM V.I. Telecommunications Fund................. annually annually
AIM V.I. Value Fund ............................. annually annually
</TABLE>
Substantially all net realized capital gains, if any, are distributed
on an annual basis, except for the Money Market Fund, which may distribute net
realized short-term gains more frequently.
All such distributions will be automatically reinvested, at the
election of Participating Insurance Companies, in shares of the Fund issuing the
distribution at the net asset value determined on the reinvestment date.
54
<PAGE> 59
TAX MATTERS. Each series of shares of the Company is treated as a
separate association taxable as a corporation. Each Fund intends to qualify
under the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company ("RIC") for each taxable year. As a RIC, a Fund will not be
subject to federal income tax to the extent it distributes to its shareholders
its net investment income and net capital gains.
In order to qualify as a regulated investment company, each Fund must
satisfy certain requirements concerning the nature of its income,
diversification of its assets and distribution of its income to shareholders. In
order to ensure that individuals holding the Contracts whose assets are invested
in a Fund will not be subject to federal income tax on distributions made by the
Fund prior to the receipt of payments under the Contracts, each Fund intends to
comply with additional requirements of Section 817(h) of the Code relating to
both diversification of its assets and eligibility of an investor to be its
shareholder. Certain of these requirements in the aggregate may limit the
ability of a Fund to engage in transactions involving options, futures
contracts, forward contracts and foreign currency and related deposits.
Any Fund's transactions in non-equity options, forward contracts,
futures contracts and foreign currency will be subject to special tax rules, the
effect of which may be to accelerate income to the Fund, defer Fund losses,
cause adjustments in the holding periods of fund securities and convert
short-term capital losses into long-term capital losses. These losses could
therefore affect the amount, timing and character of distributions.
The holding of the foreign currencies and investments by a Fund in
certain "passive foreign investment companies" may be limited in order to avoid
imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to foreign
withholding taxes on income from its investments. In any year in which more than
50% in value of a Fund's total assets at the close of the taxable year consists
of securities of foreign corporations, the Fund may elect to treat any foreign
taxes paid by it as if they had been paid by its shareholders. The insurance
company segregated asset accounts holding Fund shares should consider the impact
of this election.
Holders of Contracts under which assets are invested in the Funds
should refer to the prospectus for the Contracts for information regarding the
tax aspects of ownership of such Contracts.
Each Fund is treated as a separate association taxable as a
corporation.
Because each Fund intends to qualify under the Code as a RIC for each
taxable year, each Fund must, among other things, meet the following
requirements: A. Each Fund must generally derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities, foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies. B. Each Fund must diversify its holdings
so that, at the end of each fiscal quarter or within 30 days thereafter: (i) at
least 50% of the market value of the Fund's assets is represented by cash, cash
items (including receivables), U.S. Government securities, securities of other
RICs, and other securities, with such other securities limited, with respect to
any one issuer, to an amount not greater than 5% of the Fund's assets and not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of its assets is invested in the securities of any
one issuer (other than U.S. Government securities or securities of other RICs).
The Code imposes a nondeductible 4% excise tax on a RIC that fails to
distribute during each calendar year at least 98% of its ordinary income for the
calendar year, at least 98% of its capital gain net income for the 12-month
period ending on October 31 of the calendar year and certain other amounts. Each
Fund intends to make sufficient distributions to avoid imposition of the excise
tax. Some Funds meet an exception which results in their not being subject to
excise tax.
As a RIC, each Fund will not be subject to federal income tax on its
income and gains distributed to shareholders if it distributes at least (i) 90%
of its investment company taxable income for the taxable year; and (ii) 90% of
the excess of its tax-exempt interest income under Code Section 103(a) over its
deductions disallowed under Code Sections 265 and 171(a)(2).
55
<PAGE> 60
Each Fund intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on each Fund by the 1940 Act and Subchapter M of the Code, place certain
limitations on (i) the assets of the insurance company separate accounts that
may be invested in securities of a single issuer and (ii) eligible investors.
Because Section 817(h) and those regulations treat the assets of each Fund as
assets of the corresponding division of the insurance company separate accounts,
each Fund intends to comply with these diversification requirements.
Specifically, the regulations provide that, except as permitted by the "safe
harbor" described below, as of the end of each calendar quarter or within 30
days thereafter no more than 55% of a Fund's total assets may be represented by
any one investment, no more than 70% by any two investments, no more than 80% by
any three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and while each U.S. Government agency and instrumentality is considered a
separate issuer, a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered the same
issuer. The regulations also provide that a Fund's shareholders are limited,
generally, to life insurance company separate accounts, general accounts of the
same life insurance company, an investment adviser or affiliate in connection
with the creation or management of a Fund or the trustee of a qualified pension
plan. Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Fund to satisfy the Section 817(h)
requirements would result in taxation of and treatment of the Contract holders
investing in a corresponding division other than as described in the applicable
prospectuses of the various insurance company separate accounts.
MISCELLANEOUS INFORMATION
ORGANIZATION OF THE COMPANY
The Company was organized on January 22, 1993 as a Maryland
corporation, and is registered with the Securities and Exchange Commission as an
open-end, series, management investment company. The Company currently consists
of seventeen separate portfolios (i.e., the Funds).
The authorized capital stock of the Company consists of 4,500,000,000
shares of common stock with a par value of $.001 per share, of which 250,000,000
shares are classified AIM V.I. AGGRESSIVE GROWTH FUND shares, 250,000,000 shares
are classified AIM V.I. BALANCED FUND shares, 250,000,000 shares are classified
AIM V.I. BLUE CHIP FUND shares, 250,000,000 shares are classified AIM V.I.
CAPITAL APPRECIATION FUND shares, 250,000,000 shares are classified AIM V.I.
CAPITAL DEVELOPMENT FUND shares, 250,000,000 shares are classified as AIM V.I.
DENT DEMOGRAPHIC TRENDS FUND shares, 250,000,000 shares are classified AIM V.I.
DIVERSIFIED INCOME FUND shares, 250,000,000 shares are classified AIM V.I.
GLOBAL GROWTH AND INCOME FUND shares, 250,000,000 shares are classified AIM V.I.
GLOBAL UTILITIES FUND shares, 250,000,000 shares are classified AIM V.I.
GOVERNMENT SECURITIES FUND shares, 250,000,000 are classified AIM V.I. GROWTH
FUND shares, 250,000,000 shares are classified AIM V.I. GROWTH AND INCOME FUND
shares, 250,000,000 shares are classified AIM V.I. HIGH YIELD FUND shares,
250,000,000 shares are classified AIM V.I. INTERNATIONAL EQUITY FUND shares,
250,000,000 shares are classified AIM V.I. MONEY MARKET FUND shares, 250,000,000
shares are classified AIM V.I. TELECOMMUNICATIONS FUND shares, 250,000,000
shares are classified AIM V.I. VALUE FUND shares, and the balance of which are
unclassified.
The shares of each Fund have equal rights with respect to voting,
except that (i) the holders of shares of a particular Fund voting together will
have the exclusive right to vote on matters (such as advisory fees) pertaining
solely to that Fund, and (ii) the holders of shares of a particular Fund will
have the exclusive right to vote on matters pertaining to distribution plans, if
any such plans are adopted, relating solely to such Fund. Shareholders of the
Funds do not have cumulative voting rights.
The Company understands that insurance company separate accounts owning
shares of the Funds will vote their shares in accordance with the instructions
received from Contract owners, annuitants and beneficiaries. Fund shares held by
a registered separate account as to which no instructions have been received
will be voted for or against any proposition, or in abstention, in the same
proportion as the shares
56
<PAGE> 61
of that separate account as to which instructions have been received. Fund
shares held by a registered separate account that are not attributable to
Contracts will also be voted for or against any proposition in the same
proportion as the shares for which voting instructions are received by that
separate account. If an insurance company determines, however, that it is
permitted to vote any such shares of the Funds in its own right, it may elect to
do so, subject to the then current interpretation of the 1940 Act and the rules
thereunder.
Under Maryland law and the Company's By-Laws, the Company need not hold
an annual meeting of shareholders unless a meeting is required under the 1940
Act to elect directors. Shareholders may remove directors from office, and a
meeting of shareholders may be called at the request of the holders of 10% or
more of the Company's outstanding shares.
There are not preemptive or conversion rights applicable to any of the
Company's shares. Each Fund's shares, when issued, are fully paid and
non-assessable.
AUDIT REPORTS
The Company furnishes semi-annual reports containing information about
the Funds and their operations, including a list of the investments held in each
Fund's portfolio and their respective financial statements. Financial
statements, audited by independent auditors, will be issued annually. The firm
of Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia, PA 19103, serves
as the auditors of each Fund.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the
Company on certain federal securities law matters.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02110, is custodian of all securities and cash of the Funds.
The custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Portfolios, and
performs certain other ministerial duties. State Street also acts as transfer
and dividend disbursing agent for the Funds. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets. The Funds pay State Street such compensation as
may be agreed upon from time to time.
PRINCIPAL HOLDERS OF SECURITIES
To the best of the knowledge of each Fund, the names of the record
holders of 5% or more of the outstanding shares of the Fund as of February 1,
2000, and the percentage of the outstanding shares of such Fund owned by such
shareholders as of such date are set out below. The address of A I M Advisors,
Inc. is 11 Greenway Plaza, Suite 100, Houston, TX 77046. The address of
Connecticut General Life Insurance Company is 900 Cottage Grove Road, Hartford,
CT 06152-2321. The address of Glenbrook Life and Annuity Company is 3100 Sanders
Road, N4C, Northbrook, IL 60062. The address of IDS Life Insurance Company is
IDS Tower 10, T27/52, Minneapolis, MN 55440. The address of Merrill Lynch Life
Insurance Company is 800 Scudders Mill Road, Plainsboro, NJ 08536. The address
of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey
is Gateway Center Three, 13th Floor, Newark, NJ 07102. The address of First
Citicorp Life Insurance Company is One Court Square, Long Island City, NY 11120.
The address of Union Central Life Insurance Company is 1876 Waycross Road,
Cincinnati, OH 45240. The address for Hartford Life Insurance Company is 200
Hopmeadow Street, Simsburg, CT 06089. The address of Security Life of Denver
Insurance Company is 1290 Broadway, Denver, CO 80203. The address of Aetna Life
Insurance and Annuity Company is 151 Farmington Avenue, Hartford, CT 06156. The
address of General American Life Insurance Company is 9735 Landmark Parkway
Drive, St. Louis, MO 63127. The address of The Lincoln National Life
Insurance Company is 1300 S. Clinton, Fort Wayne, IN 46802.
57
<PAGE> 62
AIM V.I. AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 98.47%*
</TABLE>
AIM V.I. BALANCED FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 76.89%*
Union Central Life Insurance Company -0- -0- 22.45%
</TABLE>
AIM V.I. BLUE CHIP FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
A I M Advisors, Inc. -0- -0- 62.06%*
Glenbrook Life & Annuity Company -0- -0- 37.95%*
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 34.09%*
Glenbrook Life & Annuity Company -0- -0- 19.33%
Merrill Lynch Life Insurance Company -0- -0- 15.68%
Aetna Life Insurance and Annuity Company -0- -0- 11.19%
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 50.40%*
IDS Life Insurance Company -0- -0- 49.20%*
</TABLE>
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 73.99%*
A I M Advisors, Inc. -0- -0- 25.69%*
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 47.13%*
Glenbrook Life & Annuity Company -0- -0- 29.99%*
General American Life Insurance Company -0- -0- 14.30%
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
58
<PAGE> 63
AIM V.I. GLOBAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 99.64%*
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 49.30%*
Glenbrook Life & Annuity Company -0- -0- 43.74%*
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 30.10%*
Glenbrook Life & Annuity Company -0- -0- 27.54%*
First Citicorp Life Insurance Company -0- -0- 19.48%
Security Life of Denver Insurance Company -0- -0- 11.34%
</TABLE>
AIM V.I. GROWTH FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 38.80%*
Glenbrook Life & Annuity Company -0- -0- 24.84%
Aetna Life Insurance and Annuity Company -0- -0- 10.82%
The Lincoln National Life Insurance Company -0- -0- 5.78%
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
59
<PAGE> 64
AIM V.I. GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
IDS Life Insurance Company -0- -0- 61.43%*
Glenbrook Life & Annuity Company -0- -0- 9.47%
Pruco Life Insurance Company -0- -0- 8.12%
Connecticut General Life Insurance Company -0- -0- 7.75%
</TABLE>
AIM V.I. HIGH YIELD FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Glenbrook Life & Annuity Company -0- -0- 57.13%*
Hartford Life Insurance Company -0- -0- 35.27%*
A I M Advisors, Inc. -0- -0- 7.53%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 41.62%*
Glenbrook Life & Annuity Company -0- -0- 19.71%
General American Life Insurance Company -0- -0- 11.87%
First Citicorp Life Insurance Company -0- -0- 6.12%
</TABLE>
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
60
<PAGE> 65
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 48.91%*
Glenbrook Life & Annuity Company -0- -0- 29.94%*
General American Life Insurance Company -0- -0- 19.27%
</TABLE>
AIM V.I. TELECOMMUNICATIONS FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 97.13%*
</TABLE>
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Merrill Lynch Life Insurance Company -0- -0- 25.05%*
Connecticut General Life Insurance Company -0- -0- 21.82%
Pruco Life Insurance Company of New Jersey -0- -0- 15.27%
Glenbrook Life & Annuity Company -0- -0- 12.23%
</TABLE>
As of February 1, 2000, the directors and officers of the Company as a
group owned beneficially less than 1% of the outstanding shares of the Company.
- ----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
61
<PAGE> 66
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Funds
and the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C.
62
<PAGE> 67
APPENDIX A
- --------------------------------------------------------------------------------
DESCRIPTION OF CORPORATE BOND RATINGS
Investment grade debt securities are those rating categories indicated by
an asterisk (*).
Moody's Investors Service, Inc.'s corporate bond ratings are as follows:
*Aaa -- Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally referred to
as "gilt edge." Interest payments are protected by a large or by an
exceptionally stable margin and principal is secure. While the various
protective elements are likely to change, such changes as can be visualized are
most unlikely to impair the fundamentally strong position of such issues.
*Aa -- Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of protective
elements may be of greater amplitude or there may be other elements present
which make the long term risks appear somewhat larger than in Aaa securities.
*A -- Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors giving
security to principal and interest are considered adequate but elements may be
present which suggest a susceptibility to impairment sometime in the future.
*Baa -- Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact have speculative characteristics as well.
Ba -- Bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B -- Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa -- Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to principal
or interest.
Ca -- Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C -- Bonds which are rated C are the lowest rated class of bonds and issues
so rated can be regarded as having extremely poor prospects of ever attaining
any real investment standing.
Note: Moody's applies numerical modifiers, 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier indicates that the security ranks in the higher end of its generic
rating category; the modifier 2 indicates a mid-range ranking; and the modifier
3 indicates that the issue ranks in the lower end of its generic rating
category.
A-1
<PAGE> 68
Standard and Poor's Ratings Services classifications are as follows:
*AAA -- Debt rated "AAA" has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely strong.
*AA -- Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest rated issues only in small degree.
*A -- Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects of
changes in circumstances and economic conditions than debt in higher rated
categories.
*BBB -- Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher categories.
BB, B, CCC, CC, C -- Debt rated "BB", "B", "CCC", "CC" and "C" is regarded,
on balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the obligation.
"BB" indicates the lowest degree of speculation and "C" the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposures to adverse conditions.
BB -- Debt rated "BB" has less near-term vulnerability to default than
other speculative issues. However, it faces major ongoing uncertainties or
exposure to adverse business, financial, or economic conditions which could lead
to inadequate capacity to meet timely interest and principal payments. The "BB"
rating category is also used for debt subordinated to senior debt that is
assigned an actual or implied "BBB --" rating.
B -- Debt rated "B" has a greater vulnerability to default but currently
has the capacity to meet interest payments and principal repayments. Adverse
business, financial, or economic conditions will likely impair capacity or
willingness to pay interest and repay principal. The "B" rating category is also
used for debt subordinated to senior debt that is assigned an actual or implied
"BB" or "BB --" rating.
CCC -- Debt rated "CCC" has a currently identifiable vulnerability to
default, and is dependent upon favorable business, financial, and economic
conditions to meet timely payment of interest and repayment of principal. In the
event of adverse business, financial or economic conditions, it's not likely to
have the capacity to pay interest and repay principal. The "CCC" rating category
is also used for debt subordinated to senior debt that is assigned an actual or
implied "B" or "B --" rating.
CC -- The rating "CC" is typically applied to debt subordinated to senior
debt that is assigned an actual or implied "CCC" rating.
C -- The rating "C" is typically applied to debt subordinated to senior
debt which is assigned an actual or implied "CCC--" debt rating. The "C" rating
may be used to cover a situation where a bankruptcy petition has been filed, but
debt service payments are continued.
C1 -- The rating "C1" is reserved for income bonds on which no interest is
being paid.
D -- Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal or principal payments are not made on the
date due even if the applicable grace period has not expired, unless S&P
believes that such payments will be made during such grace period. The "D"
rating also will be used upon the filing of a bankruptcy petition if debt
service payments are jeopardized.
Plus (+) or Minus (-): The rating from "AA" to "CCC" maybe modified by the
addition of a plus or minus sign to show relative standing within the major
categories.
A-2
<PAGE> 69
Duff & Phelps fixed-income ratings are as follows:
*AAA -- Highest credit quality. The risk factors are negligible, being only
slightly more than for risk-free U.S. Treasury debt.
*AA+, AA, AA- -- High credit quality. Protection factors are strong. Risk
is modest but may vary slightly from time to time because of economic
conditions.
*A+, A, A- -- Protection factors are average but adequate. However, risk
factors are more variable and greater in periods of economic stress.
*BBB+, BBB, BBB- -- Below average protection factors but still considered
sufficient for prudent investment. Considerable variability in risk during
economic cycles.
BB+, BB, BB- -- Below investment grade but deemed likely to meet
obligations when due. Present or prospective financial protection factors
fluctuate according to industry conditions or company fortunes. Overall quality
may move up or down frequently within this category.
B+, B, B- -- Below investment grade and possessing risk that obligations
will not be met when due. Financial protection factors will fluctuate widely
according to economic cycles, industry conditions and/or company fortunes.
Potential exists for frequent changes in quality rating within this category or
into a higher or lower quality rating grade.
CCC -- Well below investment grade securities. May be in default or have
considerable uncertainty as to timely payment of Interest, preferred dividends
and/or principal. Protection factors are narrow and risk can be substantial with
unfavorable economic/industry conditions, and/or with unfavorable company
developments.
Fitch IBCA Inc.'s bond ratings are as follows:
*AAA -- Bonds considered to be investment grade and of the highest credit
quality. The obligor has an exceptionally strong ability to pay interest and
repay principal, which is unlikely to be affected by reasonably foreseeable
events.
*AA -- Bonds considered to be Investment grade and of very high credit
quality. The obligor's ability to pay interest and repay principal is very
strong, although not quite as strong as bonds rated "AAA". Because bonds rated
in the "AAA" and "AA" categories are not significantly vulnerable to foreseeable
future developments, short-term debt of these issuers is generally rated "F-1+".
*A -- Bonds considered to be investment grade and of high credit quality.
The obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
*BBB -- Bonds considered to be investment grade and of satisfactory credit
quality. The obligor's ability to pay interest and repay principal is considered
to be adequate adverse changes in economic conditions and circumstances,
however, are more likely to have adverse impact on these bonds, and therefore
impair timely payment. The likelihood that the ratings of these bonds will fall
below investment grade is higher than for bonds with higher ratings.
BB -- Bonds are considered speculative. The obligor's ability to pay
interest and repay principal may be affected over time by adverse economic
changes. However, business and financial alternatives can be identified which
could assist the obligor in satisfying its debt service requirements.
B -- Bonds are considered highly speculative. While bonds in this class are
currently meeting debt service requirements, the probability of continued timely
payment of principal and interest reflects the obligor's limited margin of
safety and the need for reasonable business and economic activity throughout the
life of the issue.
CCC -- Bonds have certain identifiable characteristics which, if not
remedied, may lead to default. The ability to meet obligations requires an
advantageous business and economic environment.
A-3
<PAGE> 70
CC -- Bonds are minimally protected. Default in payment of interest and/or
principal seems probable over time.
C -- Bonds are in imminent default in payment of interest or principal.
DDD, DD, and D -- Bonds are in default on interest and/or principal
payments. Such bonds are extremely speculative and should be valued on the basis
of their ultimate recovery value in liquidation or reorganization of the
obligor. "DDD" represents the highest potential for recovery on these bonds, and
"D" represents the lowest potential for recovery.
Plus (+) Minus (-) -- Plus and minus signs are used with a rating symbol to
indicate the relative position of a credit within the rating category. Plus and
minus signs, however, are not used in the "AAA", "DDD", "DD", or "D" categories.
A-4
<PAGE> 71
APPENDIX B
- --------------------------------------------------------------------------------
DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY
U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES
The following list includes certain common Agency Securities, as defined in
the Prospectus, and does not purport to be exhaustive.
EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest
and participation certificates issued and guaranteed by the Export-Import Bank
of the United States.
FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a
cooperatively owned, nationwide system of banks and associations supervised by
the Farm Credit Administration, an independent agency of the U.S. Government.
FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the
Federal Home Loan Bank System.
FHA DEBENTURES -- are debentures issued by the Federal Housing Authority of
the U.S. Government.
FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of
the U.S. Government.
FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued
and guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The
Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its
funds by selling mortgages (as well as participation interests in the mortgages)
and by borrowing funds through the issuance of debentures and otherwise.
FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided
interests in specified groups of conventional mortgage loans (and/or
participation interests in those loans) underwritten and owned by FHLMC. At
least 95% of the aggregate principal balance of the whole mortgage loans and/or
participations in a group formed by FHLMC typically consists of single-family
mortgage loans, and not more than 5% consists of multi-family loans. FHLMC
Participation Certificates are not guaranteed by, and do not constitute a debt
or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC
Participation Certificates are issued in fully registered form only, in original
unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million
and $5 million. FHLMC guarantees to each registered holder of a Participation
Certificate, to the extent of such holder's pro rata share (i) the timely
payment of interest accruing at the applicable certificate rate on the unpaid
principal balance outstanding on the mortgage loans, and (ii) collection of all
principal on the mortgage loans without any offset or deductions. Pursuant to
these guaranties, FHLMC indemnifies holders of Participation Certificates
against any reduction in principal by reason of charges for property repairs,
maintenance, and foreclosure.
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued
and guaranteed by FNMA, a federally chartered and privately-owned corporation.
FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage
pass-through certificates issued and guaranteed by FNMA. FNMA Certificates
represent a fractional undivided ownership interest in a pool of mortgage loans
either provided from FNMA's own portfolio or purchased from primary lenders. The
mortgage loans included in the pool are conventional, insured by the Federal
Housing Administration or guaranteed by the Veterans Administration. FNMA
Certificates are not backed by, nor entitled to, the full faith and credit of
the U.S. Government.
Loans not provided from FNMA's own portfolio are purchased only from
primary lenders that satisfy certain criteria developed by FNMA, including depth
of mortgage origination experience, servicing experience and financial capacity.
FNMA may purchase an entire loan pool from a single lender, and issue
Certificates
B-1
<PAGE> 72
backed by that loan pool alone, or may package a pool made up of loans purchased
from various lenders.
Various types of mortgage loans, and loans with varying interest rates, may
be included in a single pool, although each pool will consist of mortgage loans
related to one-family or two-to-four family residential properties.
Substantially all FNMA mortgage pools currently consist of fixed interest rate
and growing equity mortgage loans, although FNMA mortgage pools may also consist
of adjustable interest rate mortgage loans or other types of mortgage loans.
Each mortgage loan must conform to FNMA's published requirements or guidelines
with respect to maximum principal amount, loan-to-value ratio, loan term,
underwriting standards and insurance coverage.
All mortgage loans are held by FNMA as trustee pursuant to a trust
indenture for the benefit of Certificate holders. The trust indenture gives FNMA
responsibility for servicing and administering the loans in a pool. FNMA
contracts with the lenders or other servicing institutions to perform all
services and duties customary to the servicing of mortgages, as well as duties
specifically prescribed by FNMA, all under FNMA supervision. FNMA may remove
service providers for cause.
The pass-through rate on FNMA Certificates is the lowest annual interest
rate borne by an underlying mortgage loan in the pool, less a fee to FNMA as
compensation for servicing and for FNMA's guarantee. Lenders servicing the
underlying mortgage loans receive as compensation a portion of the fee paid to
FNMA, the excess yields on pooled loans with coupon rates above the lowest rate
borne by any mortgage loan in the pool and certain other amounts collected, such
as late charges.
The minimum size of a FNMA pool is $1 million of mortgage loans. Registered
holders purchase Certificates in amounts not less than $25,000.
FNMA Certificates are marketed by the servicing lender banks, usually
through securities dealers. The lender of a single lender pool typically markets
all Certificates based on that pool, and lenders of multiple lender pools market
Certificates based on a pro rata interest in the aggregate pool. The amount of
FNMA Certificates currently outstanding is limited.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE
MAES" -- are mortgage-backed securities which represent a partial ownership
interest in a pool of mortgage loans issued by lenders such as mortgage bankers,
commercial banks and savings and loan associations. Each mortgage loan included
in the pool is either insured by the Federal Housing Administration or
guaranteed by the Veterans Administration. A "pool" or group of such mortgages
is assembled, and, after being approved by GNMA, is offered to investors through
securities dealers. GNMA is a U.S. Government corporation within the Department
of Housing and Urban Development.
GNMA Certificates differ from bonds in that the principal is paid back
monthly by the borrower over the term of the loan rather than returned in a lump
sum at maturity. GNMA Certificates are called "modified pass-through" securities
because they entitle the holder to receive its proportionate share of all
interest and principal payments owed on the mortgage pool, net of fees paid to
the issuer and GNMA, regardless of whether or not the mortgagor actually makes
the payment. Payment of principal of and interest on GNMA Certificates of the
"modified pass-through" type is guaranteed by GNMA and backed by the full faith
and credit of the U.S. Government.
The average life of a GNMA Certificate is likely to be substantially less
than the original maturity of the mortgage pools underlying the securities.
Prepayments of principal by mortgagors and mortgage foreclosures will usually
result in the return on the greater part of principal invested far in advance of
the maturity of the mortgages in the pool. Foreclosures impose little risk to
principal investment because of the GNMA guarantee.
As the prepayment rates of individual mortgage pools will vary widely, it
is not possible to accurately predict the average life of a particular issue of
GNMA Certificates. However, statistics published by the FHA indicate that the
average life of a single family dwelling mortgage with 25- to 30-year maturity,
the type of mortgage which backs the vast majority of GNMA Certificates, is
approximately 12 years. It is therefore customary practice to treat GNMA
Certificates as 30-year mortgage-backed securities which prepay fully in the
twelfth year.
B-2
<PAGE> 73
As a consequence of the fees paid to GNMA and the issuer of GNMA
Certificates, the coupon rate of interest of GNMA Certificates is lower than the
interest paid on the VA-guaranteed or FHA-insured mortgages underlying the
Certificates.
The yield which will be earned on GNMA Certificates may vary from their
coupon rates for the following reasons: (i) Certificates may be issued at a
premium or discount, rather than at par; (ii) Certificates may trade in the
secondary market at a premium or discount after issuance; (iii) interest is
earned and compounded monthly which has the effect of raising the effective
yield earned on the Certificates; and (iv) the actual yield of each Certificate
is affected by the prepayment of mortgages included in the mortgage pool
underlying the Certificates and the rate at which principal so prepaid is
reinvested. In addition, prepayment of mortgages included in the mortgage pool
underlying a GNMA Certificate purchased at a premium may result in a loss to the
Fund.
Due to the large amount of GNMA Certificates outstanding and active
participation in the secondary market by securities dealers and investors, GNMA
Certificates are highly liquid instruments. Prices of GNMA Certificates are
readily available from securities dealers and depend on, among other things, the
level of market rates, the Certificate's coupon rate and the prepayment
experience of the pool of mortgages backing each Certificate.
GENERAL SERVICES ADMINISTRATION ("GSA") PARTICIPATION CERTIFICATES -- are
participation certificates issued by the General Services Administration of the
U.S. Government.
MARITIME ADMINISTRATION BONDS -- are bonds issued and provided by the
Department of Transportation of the U.S. Government.
NEW COMMUNITIES DEBENTURES -- are debentures issued in accordance with the
provisions of Title IV of the Housing and Urban Development Act of 1968, as
supplemented and extended by Title VII of the Housing and Urban Development Act
of 1970, the payment of which is guaranteed by the U.S. Government.
PUBLIC HOUSING NOTES AND BONDS -- are short-term project notes and
long-term bonds issued by public housing and urban renewal agencies in
connection with programs administered by the Department of Housing and Urban
Development of the U.S. Government, the payment of which is secured by the U.S.
Government.
SBA DEBENTURES -- are debentures fully guaranteed as to principal and
interest by the Small Business Administration of the U.S. Government.
SLMA DEBENTURES -- are debentures backed by the Student Loan Marketing
Association.
TITLE XI BONDS -- are bonds issued in accordance with the provisions of
Title XI of the Merchant Marine Act of 1936, as amended, the payment of which is
guaranteed by the U.S. Government.
WASHINGTON METROPOLITAN AREA TRANSIT AUTHORITY BONDS -- are bonds issued by
the Washington Metropolitan Area Transit Authority and are guaranteed by the
Secretary of Transportation of the U.S. Government.
B-3
<PAGE> 74
APPENDIX C
- --------------------------------------------------------------------------------
DESCRIPTION OF MONEY MARKET OBLIGATIONS
The following list does not purport to be an exhaustive list of all Money
Market Obligations, and the Funds reserve the right to invest in Money Market
Obligations other than those listed below:
1. GOVERNMENT OBLIGATIONS.
U.S. GOVERNMENT DIRECT OBLIGATIONS -- Bills, notes, and bonds issued by the
U.S. Treasury.
U.S. GOVERNMENT AGENCIES SECURITIES -- Certain federal agencies such as the
Government National Mortgage Association have been established as
instrumentalities of the U.S. Government to supervise and finance certain types
of activities. Issues of these agencies, while not direct obligations of the
U.S. Government, are either backed by the full faith and credit of the United
States or are guaranteed by the Treasury or supported by the issuing agencies'
right to borrow from the Treasury.
FOREIGN GOVERNMENT OBLIGATIONS -- These are U.S. dollar denominated
obligations issued or guaranteed by one or more foreign governments or any of
their political subdivisions, agencies or instrumentalities that are determined
by the Fund's investment advisor to be of comparable quality to the other
obligations in which the Fund may invest. Such securities also include debt
obligations of supranational entities. Supranational entities include
international organizations designated or supported by governmental entities to
promote economic reconstruction or development and international banking
institutions and related government agencies. Examples include the International
Bank for Reconstruction and Development (the World Bank), the European Coal and
Steel Community, the Asian Development Bank and the InterAmerican Development
Bank. The percentage of the Fund's assets invested in securities Issued by
foreign governments will vary depending on the relative yields of such
securities, the economic and financial markets of the countries in which the
investments are made and the interest rate climate of such countries.
2. BANK INSTRUMENTS.
BANKERS' ACCEPTANCES -- A bill of exchange or time draft drawn on and
accepted by a commercial bank. It is used by corporations to finance the
shipment and storage of goods and to furnish dollar exchange. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- A negotiable interest-bearing instrument with a
specific maturity. Certificates of deposit are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market, prior to maturity.
TIME DEPOSITS -- A non-negotiable receipt issued by a bank in exchange for
the deposit of funds. Like a certificate of deposit, it earns a specified rate
of interest over a definite period of time; however, it cannot be traded in the
secondary market.
EURODOLLAR OBLIGATIONS -- A Eurodollar obligation is a U.S.
dollar-denominated obligation issued by a foreign branch of a domestic bank.
YANKEE DOLLAR OBLIGATIONS -- A Yankee dollar obligation is a U.S.
dollar-denominated obligation issued by a domestic branch of a foreign bank.
3. COMMERCIAL INSTRUMENTS.
COMMERCIAL PAPER -- The term used to designate unsecured short-term
promissory notes issued by corporations and other entities. Maturities on these
issues vary from a few days to nine months.
C-1
<PAGE> 75
VARIABLE RATE MASTER DEMAND NOTES -- Variable rate master demand notes are
unsecured demand notes that permit investment of fluctuating amounts of money at
variable rates of interest pursuant to arrangements with issuers who meet the
foregoing quality criteria as discussed in the Statement of Additional
Information under "Investment Programs." The interest rate on a variable rate
master demand note is periodically redetermined according to a prescribed
formula. Although there is no secondary market in master demand notes, the payee
may demand payment of the principal amount of the note on relatively short
notice. All variable rate master demand notes acquired by the Money Market Fund
will be payable within a prescribed notice period not to exceed seven days.
4. REPURCHASE AGREEMENTS.
A repurchase agreement is a contractual undertaking whereby the seller of
securities (limited to U.S. Government securities, including securities issued
or guaranteed by the U.S. Treasury or the various agencies and instrumentalities
of the U.S. Government) agrees to repurchase the securities at a specified price
on a future date determined by negotiations.
5. TAXABLE MUNICIPAL SECURITIES.
Taxable municipal securities are debt securities issued by or on behalf of
states and their political subdivisions, the District of Columbia, and
possessions of the United States, the interest on which is not exempt from
federal income tax.
C-2
<PAGE> 76
FINANCIAL STATEMENTS
FS
<PAGE> 77
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
FS-1
<PAGE> 78
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS AND OTHER EQUITY
INTERESTS - 88.57%
AIR FREIGHT - 0.55%
Eagle USA Airfreight, Inc.(a) 1,000 $ 43,125
- ---------------------------------------------------------------------
Expeditors International of Washington, Inc. 1,200 52,575
- ---------------------------------------------------------------------
95,700
- ---------------------------------------------------------------------
AIRLINES - 0.41%
Ryanair Holdings PLC - ADR (Ireland)(a) 1,300 71,662
- ---------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.86%
Gentex Corp.(a) 3,500 97,125
- ---------------------------------------------------------------------
Meritor Automotive, Inc. 1,700 32,937
- ---------------------------------------------------------------------
Tower Automotive, Inc.(a) 1,200 18,525
- ---------------------------------------------------------------------
148,587
- ---------------------------------------------------------------------
BANKS (REGIONAL) - 1.01%
Bank United Corp. - Class A 1,300 35,425
- ---------------------------------------------------------------------
First Republic Bank(a) 1,400 32,900
- ---------------------------------------------------------------------
Southwest Bancorporation of Texas, Inc.(a) 3,300 65,381
- ---------------------------------------------------------------------
Trustmark Corp. 1,900 41,058
- ---------------------------------------------------------------------
174,764
- ---------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 0.15%
Canandaigua Brands, Inc. - (Class A(a) 500 25,500
- ---------------------------------------------------------------------
BIOTECHNOLOGY - 0.77%
PE Corp. - Celera Genomics Group(a) 900 134,100
- ---------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 1.17%
Hispanic Broadcasting Corp.(a) 1,000 92,219
- ---------------------------------------------------------------------
Radio One, Inc.(a) 1,200 110,400
- ---------------------------------------------------------------------
202,619
- ---------------------------------------------------------------------
BUILDING MATERIALS - 0.58%
Elcor Corp. 2,150 64,769
- ---------------------------------------------------------------------
Simpson Manufacturing Co., Inc.(a) 800 35,000
- ---------------------------------------------------------------------
99,769
- ---------------------------------------------------------------------
CHEMICALS (SPECIALTY) - 0.71%
Cambrex Corp. 1,400 48,212
- ---------------------------------------------------------------------
OM Group, Inc. 2,200 75,762
- ---------------------------------------------------------------------
123,974
- ---------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 6.71%
Ancor Communications, Inc.(a) 800 54,300
- ---------------------------------------------------------------------
ANTEC Corp.(a) 800 29,200
- ---------------------------------------------------------------------
Comverse Technology, Inc.(a) 850 123,037
- ---------------------------------------------------------------------
Dycom Industries, Inc.(a) 1,200 52,875
- ---------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMUNICATIONS EQUIPMENT - CONTINUED
Finisar Corp.(a) 1,700 $ 152,787
- -----------------------------------------------------------------------
Harmonic, Inc.(a) 3,100 294,306
- -----------------------------------------------------------------------
MasTec, Inc.(a) 2,142 95,319
- -----------------------------------------------------------------------
Polycom, Inc.(a) 2,800 178,325
- -----------------------------------------------------------------------
Proxim, Inc.(a) 1,100 121,000
- -----------------------------------------------------------------------
Sycamore Networks, Inc.(a) 200 61,600
- -----------------------------------------------------------------------
1,162,749
- -----------------------------------------------------------------------
COMPUTERS (HARDWARE) - 2.02%
National Instruments Corp.(a) 4,350 166,387
- -----------------------------------------------------------------------
pcOrder.com, Inc.(a) 800 40,800
- -----------------------------------------------------------------------
Visual Networks, Inc.(a) 1,800 142,650
- -----------------------------------------------------------------------
349,837
- -----------------------------------------------------------------------
COMPUTERS (NETWORKING) - 4.51%
Cabletron Systems, Inc.(a) 5,000 130,000
- -----------------------------------------------------------------------
Emulex Corp.(a) 2,900 326,250
- -----------------------------------------------------------------------
Foundry Networks, Inc.(a) 200 60,337
- -----------------------------------------------------------------------
Gadzoox Networks, Inc.(a) 1,700 74,056
- -----------------------------------------------------------------------
VeriSign, Inc.(a) 1,000 190,937
- -----------------------------------------------------------------------
781,580
- -----------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 4.29%
Actel Corp.(a) 3,600 86,400
- -----------------------------------------------------------------------
Cybex Computer Products Corp.(a) 900 36,450
- -----------------------------------------------------------------------
QLogic Corp.(a) 1,500 239,812
- -----------------------------------------------------------------------
SanDisk Corp.(a) 2,400 231,000
- -----------------------------------------------------------------------
Xircom, Inc.(a) 2,000 150,000
- -----------------------------------------------------------------------
743,662
- -----------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 11.79%
Allscripts, Inc.(a) 500 22,000
- -----------------------------------------------------------------------
Aspen Technology, Inc.(a) 2,800 74,025
- -----------------------------------------------------------------------
Business Objects S.A. - ADR (France)(a) 1,100 146,987
- -----------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 1,400 278,250
- -----------------------------------------------------------------------
Citrix Systems, Inc.(a) 1,100 135,300
- -----------------------------------------------------------------------
Concord Communications, Inc.(a) 700 31,062
- -----------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 1,800 104,625
- -----------------------------------------------------------------------
Entrust Technologies, Inc. 800 47,950
- -----------------------------------------------------------------------
FreeMarkets, Inc.(a) 200 68,262
- -----------------------------------------------------------------------
Gemstar International Group Ltd.(a) 1,400 99,750
- -----------------------------------------------------------------------
ISS Group, Inc.(a) 800 56,900
- -----------------------------------------------------------------------
Jack Henry & Associates 700 37,581
- -----------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-2
<PAGE> 79
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - CONTINUED
Macromedia, Inc.(a) 1,100 $ 80,437
- ------------------------------------------------------------------
Mercury Interactive Corp.(a) 1,300 140,319
- ------------------------------------------------------------------
Micromuse, Inc.(a) 600 102,000
- ------------------------------------------------------------------
Mission Critical Software, Inc.(a) 1,000 70,000
- ------------------------------------------------------------------
Peregrine Systems, Inc.(a) 700 58,933
- ------------------------------------------------------------------
QRS Corp.(a) 850 89,250
- ------------------------------------------------------------------
Rational Software Corp.(a) 1,400 68,775
- ------------------------------------------------------------------
ScanSource, Inc.(a) 700 28,394
- ------------------------------------------------------------------
Symantec Corp.(a) 1,100 64,487
- ------------------------------------------------------------------
TSI International Software Ltd.(a) 1,700 96,262
- ------------------------------------------------------------------
Verity, Inc.(a) 3,300 140,456
- ------------------------------------------------------------------
2,042,005
- ------------------------------------------------------------------
CONSUMER (JEWELRY, NOVELTIES & GIFTS) - 0.27%
Fossil, Inc.(a) 2,050 47,406
- ------------------------------------------------------------------
CONSUMER FINANCE - 0.08%
AmeriCredit Corp.(a) 800 14,800
- ------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 5.59%
Black Box Corp.(a) 1,300 87,100
- ------------------------------------------------------------------
CommScope, Inc.(a) 2,500 100,781
- ------------------------------------------------------------------
Cree Research, Inc.(a) 2,900 247,588
- ------------------------------------------------------------------
Molex, Inc. - Class A 2,200 99,550
- ------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 2,000 81,375
- ------------------------------------------------------------------
Sammina Corp.(a) 900 89,888
- ------------------------------------------------------------------
Sawtek, Inc.(a) 1,800 119,813
- ------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 4,500 142,313
- ------------------------------------------------------------------
968,408
- ------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 1.72%
C-COR.net Corp.(a) 2,400 183,900
- ------------------------------------------------------------------
Power-One, Inc.(a) 2,500 114,531
- ------------------------------------------------------------------
298,431
- ------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 1.77%
Alpha Industries, Inc.(a) 4,350 249,309
- ------------------------------------------------------------------
Tektronix, Inc. 1,500 58,313
- ------------------------------------------------------------------
307,622
- ------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 10.03%
ANADIGICS, Inc.(a) 1,800 84,938
- ------------------------------------------------------------------
Applied Micro Circuits Corp.(a) 2,400 305,400
- ------------------------------------------------------------------
ATMI, Inc.(a) 2,200 72,738
- ------------------------------------------------------------------
Burr-Brown Corp.(a) 2,100 75,863
- ------------------------------------------------------------------
Cymer, Inc.(a) 800 36,800
- ------------------------------------------------------------------
Dallas Semiconductor Corp. 1,500 96,656
- ------------------------------------------------------------------
GlobeSpan, Inc.(a) 800 52,100
- ------------------------------------------------------------------
Micrel, Inc.(a) 1,300 74,019
- ------------------------------------------------------------------
Microchip Technology, Inc.(a) 3,600 246,375
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRONICS (SEMICONDUCTORS) - CONTINUED
PMC-Sierra, Inc.(a) 900 $ 144,281
- ----------------------------------------------------------------------
SDL, Inc.(a) 1,400 305,200
- ----------------------------------------------------------------------
Semtech Corp.(a) 2,600 135,525
- ----------------------------------------------------------------------
TranSwitch Corp.(a) 900 65,306
- ----------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 800 41,950
- ----------------------------------------------------------------------
1,737,151
- ----------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 3.13%
Advanced Energy Industries, Inc.(a) 2,100 103,425
- ----------------------------------------------------------------------
Asyst Technologies, Inc.(a) 2,600 170,463
- ----------------------------------------------------------------------
Brooks Automation, Inc.(a) 600 19,538
- ----------------------------------------------------------------------
Credence Systems Corp. 2,200 190,300
- ----------------------------------------------------------------------
Etec Systems, Inc.(a) 1,300 58,338
- ----------------------------------------------------------------------
542,064
- ----------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.41%
SEI Investments Co. 600 71,409
- ----------------------------------------------------------------------
FOODS - 0.30%
Hain Food Group, Inc. (The)(a) 2,300 51,463
- ----------------------------------------------------------------------
FOOTWEAR - 0.44%
Steven Madden, Ltd.(a) 2,200 41,938
- ----------------------------------------------------------------------
Vans, Inc.(a) 2,800 34,300
- ----------------------------------------------------------------------
76,238
- ----------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.25%
Station Casinos, Inc.(a) 1,900 42,631
- ----------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 1.12%
Alpharma, Inc. - Class A 2,200 67,650
- ----------------------------------------------------------------------
Biovail Corporation International (Canada)(a) 800 75,000
- ----------------------------------------------------------------------
Medicis Pharmaceutical Corp. - Class A(a) 1,200 51,075
- ----------------------------------------------------------------------
193,725
- ----------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT - 0.64%
Health Management Associates, Inc. - Class A(a) 5,400 72,225
- ----------------------------------------------------------------------
Province Healthcare Co.(a) 2,000 38,000
- ----------------------------------------------------------------------
110,225
- ----------------------------------------------------------------------
HEALTH CARE (MANAGED CARE - 1.26%
Express Scripts, Inc. - Class A(a) 3,400 217,600
- ----------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.29%
ResMed, Inc.(a) 1,200 50,100
- ----------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.95%
CareInsite, Inc.(a) 500 40,250
- ----------------------------------------------------------------------
Hooper Holmes, Inc. 2,700 69,525
- ----------------------------------------------------------------------
Techne Corp.(a) 1,000 55,063
- ----------------------------------------------------------------------
164,838
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-3
<PAGE> 80
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.38%
Affiliated Managers Group, Inc.(a) 400 $ 16,175
- -----------------------------------------------------------------
Eaton Vance Corp. 1,300 49,400
- -----------------------------------------------------------------
65,575
- -----------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.38%
Kopin Corp.(a) 3,600 151,200
- -----------------------------------------------------------------
Pentair, Inc. 600 23,100
- -----------------------------------------------------------------
Spartech Corp. 2,000 64,500
- -----------------------------------------------------------------
238,800
- -----------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.20%
Mettler-Toledo International, Inc.(a) 900 34,369
- -----------------------------------------------------------------
NATURAL GAS - 0.29%
Kinder Morgan, Inc. 2,500 50,469
- -----------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.26%
Miami Computer Supply Corp.(a)(b) 1,200 44,550
- -----------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 2.16%
Cal Dive International, Inc.(a) 700 23,188
- -----------------------------------------------------------------
Core Laboratories N.V. (Netherlands)(a) 4,400 88,275
- -----------------------------------------------------------------
Global Industries Ltd.(a) 1,400 12,075
- -----------------------------------------------------------------
Marine Drilling Companies, Inc.(a) 2,300 51,606
- -----------------------------------------------------------------
Maverick Tube Corp.(a) 4,400 108,625
- -----------------------------------------------------------------
National-Oilwell, Inc.(a) 2,100 32,944
- -----------------------------------------------------------------
Patterson Energy, Inc.(a) 4,500 58,500
- -----------------------------------------------------------------
375,213
- -----------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.70%
Cabot Oil & Gas Corp. - Class A 800 12,850
- -----------------------------------------------------------------
Evergreen Resources, Inc.(a) 1,500 29,625
- -----------------------------------------------------------------
Newfield Exploration Co.(a) 2,300 61,525
- -----------------------------------------------------------------
Stone Energy Corp.(a) 500 17,813
- -----------------------------------------------------------------
121,813
- -----------------------------------------------------------------
PUBLISHING - 0.18%
IDG Books Worldwide, Inc. - Class A(a) 1,300 15,031
- -----------------------------------------------------------------
Meredith Corp. 400 16,675
- -----------------------------------------------------------------
31,706
- -----------------------------------------------------------------
RESTAURANTS - 1.30%
CEC Entertainment, Inc.(a) 3,350 95,056
- -----------------------------------------------------------------
Jack in the Box, Inc.(a) 3,100 64,131
- -----------------------------------------------------------------
Sonic Corp.(a) 2,300 65,550
- -----------------------------------------------------------------
224,737
- -----------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 0.77%
CDW Computer Centers, Inc.(a) 1,700 133,663
- -----------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.35%
99 Cents Only Stores(a) 1,575 60,244
- -----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (FOOD CHAINS) - 0.42%
Wild Oats Markets, Inc.(a) 3,300 $ 73,219
- --------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.26%
Chemdex Corp.(a) 400 44,400
- --------------------------------------------------------------------
RETAIL (SPECIALTY) - 2.54%
Cost Plus, Inc.(a) 925 32,953
- --------------------------------------------------------------------
Linens 'n Things, Inc.(a) 2,000 59,250
- --------------------------------------------------------------------
Michaels Stores, Inc.(a) 3,700 105,450
- --------------------------------------------------------------------
O'Reilly Automotive, Inc.(a) 6,400 137,600
- --------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 2,400 27,000
- --------------------------------------------------------------------
Zale Corp.(a) 1,600 77,400
- --------------------------------------------------------------------
439,653
- --------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 4.20%
American Eagle Outfitters, Inc.(a) 3,600 162,000
- --------------------------------------------------------------------
AnnTaylor Stores Corp.(a) 1,900 65,431
- --------------------------------------------------------------------
Children's Place Retail Stores, Inc. (The)(a) 2,200 36,163
- --------------------------------------------------------------------
Men's Warehouse, Inc. (The)(a) 7,737 227,274
- --------------------------------------------------------------------
Pacific Sunwear of California(a) 2,700 86,076
- --------------------------------------------------------------------
Talbots, Inc. (The) 1,600 71,400
- --------------------------------------------------------------------
Too Inc.(a) 4,600 79,350
- --------------------------------------------------------------------
727,694
- --------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.17%
Queens Copunty Bancorp, Inc. 1,100 29,838
- --------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.42%
Championship Auto Racing Teams, Inc.(a) 200 4,600
- --------------------------------------------------------------------
Copart, Inc.(a) 1,500 65,250
- --------------------------------------------------------------------
G & K Services, Inc. - Class A 800 25,900
- --------------------------------------------------------------------
Iron Mountain, Inc.(a) 2,200 86,488
- --------------------------------------------------------------------
Provant, Inc.(a) 900 22,725
- --------------------------------------------------------------------
Regis Corp. 2,150 40,581
- --------------------------------------------------------------------
245,544
- --------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.34%
Insight Enterprises, Inc.(a) 3,450 140,156
- --------------------------------------------------------------------
Sykes Enterprises, Inc.(a) 2,100 92,138
- --------------------------------------------------------------------
232,294
- --------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 3.96%
Affiliated Computer Services, Inc. - Class A(a) 2,200 101,200
- --------------------------------------------------------------------
CheckFree Holdings Corp.(a) 1,100 114,950
- --------------------------------------------------------------------
Concord EFS, Inc.(a) 9,450 243,338
- --------------------------------------------------------------------
FactSet Research Systems, Inc. 400 31,850
- --------------------------------------------------------------------
National Computer Systems, Inc. 2,500 94,063
- --------------------------------------------------------------------
NOVA Corp.(a) 3,214 101,442
- --------------------------------------------------------------------
686,843
- --------------------------------------------------------------------
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
FS-4
<PAGE> 81
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (EMPLOYMENT) - 0.33%
Robert Half International, Inc.(a) 2,000 $ 57,125
- --------------------------------------------------------------------
SPECIALTY PRINTING - 0.15%
Valassis Communications, Inc.(a) 600 25,350
- --------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.39%
Powerwave Technologies, Inc.(a) 3,200 186,800
- --------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 800 53,400
- --------------------------------------------------------------------
240,200
- --------------------------------------------------------------------
TELEPHONE - 0.30%
AirGate PCS Inc.(a) 1,000 52,750
- --------------------------------------------------------------------
TEXTILES (APPAREL) - 0.34%
Quicksilver, Inc.(a) 3,850 59,675
- --------------------------------------------------------------------
Total Common Stocks & Other Equity Interests
(Cost $10,154,502) 15,346,343
- --------------------------------------------------------------------
MONEY MARKET FUNDS - 11.32%
STIC Liquid Assets Portfolio(c) 980,282 980,282
- --------------------------------------------------------------------
STIC Prime Portfolio(c) 980,282 980,282
- --------------------------------------------------------------------
Total Money Market Funds (Cost $1,960,564) 1,960,564
- --------------------------------------------------------------------
TOTAL INVESTMENTS - 99.89%
(Cost $12,115,066) 17,306,907
====================================================================
OTHER ASSETS LESS LIABILITIES - 0.11% 18,937
====================================================================
NET ASSETS - 100.00% $17,325,844
====================================================================
</TABLE>
INVESTMENT ABBREVIATIONS:
ADR - American Depositary Receipt
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Security fair valued in accordance with the procedures established by the
Board of Directors.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-5
<PAGE> 82
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $12,115,066) $17,306,907
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 15,394
- ---------------------------------------------------------------------
Investments sold 13,272
- ---------------------------------------------------------------------
Dividends and interest 7,125
- ---------------------------------------------------------------------
Investment for deferred compensation plan 8,650
- ---------------------------------------------------------------------
Total assets 17,351,348
- ---------------------------------------------------------------------
LIABILITIES:
Payables For:
Deferred compensation plan 8,650
- ---------------------------------------------------------------------
Accrued administrative services fees 6,655
- ---------------------------------------------------------------------
Accrued operating expenses 10,199
- ---------------------------------------------------------------------
Total liabilities 25,504
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $17,325,844
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,215,530
=====================================================================
Net asset value, offering and redemption price per share $14.25
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 42,924
- ----------------------------------------------------------------------
Dividends (net of $10 foreign withholding tax) 21,977
- ----------------------------------------------------------------------
Total investment income 64,901
- ----------------------------------------------------------------------
EXPENSES:
Advisory fees 66,764
- ----------------------------------------------------------------------
Administrative services fees 46,310
- ----------------------------------------------------------------------
Custodian fees 39,591
- ----------------------------------------------------------------------
Directors' fees 7,391
- ----------------------------------------------------------------------
Printing fees 12,615
- ----------------------------------------------------------------------
Professional fees 28,738
- ----------------------------------------------------------------------
Other 888
- ----------------------------------------------------------------------
Total expenses 202,297
- ----------------------------------------------------------------------
Less: Fees waived by advisor (103,002)
- ----------------------------------------------------------------------
Expenses paid indirectly (98)
- ----------------------------------------------------------------------
Net expenses 99,197
- ----------------------------------------------------------------------
Net investment income (loss) (34,296)
- ----------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FUTURES CONTRACTS:
Net realized gain (loss) from:
Investment securities (32,898)
- ----------------------------------------------------------------------
Futures contracts 19,210
- ----------------------------------------------------------------------
(13,688)
- ----------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 4,518,631
- ----------------------------------------------------------------------
Futures contracts (15,300)
- ----------------------------------------------------------------------
4,503,331
- ----------------------------------------------------------------------
Net gain from investment securities and futures contracts 4,489,643
- ----------------------------------------------------------------------
Net increase in net assets resulting from operations $4,455,347
======================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-6
<PAGE> 83
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (34,296) $ 15,665
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities
and futures contracts (13,688) (395,537)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and futures contracts 4,503,331 688,510
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 4,455,347 308,638
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (22,273)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 8,471,394 4,112,738
- --------------------------------------------------------------------------------
Net increase in net assets 12,926,741 4,399,103
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of period 4,399,103 --
- --------------------------------------------------------------------------------
End of period $17,325,844 $4,399,103
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $12,551,916 $4,108,916
- --------------------------------------------------------------------------------
Undistributed net investment income (loss) (8,688) (2,786)
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities and futures contracts (409,225) (395,537)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
futures contracts 5,191,841 688,510
- --------------------------------------------------------------------------------
$17,325,844 $4,399,103
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Aggressive Growth Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to
achieve long-term growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-7
<PAGE> 84
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
FS-8
<PAGE> 85
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold 1,128,485 $12,082,374 464,162 $4,261,686
- -----------------------------------------------------------------------
Issued as reinvestment of
dividends -- -- 2,421 22,273
- -----------------------------------------------------------------------
Reacquired (359,576) (3,610,980) (19,962) (171,221)
- -----------------------------------------------------------------------
768,909 $ 8,471,394 446,621 $4,112,738
=======================================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998
(date operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998
------- ------
<S> <C> <C>
Net asset value, beginning of period $ 9.85 $10.00
- -----------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.04) 0.04
- -----------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 4.44 (0.14)
- -----------------------------------------------------------------------------
Total from investment operations 4.40 (0.10)
- -----------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.05)
- -----------------------------------------------------------------------------
Net asset value, end of period $ 14.25 $ 9.85
=============================================================================
Total return(b) 44.67% (0.94)%
=============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $17,326 $4,399
=============================================================================
Ratio of expenses to average net assets(c) 1.19%(d) 1.16%(e)
=============================================================================
Ratio of net investment income (loss) to average net
assets(f) (0.41)%(d) 0.96%(e)
=============================================================================
Portfolio turnover rate 89% 30%
=============================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
2.42% and 4.62% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $8,345,480.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (1.64)% and (2.50)% (annualized) for 1999 and 1998,
respectively.
AIM V.I. AGGRESSIVE GROWTH FUND
FS-9
<PAGE> 86
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
FS-10
<PAGE> 87
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS & NOTES - 26.99%
AIRLINES - 1.20%
AMR Corp., Deb., 10.00%, 04/15/21 $ 50,000 $ 56,721
- -------------------------------------------------------------------------------
Delta Air Lines, Inc.,
- -------------------------------------------------------------------------------
Deb., 9.00%, 05/15/16 100,000 103,442
- -------------------------------------------------------------------------------
Deb., 10.38%, 12/15/22 100,000 117,515
- -------------------------------------------------------------------------------
Notes, 7.90%, 12/15/09 (Acquired 12/07/99;
Cost $99,306)(a) 100,000 98,068
- -------------------------------------------------------------------------------
Series C, Medium Term Notes, 6.65%, 03/15/04 100,000 95,928
- -------------------------------------------------------------------------------
United Air Lines, Inc., Deb., 9.75%, 08/15/21 (Acquired
09/23/99; Cost $112,146)(a) 100,000 109,534
- -------------------------------------------------------------------------------
581,208
- -------------------------------------------------------------------------------
AUTOMOBILES - 0.31%
DaimlerChrysler N.A. Holdings, Gtd. Notes,
7.20%, 09/01/09 150,000 147,564
- -------------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.50%
Bank One Corp. - Series A, Medium Term Sub. Notes,
6.00%, 02/17/09 250,000 222,002
- -------------------------------------------------------------------------------
Midland Bank PLC (United Kingdom), Yankee Sub. Notes,
7.65%, 05/01/25 20,000 19,952
- -------------------------------------------------------------------------------
241,954
- -------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 0.72%
First Union Corp., Putable Sub. Deb., 7.50%, 04/15/35 200,000 199,650
- -------------------------------------------------------------------------------
Republic New York Corp.,
Sub. Notes, 9.70%, 02/01/09 65,000 71,731
- -------------------------------------------------------------------------------
Sub. Deb., 9.50%, 04/15/14 70,000 77,146
- -------------------------------------------------------------------------------
348,527
- -------------------------------------------------------------------------------
BANKS (REGIONAL) - 0.82%
Mercantile Bancorp., Inc., Unsec. Sub. Notes,
7.30%, 06/15/07 200,000 195,830
- -------------------------------------------------------------------------------
Riggs Capital Trust II-Series C, Gtd. Bonds,
8.88%, 03/15/27 110,000 100,340
- -------------------------------------------------------------------------------
US Bancorp, Sub. Deb., 7.50%, 06/01/26 100,000 98,977
- -------------------------------------------------------------------------------
395,147
- -------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.38%
British Sky Broadcasting Group PLC (United Kingdom), Sr.
Unsec. Gtd. Yankee Notes, 8.20%, 07/15/09 190,000 182,975
- -------------------------------------------------------------------------------
Clear Channel Communications, Inc., Conv. Unsec. Notes,
1.50%, 12/01/02 150,000 154,125
- -------------------------------------------------------------------------------
Continental Cablevision, Inc., Sr. Notes,
8.30%, 05/15/06 150,000 155,614
- -------------------------------------------------------------------------------
Cox Communications, Inc., Unsec. Notes,
7.75%, 08/15/06 200,000 201,498
- -------------------------------------------------------------------------------
CSC Holdings Inc., Sr. Unsec. Deb.,
7.88%, 02/15/18 100,000 95,696
- -------------------------------------------------------------------------------
7.63%, 07/15/18 110,000 102,663
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - CONTINUED
Lenfest Communications, Inc., Sr. Unsec. Sub. Notes,
8.25%, 02/15/08 (Acquired 11/17/99;
Cost $50,875)(a) $ 50,000 $ 50,250
- -------------------------------------------------------------------------------
TCI Communications, Inc., Sr. Notes, 8.00%, 08/01/05 200,000 206,090
- -------------------------------------------------------------------------------
1,148,911
- -------------------------------------------------------------------------------
CHEMICALS - 0.19%
Airgas, Inc., Medium Term Notes, 7.14%, 03/08/04 100,000 94,284
- -------------------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.51%
Equistar Chemical, L.P., Sr. Unsec. Notes,
8.50%, 02/15/04 250,000 248,780
- -------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.78%
Comverse Technology, Inc., Conv. Unsec. Sub. Deb.,
4.50%, 07/01/05 111,000 378,649
- -------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.28%
Candescent Technology Corp., Sr. Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired 11/06/98-10/12/99;
Cost $144,790)(a) 173,000 134,940
- -------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.84%
VERITAS Software Corp., Conv. Unsec. Disc. Notes,
1.86%, 08/13/06(b) 150,000 404,437
- -------------------------------------------------------------------------------
CONSUMER FINANCE - 0.77%
Capital One Financial Corp., Unsec. Notes,
7.25%, 05/01/06 40,000 37,784
- -------------------------------------------------------------------------------
Countrywide Capital III-Series B, Gtd. Bonds,
8.05%, 06/15/27 52,000 47,890
- -------------------------------------------------------------------------------
General Motors Acceptance Corp., Notes,
9.00%, 10/15/02 100,000 104,611
- -------------------------------------------------------------------------------
Household Finance Corp., Sr. Unsec. Unsub. Notes,
6.40%, 06/17/08 100,000 92,302
- -------------------------------------------------------------------------------
MBNA Capital I-Series A, Gtd. Bonds, 8.28%, 12/01/26 100,000 87,744
- -------------------------------------------------------------------------------
370,331
- -------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.05%
CMS Energy Corp., Sr. Unsec. Notes, 8.13%, 05/15/02 200,000 199,306
- -------------------------------------------------------------------------------
Commonwealth Edison Co. - Series 94, First Mortgage
Notes, 7.50%, 07/01/13 200,000 195,400
- -------------------------------------------------------------------------------
Empire District Electric Co. (The), Sr. Notes,
7.70%, 11/15/04 150,000 147,073
- -------------------------------------------------------------------------------
Niagara Mohawk Power Co. -
Series G, Sr. Unsec. Notes, 7.75%, 10/01/08 300,000 300,423
- -------------------------------------------------------------------------------
Series H, Sr. Unsec. Disc. Notes, 8.50%, 07/01/10
(Acquired 08/11/99: Cost $150,167)(b) 200,000 149,824
- -------------------------------------------------------------------------------
Southern Energy, Inc., Sr. Notes, 7.90%, 07/15/09
(Acquired 07/21/99; Cost $274,898)(a) 275,000 265,144
- -------------------------------------------------------------------------------
Texas-New Mexico Power Co., Sr. Sec. Notes,
6.25%, 01/15/09 250,000 215,028
- -------------------------------------------------------------------------------
1,472,198
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-11
<PAGE> 88
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT - 0.68%
Time Warner Inc., Deb.,
9.13%, 01/15/13 $ 145,000 $ 159,278
- --------------------------------------------------------------------------
9.15%, 02/01/23 150,000 167,484
- --------------------------------------------------------------------------
326,762
- --------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.28%
Dow Capital B.V. (Netherlands), Gtd. Yankee Deb.,
9.20%, 06/01/10 150,000 165,105
- --------------------------------------------------------------------------
Heller Financial, Inc., Notes, 7.38%, 11/01/09
(Acquired 11/23/99; Cost $134,572)(a) 135,000 131,670
- --------------------------------------------------------------------------
Private Export Funding, Sec. Deb., 8.35%, 01/31/01 230,000 234,395
- --------------------------------------------------------------------------
Source One Mortgage Services Corp., Deb.,
9.00%, 06/01/12 80,000 87,139
- --------------------------------------------------------------------------
618,309
- --------------------------------------------------------------------------
FOODS - 0.40%
ConAgra, Inc., Sr. Unsec. Putable Notes,
7.13%, 10/01/26 200,000 193,802
- --------------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.11%
Alpharma, Inc., Conv. Sr. Unsec. Sub. Notes, 3.00%,
06/01/06 (Acquired 05/27/99; Cost $50,000)(a) 50,000 53,875
- --------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.22%
Procter & Gamble Co. (The), Putable Deb.,
8.00%, 09/01/24 100,000 106,172
- --------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.82%
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 105,000 98,092
- --------------------------------------------------------------------------
9.00%, 10/15/06 30,000 30,877
- --------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 300,000 268,149
- --------------------------------------------------------------------------
397,118
- --------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.71%
Florida Windstorm, Sr. Sec. Notes, 7.13%, 02/25/19
(Acquired 03/26/99; Cost $149,177)(a) 150,000 138,182
- --------------------------------------------------------------------------
Terra Nova Insurance PLC (United Kingdom),(a)
Sr. Unsec. Gtd. Notes, 7.00%, 05/15/08 (Acquired
02/25/99; Cost $146,485) 150,000 137,967
- --------------------------------------------------------------------------
Sr. Unsec. Gtd. Yankee Notes, 7.20%, 08/15/07 70,000 65,533
- --------------------------------------------------------------------------
341,682
- --------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 0.41%
HSBC America Capital Trust II, Gtd. Bonds, 8.38%,
05/15/27 (Acquired 08/12/99; Cost $19,168)(a) 20,000 18,520
- --------------------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Sr. Sub. Notes, 7.38%, 01/15/07 45,000 43,695
- --------------------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 60,000 62,730
- --------------------------------------------------------------------------
Notes, 8.50%, 08/01/15 70,000 71,723
- --------------------------------------------------------------------------
196,668
- --------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
NATURAL GAS - 1.83%
CMS Panhandle Holding Co., Sr. Notes,
6.13%, 03/15/04 $ 200,000 $ 189,415
- -------------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%, 09/15/12 200,000 203,152
- -------------------------------------------------------------------------------
Ferrellgas Partners L.P., - Series B, Sr. Sec. Gtd.
Notes, 9.38%, 06/15/06 50,000 49,250
- -------------------------------------------------------------------------------
Kinder Morgan, Inc., Unsec. Deb., 7.35%, 08/01/26 200,000 194,644
- -------------------------------------------------------------------------------
National Fuel Gas Co. - Series D, Medium Term Notes,
6.30%, 05/27/08 100,000 91,051
- -------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb., 8.50%,
12/15/12 150,000 156,044
- -------------------------------------------------------------------------------
883,556
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.38%
NRG Energy, Inc., Sr. Unsec. Notes, 7.50%, 06/01/09 200,000 184,140
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
ONEOK, Inc., Unsec. Notes, 7.75%, 08/15/06 100,000 98,999
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.82%
AES Corp., Sr. Unsec. Sub. Notes, 10.25%, 07/15/06 100,000 102,000
- -------------------------------------------------------------------------------
CE Generation LLC, Sr. Sec. Notes, 7.42%, 12/15/18
(Acquired 04/13/99; Cost $205,604)(a) 200,000 184,306
- -------------------------------------------------------------------------------
Hydro-Quebec - Series B (Canada), Gtd. Medium Term
Notes, 8.62%, 12/15/11 100,000 107,942
- -------------------------------------------------------------------------------
394,248
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.45%
News America Holdings, Inc., Sr. Gtd. Deb.,
9.25%, 02/01/13 200,000 217,980
- -------------------------------------------------------------------------------
RAILROADS - 0.85%
CSX Corp., Deb., 9.00%, 08/15/06 250,000 264,675
- -------------------------------------------------------------------------------
Norfolk Southern Corp., Notes, 7.05%, 05/01/37 150,000 147,035
- -------------------------------------------------------------------------------
411,710
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.37%
Spieker Properties, Inc., Unsec. Deb.,
7.35%, 12/01/17 200,000 176,542
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY - APPAREL) - 0.22%
AnnTaylor Stores Corp., Conv. Unsec. Gtd. Sub. Bonds,
0.55%, 06/18/19 (Acquired 11/04/99-11/17/99; Cost
$123,616)(a) 200,000 107,250
- -------------------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.47%
Dime Capital Trust I - Series A, Gtd. Bonds,
9.33%, 05/06/27 75,000 70,719
- -------------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Notes,
7.13%, 02/15/04 75,000 73,106
- -------------------------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 55,000 52,554
- -------------------------------------------------------------------------------
Notes, 7.50%, 08/15/06 30,000 29,858
- -------------------------------------------------------------------------------
226,237
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-12
<PAGE> 89
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING) - 0.23%
Lamar Advertising Co., Conv. Unsec. Notes, 5.25%,
09/15/06 $ 75,000 $ 109,688
- ------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.37%
Laidlaw Inc. (Canada),
Unsec. Yankee Notes, 7.65%, 05/15/06 100,000 92,905
- ------------------------------------------------------------------------------
Unsec. Yankee Deb., 6.70%, 05/01/08 100,000 85,117
- ------------------------------------------------------------------------------
178,022
- ------------------------------------------------------------------------------
SOVEREIGN DEBT - 0.62%
Province of Manitoba - Series AZ (Canada), Putable
Yankee Deb., 7.75%, 07/17/16 100,000 102,395
- ------------------------------------------------------------------------------
Province of Quebec - Series A (Canada), Medium Term
Putable Yankee Notes,
5.74%, 03/02/26 100,000 99,162
- ------------------------------------------------------------------------------
6.29%, 03/06/26 100,000 98,324
- ------------------------------------------------------------------------------
299,881
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.49%
AT&T Corp., Deb., 8.63%, 12/01/31 200,000 204,998
- ------------------------------------------------------------------------------
MCI Communications Corp.,
Sr. Unsec. Notes, 6.50%, 04/15/10 100,000 93,336
- ------------------------------------------------------------------------------
Sr. Unsec. Putable Deb., 7.13%, 06/15/27 200,000 200,960
- ------------------------------------------------------------------------------
Sprint Corp., Putable Deb., 9.00%, 10/15/19 200,000 221,594
- ------------------------------------------------------------------------------
720,888
- ------------------------------------------------------------------------------
TELEPHONE - 1.20%
Cable & Wireless Communications PLC (United Kingdom),
Yankee Notes, 6.75%, 12/01/08 100,000 98,517
- ------------------------------------------------------------------------------
Electric Lightwave, Inc. Notes, 6.05%, 05/15/04
(Acquired 04/21/99; Cost $199,854)(a) 200,000 188,722
- ------------------------------------------------------------------------------
GTE Corp., Unsec. Deb., 6.84%, 04/15/18 100,000 91,652
- ------------------------------------------------------------------------------
NTL Inc., Conv. Sub. Notes, 5.75%, 12/15/09 (Acquired
12/17/99; Cost $130,000)(a) 130,000 140,400
- ------------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.38%, 07/15/43 70,000 62,968
- ------------------------------------------------------------------------------
582,259
- ------------------------------------------------------------------------------
WASTE MANAGEMENT - 0.51%
Browning-Ferris Industries, Inc., Deb., 7.40%, 09/15/35 200,000 145,000
- ------------------------------------------------------------------------------
Waste Management, Inc.,
Sr. Unsec. Notes, 7.13%, 12/15/17 10,000 7,836
- ------------------------------------------------------------------------------
Unsec. Putable Notes, 7.10%, 08/01/26 100,000 92,742
- ------------------------------------------------------------------------------
245,578
- ------------------------------------------------------------------------------
Total U.S. Dollar Denominated Bonds & Notes (Cost
$13,150,798) 13,038,296
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 42.08%
AUTOMOBILES - 0.30%
Ford Motor Co. 2,700 $ 144,281
- ------------------------------------------------------------------------------
BANKS (MONEY CENTER) - 0.45%
Chase Manhattan Corp. (The) 2,800 217,525
- ------------------------------------------------------------------------------
BIOTECHNOLOGY - 0.57%
Biogen, Inc.(c) 2,100 177,450
- ------------------------------------------------------------------------------
Genzyme Corp.(c) 2,200 99,000
- ------------------------------------------------------------------------------
276,450
- ------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 2.67%
CBS Corp.(c) 5,300 338,869
- ------------------------------------------------------------------------------
Hispanic Broadcasting Corp.(c) 2,700 248,991
- ------------------------------------------------------------------------------
Infinity Broadcasting Corp. - Class A(c) 6,750 244,266
- ------------------------------------------------------------------------------
Univision Communications, Inc. - Class A(c) 4,500 459,844
- ------------------------------------------------------------------------------
1,291,970
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.16%
ANTEC Corp.(c) 3,300 120,450
- ------------------------------------------------------------------------------
JDS Uniphase Corp.(c) 800 129,050
- ------------------------------------------------------------------------------
Lucent Technologies Inc. 7,600 568,575
- ------------------------------------------------------------------------------
Motorola, Inc. 1,400 206,150
- ------------------------------------------------------------------------------
Sycamore Networks, Inc.(c) 700 215,600
- ------------------------------------------------------------------------------
Tellabs, Inc.(c) 2,700 173,306
- ------------------------------------------------------------------------------
Williams Communications Group, Inc.(c) 3,900 112,856
- ------------------------------------------------------------------------------
1,525,987
- ------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 1.52%
Dell Computer Corp.(c) 1,900 96,900
- ------------------------------------------------------------------------------
International Business Machines Corp.(d) 1,800 194,400
- ------------------------------------------------------------------------------
Sun Microsystems, Inc.(c) 5,700 441,394
- ------------------------------------------------------------------------------
732,694
- ------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 1.42%
Cisco Systems, Inc.(c) 5,000 535,625
- ------------------------------------------------------------------------------
Foundry Networks, Inc.(c) 500 150,844
- ------------------------------------------------------------------------------
686,469
- ------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.11%
EMC Corp.(c) 4,500 491,625
- ------------------------------------------------------------------------------
Immersion Corp.(c) 1,200 46,050
- ------------------------------------------------------------------------------
537,675
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-13
<PAGE> 90
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (SOFTWARE & SERVICES) - 5.31%
America Online, Inc.(c)(d) 6,400 $ 482,800
- --------------------------------------------------------------
Concord Communications, Inc.(c) 1,000 44,375
- --------------------------------------------------------------
eSPEED, Inc. - Class A(c) 2,300 81,794
- --------------------------------------------------------------
FreeMarkets, Inc.(c) 1,300 443,706
- --------------------------------------------------------------
InfoSpace.com, Inc.(c) 2,700 577,800
- --------------------------------------------------------------
ISS Group, Inc.(c) 3,100 220,487
- --------------------------------------------------------------
Microsoft Corp.(c) 2,800 326,900
- --------------------------------------------------------------
Telemate.Net Software, Inc.(c) 3,600 58,500
- --------------------------------------------------------------
USWeb Corp.(c) 7,400 328,837
- --------------------------------------------------------------
2,565,199
- --------------------------------------------------------------
CONSUMER FINANCE - 0.17%
SLM Holding Corp. 2,000 84,500
- --------------------------------------------------------------
ELECTRIC COMPANIES - 0.08%
Plug Power, Inc.(c) 1,400 39,550
- --------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.66%
Conexant Systems, Inc.(c) 600 39,825
- --------------------------------------------------------------
General Electric Co. 1,800 278,550
- --------------------------------------------------------------
318,375
- --------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.24%
General Motors Corp. - Class H(c)(d) 1,200 115,200
- --------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.93%
Analog Devices, Inc.(c) 2,800 260,400
- --------------------------------------------------------------
Intel Corp. 3,400 279,862
- --------------------------------------------------------------
Microchip Technology, Inc.(c) 1,900 130,031
- --------------------------------------------------------------
SDL, Inc.(c) 1,200 261,600
- --------------------------------------------------------------
931,893
- --------------------------------------------------------------
ENTERTAINMENT - 0.30%
Time Warner Inc. 2,000 144,875
- --------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 0.47%
Applied Materials, Inc.(c) 1,800 228,037
- --------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.69%
American Express Co. 1,100 182,875
- --------------------------------------------------------------
Citigroup Inc. 3,450 191,691
- --------------------------------------------------------------
Fannie Mae 2,400 149,850
- --------------------------------------------------------------
Freddie Mac 3,400 160,012
- --------------------------------------------------------------
MGIC Investment Corp. 2,200 132,412
- --------------------------------------------------------------
816,840
- --------------------------------------------------------------
FOODS - 0.17%
Keebler Foods Co.(c) 3,000 84,375
- --------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DIVERSIFIED) - 1.12%
American Home Products Corp. 2,600 $ 102,537
- --------------------------------------------------------------------
Bristol-Myers Squibb Co. 1,900 121,956
- --------------------------------------------------------------------
Johnson & Johnson 1,300 121,062
- --------------------------------------------------------------------
Warner-Lambert Co. 2,400 196,650
- --------------------------------------------------------------------
542,205
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - GENERIC & OTHER) - 0.28%
Forest Laboratories, Inc.(c) 2,200 135,162
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 0.98%
Lilly (Eli) & Co. 1,900 126,350
- --------------------------------------------------------------------
Merck & Co., Inc. 1,600 107,300
- --------------------------------------------------------------------
Pfizer Inc. 4,500 145,969
- --------------------------------------------------------------------
Schering-Plough Corp. 2,200 92,812
- --------------------------------------------------------------------
472,431
- --------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.65%
Baxter International, Inc. 2,100 131,906
- --------------------------------------------------------------------
Guidant Corp. 4,000 188,000
- --------------------------------------------------------------------
Medtronic, Inc. 7,100 258,706
- --------------------------------------------------------------------
VISX, Inc.(c) 4,200 217,350
- --------------------------------------------------------------------
795,962
- --------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 0.18%
MAXIMUS, Inc.(c) 2,600 88,237
- --------------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES - 0.26%
Ethan Allen Interiors, Inc. 3,900 125,044
- --------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.36%
Procter & Gamble, Co. (The) 1,600 175,300
- --------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.40%
AXA Financial, Inc. 4,400 149,050
- --------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 1,600 44,700
- --------------------------------------------------------------------
193,750
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 0.83%
American International Group, Inc. 2,500 270,313
- --------------------------------------------------------------------
CIGNA Corp. 1,600 128,900
- --------------------------------------------------------------------
399,213
- --------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.21%
Travelers Property Casualty Corp. - Class A 2,900 99,325
- --------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.19%
Goldman Sachs Group, Inc. (The) 650 61,222
- --------------------------------------------------------------------
Merrill Lynch & Co., Inc. 2,400 200,400
- --------------------------------------------------------------------
Morgan Stanley Dean Witter & Co. 2,200 314,050
- --------------------------------------------------------------------
575,672
- --------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-14
<PAGE> 91
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.11%
Federated Investors, Inc. - Class B 2,600 $ 52,163
- -------------------------------------------------------------------
LODGING - HOTELS - 0.72%
Carnival Corp. 3,300 157,781
- -------------------------------------------------------------------
Royal Caribbean Cruises Ltd. 3,900 192,319
- -------------------------------------------------------------------
350,100
- -------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.29%
Tyco International Ltd. 3,600 139,950
- -------------------------------------------------------------------
NATURAL GAS - 0.61%
Enron Corp. 4,200 186,375
- -------------------------------------------------------------------
Williams Companies, Inc. (The) 3,500 106,969
- -------------------------------------------------------------------
293,344
- -------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
Apache Corp. 2,600 96,038
- -------------------------------------------------------------------
OIL (DOMESTIC INTEGRATED) - 0.21%
Conoco Inc. - Class B 4,100 101,988
- -------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 0.25%
Exxon Mobil Corp. 1,500 120,844
- -------------------------------------------------------------------
PERSONAL CARE - 0.12%
Steiner Leisure Ltd.(c) 3,500 58,406
- -------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.48%
AES Corp.(c) 3,100 231,725
- -------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.51%
Home Depot, Inc. (The) 3,600 246,825
- -------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.21%
Safeway Inc.(c) 2,900 103,131
- -------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.46%
Dayton Hudson Corp. 3,000 220,313
- -------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.78%
Amazon.com, Inc.(c) 1,300 98,963
- -------------------------------------------------------------------
Bed Bath & Beyond, Inc.(c) 4,200 145,950
- -------------------------------------------------------------------
Linens 'n Things, Inc.(c) 4,400 130,350
- -------------------------------------------------------------------
375,263
- -------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.91%
Omnicom Group, Inc. 1,900 190,000
- -------------------------------------------------------------------
Young & Rubicam Inc. 3,500 247,625
- -------------------------------------------------------------------
437,625
- -------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.88%
National Information Consortium, Inc.(c) 4,000 128,000
- -------------------------------------------------------------------
Official Payments Corp.(c) 2,600 135,200
- -------------------------------------------------------------------
Quanta Services, Inc.(c) 5,700 161,025
- -------------------------------------------------------------------
424,225
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (DATA PROCESSING) - 0.22%
DST Systems, Inc.(c) 1,400 $ 106,838
- -------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.45%
Broadwing Inc.(c) 5,915 218,105
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.70%
Infonet Services Corp. - Class B(c) 5,500 144,375
- -------------------------------------------------------------------------
Western Wireless Corp. - Class A(c) 2,900 193,575
- -------------------------------------------------------------------------
337,950
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.48%
AT&T Corp. 3,150 159,863
- -------------------------------------------------------------------------
Global TeleSystems Group, Inc.(c) 6,550 226,794
- -------------------------------------------------------------------------
MCI WorldCom, Inc.(c) 6,150 326,334
- -------------------------------------------------------------------------
712,991
- -------------------------------------------------------------------------
TELEPHONE - 2.81%
Bell Atlantic Corp. 2,200 135,438
- -------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(c) 4,100 241,388
- -------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(c) 3,500 290,719
- -------------------------------------------------------------------------
Qwest Communications International, Inc.(c) 9,400 404,200
- -------------------------------------------------------------------------
SBC Communications, Inc. 2,900 141,375
- -------------------------------------------------------------------------
Time Warner Telecom, Inc.(c) 2,900 144,819
- -------------------------------------------------------------------------
1,357,939
- -------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $15,068,638) 20,329,959
- -------------------------------------------------------------------------
DOMESTIC PREFERRED STOCKS - 2.05%
COMPUTERS (SOFTWARE & SERVICES) - 0.39%
PSINet, Inc. - SeriesC, $3.375 Conv. Pfd. 1,400 81,725
- -------------------------------------------------------------------------
Verio Inc. - $3.375 Conv. Pfd. (Acquired 07/15/99-
10/01/99; Cost $89,082)(a) 1,900 107,350
- -------------------------------------------------------------------------
189,075
- -------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.27%
Calpine Capital Trust - $2.875 Conv. Pfd. 2,000 129,250
- -------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 0.20%
Kerr-McGee Corp. - 5.50% Pfd. DECS 3,000 97,500
- -------------------------------------------------------------------------
PERSONAL CARE - 0.07%
Estee Lauder Cos. Inc. - $3.805 Conv. Pfd. 400 34,625
- -------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.12%
Broadwing Inc. - Series B, $3.375 Conv. Pfd. 990 58,657
- -------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.66%
WinStar Communications, Inc. - Series F,
$72.50 Conv. Pfd. 237 315,803
- -------------------------------------------------------------------------
TELEPHONE - 0.16%
NEXTLINK Communications, Inc. - $3.25 Conv. Pfd. 400 76,750
- -------------------------------------------------------------------------
WATER UTILITIES - 0.18%
AES Trust III - $3.375 Conv. Pfd. 1,400 86,275
- -------------------------------------------------------------------------
Total Domestic Preferred Stocks
(Cost $876,497) 987,935
- -------------------------------------------------------------------------
</TABLE>
AIM V.I. BALANCED FUND
FS-15
<PAGE> 92
<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>
AIM V.I. BALANCED FUND
FS-16
<PAGE> 93
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS--0.36%
Libertel N.V. (Telecommunications-Cellular/Wireless)(c) 6,600 172,707
- -------------------------------------------------------------------------------
SOUTH KOREA--0.32%
Korea Telecom Corp. - ADR (Telephone) 2,084 155,779
- -------------------------------------------------------------------------------
SPAIN--0.46%
Telefonica S.A. (Telephone)(c) 7,000 174,720
- -------------------------------------------------------------------------------
Terra Networks, S.A. (Computers-Software & Services)(c) 900 49,140
- -------------------------------------------------------------------------------
223,860
- -------------------------------------------------------------------------------
Total Foreign Stocks (Cost $1,401,762) 2,465,665
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. GOVERNMENT AGENCY SECURITIES - 1.62%
FEDERAL NATIONAL MORTGAGE ASSOCIATION
("FNMA")--1.24%
Medium Term Notes, 6.18%, 03/15/01 $300,000 299,019
- -------------------------------------------------------------------------------
Pass through certificates, 6.50%, 11/01/28 318,984 300,541
- -------------------------------------------------------------------------------
599,560
- -------------------------------------------------------------------------------
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") - 0.38%
Pass through certificates 6.50%, 03/15/29 196,178 184,162
- -------------------------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $819,115) 783,722
- -------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.61%
U.S. Treasury Notes - 8.61%
5.75%, 04/30/03(f) 600,000 589,320
- -------------------------------------------------------------------------------
7.25%, 08/15/04(f) 300,000 309,420
- -------------------------------------------------------------------------------
5.88%, 11/15/04(f) 250,000 245,077
- -------------------------------------------------------------------------------
6.50%, 08/15/05 to 10/15/06(f) 2,000,000 1,996,340
- -------------------------------------------------------------------------------
6.88%, 05/15/06 1,000,000 1,017,050
- -------------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $4,223,663) 4,157,207
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
NUMBER OF EXERCISE EXPIRATION
CONTRACTS PRICE DATE
<S> <C> <C> <C> <C>
OPTIONS PURCHASED - 0.01%
ELECTRONICS (DEFENSE) - 0.01%
General Motors Corp. - Class H (Cost
$5,886) 12 90 Jan-00 2,475
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 10.36%
STIC Liquid Assets Portfolio(g) 2,501,867 2,501,867
- -------------------------------------------------------------------------
STIC Prime Portfolio(g) 2,501,867 2,501,867
- -------------------------------------------------------------------------
Total Money Market Funds
(Cost $5,003,734) 5,003,734
- -------------------------------------------------------------------------
TOTAL INVESTMENTS - 99.00%
(COST $41,658,737) 47,823,921
- -------------------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 1.00% 483,149
- -------------------------------------------------------------------------
NET ASSETS - 100.00% $48,307,070
=========================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
AUD - Australian Dollar
CAD - Canadian Dollars
Conv. - Convertible
Ctfs. - Certificates
Deb. - Debentures
DECS - Dividend Enhanced Convertible Stock
DEM - German Deutsche Mark
Disc. - Discounted
GBP - British Pound Sterling
Gtd. - Guaranteed
NZD - New Zealand Dollar
Pfd. - Preferred
Sec. - Secured
SEK - Swedish Krona
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/99 was $1,866,178
which represented 3.86% of the Fund's net assets.
(b) Discounted bond at purchase. Interest rate shown represents the coupon
rate at which the bond will accrue at a specified future date.
(c) Non-income producing security.
(d) A portion of this security is subject to call options written. See Note 6.
(e) Foreign denominated securities. Par value and coupon are denominated in
currency indicated.
(f) A portion of this principal was pledged as collateral to cover margin
contracts for open future contracts. See Note 7.
(g) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. BALANCED FUND
FS-17
<PAGE> 94
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.
AIM V.I. BALANCED FUND
FS-18
<PAGE> 95
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
FS-19
<PAGE> 96
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$20,935 and, undistributed net realized gains increased by $20,935 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
Outstanding foreign currency contracts at December 31, 1999 were as follows:
<TABLE>
<CAPTION>
CONTRACT TO
SETTLEMENT ------------------ UNREALIZED
DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION
---------- -------- --------- -------- -------- ------------
<S> <C> <C> <C> <C> <C>
01/24/00 SEK 1,500,000 $184,884 $176,563 $8,321
===============================================================
</TABLE>
G. Futures Contracts - The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options - The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset
and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
I. Put Options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
Fund to hedge securities it owns by locking in a minimum price at which the
Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
time, because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
AIM V.I. BALANCED FUND
FS-20
<PAGE> 97
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
FS-21
<PAGE> 98
NOTE 9--CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
---------------------- -------------------
SHARES AMOUNT SHARES AMOUNT
--------- ----------- ------- ----------
<S> <C> <C> <C> <C>
Sold 2,956,052 $34,512,915 954,695 $9,785,741
- -----------------------------------------------------------------------
Issued as reinvestment of
dividends 66,460 830,090 12,578 135,589
- -----------------------------------------------------------------------
Reacquired (247,878) (2,881,446) (38,646) (383,779)
- -----------------------------------------------------------------------
2,774,634 $32,461,559 928,627 $9,537,551
=======================================================================
</TABLE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998 (date
operation commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 11.14 $ 10.00
- ----------------------------------------------------------------------
Income from investment operations:
Net investment income 0.31 0.12
- ----------------------------------------------------------------------
Net gains on securities (both realized and
unrealized) 1.83 1.18
- ----------------------------------------------------------------------
Total from investment operations 2.14 1.30
- ----------------------------------------------------------------------
Less Distributions:
Dividends from net investment income (0.17) (0.14)
- ----------------------------------------------------------------------
Distributions from net realized gains (0.07) (0.02)
- ----------------------------------------------------------------------
Total Distributions (0.24) (0.16)
- ----------------------------------------------------------------------
Net asset value, end of period $ 13.04 $ 11.14
======================================================================
Total return(b) 19.31% 13.02%
======================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $48,307 $10,343
======================================================================
Ratio of expenses to average net assets(c) 1.21%(d) 1.18%(e)
======================================================================
Ratio of net investment income to average net
assets(f) 2.66%(d) 3.71%(e)
======================================================================
Portfolio turnover rate 57% 9%
======================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total return is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.31% and 2.83% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $28,037,647.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income to average net assets prior to fee waivers and/or expense
reimbursement were 2.56% and 2.07% (annualized) for 1999 and 1998,
respectively.
AIM V.I. BALANCED FUND
FS-22
<PAGE> 99
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
FS-23
<PAGE> 100
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.
AIM V.I. BLUE CHIP FUND
FS-24
<PAGE> 101
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
FS-25
<PAGE> 102
STATEMENT OF CHANGES IN NET ASSETS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<CAPTION>
1999
---------
<S> <C>
OPERATIONS:
Net investment income $ 168
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment
securities (574)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (406)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,000,010
- ------------------------------------------------------------------------------
Net increase in net assets 999,604
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $ 999,604
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 999,988
- ------------------------------------------------------------------------------
Undistributed net investment income 190
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (574)
- ------------------------------------------------------------------------------
$ 999,604
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Blue Chip Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be voted
on exclusively by the shareholders of such portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. The Fund
commenced operations December 29, 1999. Currently, shares of the Fund are sold
only to insurance company separate accounts to fund the benefits of variable
annuity contracts and variable life insurance policies. The Fund's investment
objective is to achieve long-term growth of capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
AIM V.I. BLUE CHIP FUND
FS-26
<PAGE> 103
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$22 and paid-in capital decreased by $22 as a result of differing book/tax
treatment of organizational costs reclassifications. Net assets of the Fund
were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Futures Contracts - The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $350 million of the Fund's average daily net assets, plus 0.625% of
the Fund's average daily net assets in excess of $350 million. During the
period December 29, 1999 (date operations commenced) through December 31,
1999, AIM waived fees of $315 and reimbursed expenses of $298.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
period December 29, 1999 (date operations commenced) through December 31,
1999, AIM was paid $0 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the
period December 29, 1999 (date operations commenced) through December 31,
1999, the Fund did not borrow under the line of credit agreement. The funds
which are party to the line of credit are charged a commitment fee of 0.09% on
the unused balance of the committed line. The commitment fee is allocated
among the funds based on their respective average net assets for the period.
NOTE 5 - FUTURES CONTRACTS
On December 31, 1999, $46,000 of the principal amount of U.S. Treasury
obligations was pledged as collateral to cover margin requirements for open
futures contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
UNREALIZED
NO. OF APPRECIATION
CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION)
- -------- --------- ---------------- --------------
<S> <C> <C> <C>
S&P 500 Mini 11 Mar-00/Buy $(578)
</TABLE>
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period December 29, 1999 (date
operations commenced) through December 31, 1999 were as follows:
<TABLE>
<CAPTION>
1999
------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 100,001 $1,000,010
======================================================================
</TABLE>
AIM V.I. BLUE CHIP FUND
FS-27
<PAGE> 104
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period December 29, 1999 (date operations commenced) through
December 31, 1999.
<TABLE>
<CAPTION>
1999
------
<S> <C>
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00
- -------------------------------------------------------------------------
Less distributions:
Dividends from net investment income --
- -------------------------------------------------------------------------
Net asset value, end of period $10.00
=========================================================================
Total return(a) 0.00%
=========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,000
=========================================================================
Ratio of expenses to average net assets (b):
With expense waiver and reimbursement 1.30%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement 12.49%
=========================================================================
Ratio of net investment income (loss) to average net assets(b):
With expense waiver and reimbursement 3.07%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement (8.12)%
=========================================================================
Portfolio turnover rate --
=========================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $666,531.
AIM V.I. BLUE CHIP FUND
FS-28
<PAGE> 105
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
AIM V.I. CAPITAL APPRECIATION FUND
FS-29
<PAGE> 106
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C> <C>
COMMON STOCKS & OTHER
EQUITY INTERESTS - 94.37%
AIRLINES - 0.19%
Southwest Airlines Co. 130,400 $ 2,110,850
- ----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.52%
Danaher Corp. 72,500 3,498,125
- ----------------------------------------------------------------------------
SPX Corp.(a) 29,000 2,343,562
- ----------------------------------------------------------------------------
5,841,687
- ----------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.50%
Northern Trust Corp. 107,300 5,686,900
- ----------------------------------------------------------------------------
BANKS (REGIONAL) - 0.68%
Bank United Corp. - Class A 58,000 1,580,500
- ----------------------------------------------------------------------------
Compass Bancshares, Inc. 58,000 1,294,125
- ----------------------------------------------------------------------------
Old Kent Financial Corp. 47,420 1,677,482
- ----------------------------------------------------------------------------
TCF Financial Corp. 41,800 1,039,775
- ----------------------------------------------------------------------------
Zions Bancorp.(a) 34,800 2,059,725
- ----------------------------------------------------------------------------
7,651,607
- ----------------------------------------------------------------------------
BIOTECHNOLOGY - 1.30%
Biogen, Inc.(a) 144,900 12,244,050
- ----------------------------------------------------------------------------
Chiron Corp.(a) 58,000 2,457,750
- ----------------------------------------------------------------------------
14,701,800
- ----------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.82%
Adelphia Communications Corp.(a) 82,500 5,414,062
- ----------------------------------------------------------------------------
AMFM Inc.(a) 130,400 10,203,800
- ----------------------------------------------------------------------------
AT&T Corp. - Liberty Media Group - Class A(a) 173,900 9,868,825
- ----------------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 92,500 4,763,750
- ----------------------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 68,500 6,316,984
- ----------------------------------------------------------------------------
Univision Communications, Inc. - Class A(a) 85,000 8,685,937
- ----------------------------------------------------------------------------
USA Networks, Inc.(a) 92,500 5,110,625
- ----------------------------------------------------------------------------
Westwood One, Inc.(a) 55,100 4,187,600
- ----------------------------------------------------------------------------
54,551,583
- ----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 11.05%
ADC Telecommunications, Inc.(a) 117,600 8,533,350
- ----------------------------------------------------------------------------
Comverse Technology, Inc.(a) 87,000 12,593,250
- ----------------------------------------------------------------------------
Corning, Inc. 184,700 23,814,756
- ----------------------------------------------------------------------------
General Instrument Corp.(a) 110,100 9,358,500
- ----------------------------------------------------------------------------
JDS Uniphase Corp.(a) 174,000 28,068,375
- ----------------------------------------------------------------------------
Lucent Technologies Inc. 40,345 3,018,310
- ----------------------------------------------------------------------------
Motorola, Inc. 43,500 6,405,375
- ----------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 87,000 16,530,000
- ----------------------------------------------------------------------------
QUALCOMM, Inc.(a) 58,000 10,222,500
- ----------------------------------------------------------------------------
Scientific-Atlanta, Inc. 115,900 6,446,937
- ----------------------------------------------------------------------------
124,991,353
- ----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (HARDWARE) - 1.28%
Apple Computer, Inc.(a) 58,000 $ 5,963,125
- -----------------------------------------------------------------------------
Comdisco, Inc. 4,200 156,450
- -----------------------------------------------------------------------------
Gateway Inc.(a) 115,900 8,352,044
- -----------------------------------------------------------------------------
14,471,619
- -----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 2.08%
Exodus Communications, Inc.(a) 34,800 3,090,675
- -----------------------------------------------------------------------------
VeriSign, Inc.(a) 107,000 20,430,312
- -----------------------------------------------------------------------------
23,520,987
- -----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.40%
Adaptec, Inc.(a) 173,900 8,673,262
- -----------------------------------------------------------------------------
EMC Corp.(a)(b) 121,500 13,273,875
- -----------------------------------------------------------------------------
Lexmark International Group, Inc. - Class A(a) 58,000 5,249,000
- -----------------------------------------------------------------------------
27,196,137
- -----------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 18.94%
America Online, Inc.(a) 318,900 24,057,019
- -----------------------------------------------------------------------------
At Home Corp. - Series A(a) 90,000 3,858,750
- -----------------------------------------------------------------------------
BMC Software, Inc.(a) 104,900 8,385,444
- -----------------------------------------------------------------------------
Business Objects S.A. - ADR (France)(a) 40,600 5,425,175
- -----------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 43,500 8,645,625
- -----------------------------------------------------------------------------
Citrix Systems, Inc.(a) 133,300 16,395,900
- -----------------------------------------------------------------------------
Electronic Arts Inc.(a) 81,000 6,804,000
- -----------------------------------------------------------------------------
Electronics for Imaging, Inc.(a) 120,000 6,975,000
- -----------------------------------------------------------------------------
Inktomi Corp.(a) 104,400 9,265,500
- -----------------------------------------------------------------------------
Intuit Inc.(a) 217,400 13,030,412
- -----------------------------------------------------------------------------
J.D. Edwards & Co.(a) 104,500 3,121,937
- -----------------------------------------------------------------------------
Lycos, Inc.(a) 230,000 18,299,375
- -----------------------------------------------------------------------------
Microsoft Corp.(a) 97,500 11,383,125
- -----------------------------------------------------------------------------
RealNetworks, Inc.(a) 58,000 6,978,125
- -----------------------------------------------------------------------------
Siebel Systems, Inc.(a) 69,600 5,846,400
- -----------------------------------------------------------------------------
Synopsys, Inc.(a) 35,000 2,336,250
- -----------------------------------------------------------------------------
Verio, Inc.(a) 130,400 6,022,850
- -----------------------------------------------------------------------------
VERITAS Software Corp.(a) 217,350 31,108,219
- -----------------------------------------------------------------------------
Yahoo! Inc.(a) 60,900 26,350,669
- -----------------------------------------------------------------------------
214,289,775
- -----------------------------------------------------------------------------
CONSUMER FINANCE - 1.70%
Capital One Financial Corp. 136,200 6,563,137
- -----------------------------------------------------------------------------
Providian Financial Corp. 105,800 9,634,412
- -----------------------------------------------------------------------------
SLM Holding Corp. 72,500 3,063,125
- -----------------------------------------------------------------------------
19,260,674
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-30
<PAGE> 107
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 4.98%
American Power Conversion Corp.(a) 304,400 $ 8,028,550
- ------------------------------------------------------------------------
Conexant Systems, Inc.(a) 177,100 11,755,012
- ------------------------------------------------------------------------
Sanmina Corp.(a) 58,000 5,792,750
- ------------------------------------------------------------------------
Solectron Corp.(a) 173,900 16,542,237
- ------------------------------------------------------------------------
Symbol Technologies, Inc. 152,175 9,672,623
- ------------------------------------------------------------------------
Vishay Intertechnology, Inc.(a) 144,900 4,582,462
- ------------------------------------------------------------------------
56,373,634
- ------------------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.30%
General Motors Corp. - Class H(a) 34,800 3,340,800
- ------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 1.23%
PE Corp - PE Biosystems Group 98,600 11,862,812
- ------------------------------------------------------------------------
Waters Corp.(a) 37,700 1,998,100
- ------------------------------------------------------------------------
13,860,912
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 7.08%
Altera Corp.(a) 108,700 5,387,444
- ------------------------------------------------------------------------
Analog Devices, Inc.(a) 155,400 14,452,200
- ------------------------------------------------------------------------
ASM Lithography Holding N.V. (Netherlands)(a) 37,700 4,288,375
- ------------------------------------------------------------------------
Atmel Corp.(a) 106,200 3,139,538
- ------------------------------------------------------------------------
Cypress Semiconductor Corp.(a) 173,900 5,630,013
- ------------------------------------------------------------------------
Linear Technology Corp. 79,200 5,667,750
- ------------------------------------------------------------------------
LSI Logic Corp.(a) 86,800 5,859,000
- ------------------------------------------------------------------------
Maxim Integrated Products, Inc.(a) 119,600 5,643,625
- ------------------------------------------------------------------------
Microchip Technology, Inc.(a) 60,100 4,113,094
- ------------------------------------------------------------------------
PMC-Sierra, Inc.(a) 87,700 14,059,406
- ------------------------------------------------------------------------
Vitesse Semiconductor Corp.(a) 120,000 6,292,500
- ------------------------------------------------------------------------
Xilinx, Inc.(a) 123,000 5,592,656
- ------------------------------------------------------------------------
80,125,601
- ------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 2.00%
Applied Materials, Inc.(a) 29,000 3,673,938
- ------------------------------------------------------------------------
KLA-Tencor Corp.(a) 69,600 7,751,700
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 29,000 3,553,406
- ------------------------------------------------------------------------
Teradyne, Inc.(a) 115,900 7,649,400
- ------------------------------------------------------------------------
22,628,444
- ------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.31%
American Express Co. 33,300 5,536,125
- ------------------------------------------------------------------------
Citigroup Inc. 70,000 3,889,375
- ------------------------------------------------------------------------
MGIC Investment Corp. 89,633 5,394,786
- ------------------------------------------------------------------------
14,820,286
- ------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.34%
Park Place Entertainment(a) 307,500 3,843,750
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
HEALTH CARE (DRUGS - GENERIC & OTHER) - 2.09%
Forest Laboratories, Inc.(a) 101,500 $ 6,235,906
- ---------------------------------------------------------------------
Jones Pharma Inc. 213,950 9,293,453
- ---------------------------------------------------------------------
Medicis Pharmaceutical Corp. - Class A(a) 77,500 3,298,594
- ---------------------------------------------------------------------
MedImmune, Inc.(a) 29,000 4,810,375
- ---------------------------------------------------------------------
23,638,328
- ---------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.33%
Express Scripts, Inc. - Class A(a) 58,000 3,712,000
- ---------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 1.56%
Bausch & Lomb, Inc. 58,000 3,969,375
- ---------------------------------------------------------------------
Biomet, Inc. 144,900 5,796,000
- ---------------------------------------------------------------------
Medtronic, Inc. 217,400 7,921,513
- ---------------------------------------------------------------------
17,686,888
- ---------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 0.27%
AFLAC, Inc. 65,000 3,067,188
- ---------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.62%
Goldman Sachs Group, Inc. (The) 100,000 9,418,750
- ---------------------------------------------------------------------
Schwab (Charles) Corp. (The) 231,900 8,899,163
- ---------------------------------------------------------------------
18,317,913
- ---------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.62%
Federated Investors, Inc. - Class B 119,700 2,401,481
- ---------------------------------------------------------------------
Knight/Trimark Group, Inc. - Class A(a) 90,000 4,140,000
- ---------------------------------------------------------------------
Southwest Securities Group, Inc. -
$2.83 Conv. Pfd. 11,800 520,675
- ---------------------------------------------------------------------
7,062,156
- ---------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 0.77%
Harley-Davidson, Inc. 136,200 8,725,313
- ---------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.26%
Millipore Corp. 75,000 2,896,875
- ---------------------------------------------------------------------
NATURAL GAS - 0.57%
El Paso Energy Corp. 87,000 3,376,688
- ---------------------------------------------------------------------
Enron Corp. 68,500 3,039,688
- ---------------------------------------------------------------------
6,416,376
- ---------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.09%
BJ Services Co.(a) 115,900 4,846,069
- ---------------------------------------------------------------------
Cooper Cameron Corp.(a) 160,100 7,834,894
- ---------------------------------------------------------------------
Diamond Offshore Drilling, Inc. 58,000 1,772,625
- ---------------------------------------------------------------------
Global Industries Ltd.(a) 173,900 1,499,888
- ---------------------------------------------------------------------
R&B Falcon Corp.(a) 215,500 2,855,375
- ---------------------------------------------------------------------
Rowan Companies, Inc.(a) 130,400 2,828,050
- ---------------------------------------------------------------------
Smith International, Inc.(a) 101,500 5,043,281
- ---------------------------------------------------------------------
Transocean Sedco Forex Inc. 87,000 2,930,813
- ---------------------------------------------------------------------
Varco International, Inc.(a) 144,900 1,476,169
- ---------------------------------------------------------------------
Weatherford International, Inc.(a) 96,300 3,845,981
- ---------------------------------------------------------------------
34,933,145
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-31
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
OIL & GAS (EXPLORATION & PRODUCTION) - 0.73%
Apache Corp. 103,800 $ 3,834,113
- -------------------------------------------------------------------
EOG Resources, Inc. 202,900 3,563,431
- -------------------------------------------------------------------
Santa Fe Snyder Corp.(a) 101,500 812,000
- -------------------------------------------------------------------
8,209,544
- -------------------------------------------------------------------
PUBLISHING - 0.32%
McGraw-Hill Companies, Inc. (The) 58,000 3,574,250
- -------------------------------------------------------------------
RAILROADS - 1.02%
Kansas City Southern Industries, Inc. 155,000 11,566,875
- -------------------------------------------------------------------
RESTAURANTS - 0.53%
Brinker International, Inc.(a) 115,900 2,781,600
- -------------------------------------------------------------------
Outback Steakhouse, Inc.(a) 124,000 3,216,250
- -------------------------------------------------------------------
5,997,850
- -------------------------------------------------------------------
RETAIL (BUILDING SUPPLIES) - 0.61%
Lowe's Companies, Inc. 115,000 6,871,250
- -------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.45%
CDW Computer Centers, Inc.(a) 85,000 6,683,125
- -------------------------------------------------------------------
Circuit City Stores-Circuit City Group 88,400 3,983,525
- -------------------------------------------------------------------
Tandy Corp. 115,900 5,700,831
- -------------------------------------------------------------------
16,367,481
- -------------------------------------------------------------------
RETAIL (DEPARTMENT STORES) - 0.74%
Kohl's Corp.(a) 115,900 8,366,531
- -------------------------------------------------------------------
RETAIL (DISCOUNTERS) - 0.87%
Dollar Tree Stores, Inc.(a) 104,975 5,084,727
- -------------------------------------------------------------------
Family Dollar Stores, Inc. 165,200 2,694,825
- -------------------------------------------------------------------
Ross Stores, Inc. 115,900 2,078,956
- -------------------------------------------------------------------
9,858,508
- -------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.04%
Lands' End, Inc.(a) 14,600 507,350
- -------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.87%
Barnes & Noble, Inc.(a) 50,000 1,031,250
- -------------------------------------------------------------------
Bed Bath & Beyond, Inc.(a) 159,400 5,539,150
- -------------------------------------------------------------------
Linens 'n Things, Inc.(a) 74,500 2,207,063
- -------------------------------------------------------------------
Payless ShoeSource, Inc.(a) 500 23,500
- -------------------------------------------------------------------
Staples, Inc.(a) 347,880 7,218,510
- -------------------------------------------------------------------
Williams-Sonoma, Inc.(a) 111,900 5,147,400
- -------------------------------------------------------------------
21,166,873
- -------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 1.18%
American Eagle Outfitters, Inc.(a) 115,700 5,206,500
- -------------------------------------------------------------------
Men's Wearhouse, Inc. (The)(a) 144,900 4,256,438
- -------------------------------------------------------------------
Talbots, Inc. (The) 87,000 3,882,375
- -------------------------------------------------------------------
13,345,313
- -------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
SERVICES (ADVERTISING/MARKETING) - 3.49%
CMGI, Inc.(a) 30,000 $ 8,306,250
- ------------------------------------------------------------------------------
Interpublic Group of Companies, Inc. 107,500 6,201,406
- ------------------------------------------------------------------------------
Lamar Advertising Co.(a) 173,900 10,531,819
- ------------------------------------------------------------------------------
Omnicom Group, Inc. 144,900 14,490,000
- ------------------------------------------------------------------------------
39,529,475
- ------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.63%
ChoicePoint, Inc.(a) 71,600 2,962,450
- ------------------------------------------------------------------------------
Cintas Corp. 77,000 4,090,625
- ------------------------------------------------------------------------------
Viad Corp. 3,100 86,413
- ------------------------------------------------------------------------------
7,139,488
- ------------------------------------------------------------------------------
SERVICES (DATA PROCESSING) - 2.56%
Affiliated Computer Services, Inc. - Class A(a) 58,000 2,668,000
- ------------------------------------------------------------------------------
Concord EFS, Inc.(a) 391,300 10,075,975
- ------------------------------------------------------------------------------
DST Systems, Inc.(a) 46,500 3,548,531
- ------------------------------------------------------------------------------
Fiserv, Inc.(a) 217,375 8,328,180
- ------------------------------------------------------------------------------
Paychex, Inc. 108,712 4,348,480
- ------------------------------------------------------------------------------
28,969,166
- ------------------------------------------------------------------------------
SPECIALTY PRINTING - 0.24%
Valassis Communications, Inc.(a) 65,250 2,756,813
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.19%
Broadwing Inc.(a) 58,000 2,138,750
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.33%
Crown Castle International Corp.(a) 159,400 5,120,725
- ------------------------------------------------------------------------------
Metromedia Fiber Network, Inc. - Class A(a) 113,600 5,445,700
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 67,000 4,472,250
- ------------------------------------------------------------------------------
15,038,675
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.27%
Global TeleSystems Group, Inc.(a) 87,000 3,012,375
- ------------------------------------------------------------------------------
TELEPHONE - 1.68%
CenturyTel, Inc. 130,450 6,180,069
- ------------------------------------------------------------------------------
NTL Inc.(a) 80,200 10,004,950
- ------------------------------------------------------------------------------
RCN Corp.(a) 58,000 2,813,000
- ------------------------------------------------------------------------------
18,998,019
- ------------------------------------------------------------------------------
TEXTILES (APPAREL) - 0.74%
Jones Apparel Group, Inc.(a) 208,600 5,658,275
- ------------------------------------------------------------------------------
Tommy Hilfiger Corp.(a) 115,900 2,701,919
- ------------------------------------------------------------------------------
8,360,194
- ------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests (Cost
$576,300,943) 1,067,499,361
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-31
<PAGE> 108
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
MONEY MARKET FUNDS - 5.56%
STIC Liquid Assets Portfolio(c) 31,488,016 $ 31,488,016
- ----------------------------------------------------------------
STIC Prime Portfolio(c) 31,488,016 31,488,016
- ----------------------------------------------------------------
Total Money Market Funds
(Cost $62,976,032) 62,976,032
- ----------------------------------------------------------------
TOTAL INVESTMENTS - 99.93%
(Cost $639,276,975) 1,130,475,393
- ----------------------------------------------------------------
OTHER ASSETS LESS LIABILITIES - 0.07% 742,067
- ----------------------------------------------------------------
NET ASSETS - 100.00% $1,131,217,460
================================================================
</TABLE>
Investment Abbreviations:
ADR - American Depositary Receipt
Conv. - Convertible
Pfd. - Preferred
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) A portion of this security is subject to call options written. See note 7.
(c) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-32
<PAGE> 109
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $639,276,975) $1,130,475,393
- ------------------------------------------------------------------------
Receivables for:
Investments sold 525,180
- ------------------------------------------------------------------------
Capital stock sold 1,550,637
- ------------------------------------------------------------------------
Dividends and interest 556,346
- ------------------------------------------------------------------------
Investment for deferred compensation plan 33,908
- ------------------------------------------------------------------------
Other assets 2,261
- ------------------------------------------------------------------------
Total assets 1,133,143,725
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 75,495
- ------------------------------------------------------------------------
Capital stock reacquired 417,439
- ------------------------------------------------------------------------
Deferred compensation plan 33,908
- ------------------------------------------------------------------------
Options written (Premiums received $59,230) 502,969
- ------------------------------------------------------------------------
Accrued advisory fees 549,277
- ------------------------------------------------------------------------
Accrued administrative services fees 259,589
- ------------------------------------------------------------------------
Accrued operating expenses 87,588
- ------------------------------------------------------------------------
Total liabilities 1,926,265
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $1,131,217,460
========================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ------------------------------------------------------------------------
Outstanding 31,793,662
- ------------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 35.58
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 2,451,091
- ------------------------------------------------------------------------------
Dividends (net of $11,388 foreign withholding tax) 2,847,893
- ------------------------------------------------------------------------------
Total investment income 5,298,984
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 4,830,846
- ------------------------------------------------------------------------------
Administrative services fees 578,362
- ------------------------------------------------------------------------------
Custodian fees 122,880
- ------------------------------------------------------------------------------
Directors' fees 11,313
- ------------------------------------------------------------------------------
Other 199,126
- ------------------------------------------------------------------------------
Total expenses 5,742,527
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (1,411)
- ------------------------------------------------------------------------------
Net expenses 5,741,116
- ------------------------------------------------------------------------------
Net investment income (loss) (442,132)
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain from:
Investment securities 41,879,881
- ------------------------------------------------------------------------------
Option contracts 49,576
- ------------------------------------------------------------------------------
41,929,457
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 297,792,190
- ------------------------------------------------------------------------------
Foreign currencies (43)
- ------------------------------------------------------------------------------
Option contracts (443,738)
- ------------------------------------------------------------------------------
297,348,409
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 339,277,866
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $338,835,734
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. CAPITAL APPRECIATION FUND
FS-33
<PAGE> 110
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- ------------
<S> <C> <C>
OPERATIONS:
Net investment income (loss) $ (442,132) $ 631,581
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and option contracts 41,929,457 22,808,693
- ------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
option contracts 297,348,409 78,385,559
- ------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 338,835,734 101,825,833
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (738,724) (922,615)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (23,048,204) (16,345,246)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 168,920,651 39,909,953
- ------------------------------------------------------------------------------
Net increase in net assets 483,969,457 124,467,925
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 647,248,003 522,780,078
- ------------------------------------------------------------------------------
End of year $1,131,217,460 $647,248,003
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 599,987,913 $434,303,451
- ------------------------------------------------------------------------------
Undistributed net investment income (loss) (47,777) 700,362
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and option
contracts 40,522,686 22,076,541
- ------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and option
contracts 490,754,638 190,167,649
- ------------------------------------------------------------------------------
$1,131,217,460 $647,248,003
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Appreciation Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to seek
capital appreciation through investments in common stocks, with emphasis on
medium-sized and smaller emerging growth companies.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange
where the security is principally traded, or lacking any sales on a
particular day, the security is valued at the closing bid price on that day.
Each security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market quotations
are not readily available or are questionable are valued at fair value as
determined in good faith by or under the supervision of the Company's
officers in a manner specifically authorized by the Board of Directors of the
Company. Short-term obligations having 60 days or less to maturity are valued
at amortized cost which approximates market value. For purposes of
determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the New
York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
AIM V.I. CAPITAL APPRECIATION FUND
FS-34
<PAGE> 111
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$432,717, undistributed net realized gains decreased by $435,108 and paid-
in capital increased by $2,391 as a result of differing book/tax treatment
of net operating loss reclassifications. Net assets of the Fund were
unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset
and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
H. Put Options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
Fund to hedge securities it owns by locking in a minimum price at which the
Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
time, because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $578,362 of which AIM retained
$78,369 for such services.
The Company has entered into a master distribution agreement with
A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for
the Fund. Certain officers and directors of the Company are officers of AIM
and AIM Distributors.
AIM V.I. CAPITAL APPRECIATION FUND
FS-35
<PAGE> 112
During the year ended December 31, 1999, the Fund paid legal fees of $6,011
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,411 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,411 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $627,067,583 and $470,380,607, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $497,637,083
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (7,642,675)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $489,994,408
===========================================================================
</TABLE>
Cost of investments for tax purposes is $640,480,985.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
-------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ---------
<S> <C> <C>
Beginning of period -- $ --
- ---------------------------------------------------------------------------
Written 2,274 452,115
- ---------------------------------------------------------------------------
Closed (784) (160,367)
- ---------------------------------------------------------------------------
Exercised (1,180) (209,295)
- ---------------------------------------------------------------------------
Expired (165) (23,223)
- ---------------------------------------------------------------------------
End of period 145 59,230
===========================================================================
</TABLE>
Open call option contracts written as of December 31, 1999 were as follows:
<TABLE>
<CAPTION>
DECEMBER 31, UNREALIZED
CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION
ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION)
- --------- -------- ------ --------- -------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
EMC Corp. January $75 145 $59,230 $502,969 ($443,739)
- -------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL APPRECIATION FUND
FS-36
<PAGE> 113
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------- ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------- ---------- ------------
<S> <C> <C> <C> <C>
Sold 10,987,866 $ 295,821,855 4,333,736 $ 99,858,597
- -------------------------------------------------------------------------------
Issued as reinvestment of
dividends 746,374 23,786,928 740,474 17,267,861
- -------------------------------------------------------------------------------
Issued in connection with
acquisitions* 1,111,610 29,381,435 -- --
- -------------------------------------------------------------------------------
Reacquired (6,741,717) (180,069,567) (3,416,071) (77,216,505)
- -------------------------------------------------------------------------------
6,104,133 $ 168,920,651 1,658,139 $ 39,909,953
===============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable America Fund ("Variable America Fund")
pursuant to a plan of reorganization approved by Variable America Fund's
shareholders on August 25, 1999. The acquisition was accomplished by a tax-
free exchange of 1,111,610 shares of the Fund for 1,874,912 shares of
Variable America Fund as of the close of business on October 15, 1999.
Variable America Fund's net assets at that date were $29,381,435, including
$3,238,580 of unrealized appreciation, were combined with those of the Fund.
The net assets of the Fund immediately before the acquisition were
$757,029,224.
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ JANUARY 31,
1999 1998 1997 1996 1995 1995
---------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05 $ 12.58
- ------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.02) 0.02 0.03 0.02 0.04 0.05
- ------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 11.17 4.12 2.58 2.89 4.46 (0.54)
- ------------------------------------------------------------------------------------------------
Total from investment
operations 11.15 4.14 2.61 2.91 4.50 (0.49)
- ------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.02) (0.04) (0.02) (0.03) -- (0.04)
- ------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.75) (0.65) (0.27) -- -- --
- ------------------------------------------------------------------------------------------------
Total distributions (0.77) (0.69) (0.29) (0.03) -- (0.04)
- ------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 35.58 $ 25.20 $ 21.75 $ 19.43 $ 16.55 $ 12.05
================================================================================================
Total return(a) 44.61% 19.30% 13.51% 17.58% 37.38% (3.91)%
================================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $1,131,217 $647,248 $522,642 $370,063 $212,152 $88,177
================================================================================================
Ratio of expenses to
average net assets 0.73%(b) 0.67% 0.68% 0.73% 0.75%(c) 0.84%
================================================================================================
Ratio of net investment
income to average net
assets (0.06)%(b) 0.11% 0.18% 0.18% 0.39%(c) 0.46%
================================================================================================
Portfolio turnover rate 65% 83% 65% 59% 37% 81%
================================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $784,307,675.
(c) Annualized.
AIM V.I. CAPITAL APPRECIATION FUND
FS-37
<PAGE> 114
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
FS-38
<PAGE> 115
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY INTERESTS - 85.34%
AEROSPACE/DEFENSE - 0.27%
HEICO Corp. - Class A 1,400 $ 29,575
- ------------------------------------------------------------------------
AIRLINES - 0.50%
Ryanair Holdings PLC. - ADR (Ireland)(a) 1,000 55,125
- ------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.33%
Dura Automotive Systems, Inc.(a) 1,000 17,437
- ------------------------------------------------------------------------
Stoneridge, Inc.(a) 1,200 18,525
- ------------------------------------------------------------------------
35,962
- ------------------------------------------------------------------------
BANKS (REGIONAL) - 1.64%
Bank United Corp. - Class A 800 21,800
- ------------------------------------------------------------------------
Colonial BancGroup, Inc. (The) 4,200 43,575
- ------------------------------------------------------------------------
Independence Community Bank Corp. 3,800 47,500
- ------------------------------------------------------------------------
North Fork Bancorporation, Inc. 2,500 43,750
- ------------------------------------------------------------------------
UCBH Holdings, Inc.(a) 1,200 24,675
- ------------------------------------------------------------------------
181,300
- ------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 0.46%
Canandaigua Brands, Inc. - Class A(a) 1,000 51,000
- ------------------------------------------------------------------------
BIOTECHNOLOGY - 0.13%
IDEXX Laboratories, Inc.(a) 900 14,512
- ------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 4.92%
Citadel Communications Corp.(a) 1,000 64,875
- ------------------------------------------------------------------------
Cox Radio, Inc. - Class A(a) 800 79,800
- ------------------------------------------------------------------------
Emmis Communications Corp. - Class A(a) 800 99,712
- ------------------------------------------------------------------------
Entercom Communications Corp.(a) 1,300 85,800
- ------------------------------------------------------------------------
Hispanic Broadcasting Corp.(a) 400 36,887
- ------------------------------------------------------------------------
Insight Communications Company, Inc.(a) 2,600 77,025
- ------------------------------------------------------------------------
Interep National Radio Sales, Inc.(a) 2,000 26,750
- ------------------------------------------------------------------------
Westwood One, Inc.(a) 950 72,200
- ------------------------------------------------------------------------
543,049
- ------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 3.89%
ADTRAN, Inc.(a) 600 30,862
- ------------------------------------------------------------------------
Davox Corp.(a) 2,200 43,175
- ------------------------------------------------------------------------
Gilat Satellite Networks Ltd. (Israel)(a) 700 83,125
- ------------------------------------------------------------------------
Next Level Communications, Inc.(a) 400 29,950
- ------------------------------------------------------------------------
NorthEast Optic Network, Inc.(a) 700 43,794
- ------------------------------------------------------------------------
Osicom Technologies, Inc.(a) 2,600 117,975
- ------------------------------------------------------------------------
Proxim, Inc.(a) 100 11,000
- ------------------------------------------------------------------------
Scientific-Atlanta, Inc. 1,100 61,187
- ------------------------------------------------------------------------
Z-Tel Technologies, Inc.(a) 200 8,075
- ------------------------------------------------------------------------
429,143
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMPUTERS (NETWORKING) - 0.31%
Auspex Systems, Inc.(a) 900 $ 9,225
- ------------------------------------------------------------------------
Gadzoox Networks, Inc.(a) 300 13,069
- ------------------------------------------------------------------------
SonicWALL, Inc.(a) 300 12,075
- ------------------------------------------------------------------------
34,369
- ------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.10%
QLogic Corp.(a) 400 63,950
- ------------------------------------------------------------------------
SanDisk Corp.(a) 600 57,750
- ------------------------------------------------------------------------
121,700
- ------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 15.68%
AppNet, Inc.(a) 1,100 48,125
- ------------------------------------------------------------------------
Check Point Software Technologies Ltd. (Israel)(a) 600 119,251
- ------------------------------------------------------------------------
Delathree.com, Inc.(a) 500 12,875
- ------------------------------------------------------------------------
Dendrite International, Inc.(a) 750 25,406
- ------------------------------------------------------------------------
Digital Insight Corp.(a) 1,000 36,375
- ------------------------------------------------------------------------
Documentum, Inc.(a) 1,000 59,875
- ------------------------------------------------------------------------
eBenX Inc.(a) 300 13,575
- ------------------------------------------------------------------------
Eclipsys Corp.(a) 2,200 56,375
- ------------------------------------------------------------------------
Hyperion Solutions Corp.(a) 1,500 65,250
- ------------------------------------------------------------------------
InfoCure Corp.(a) 2,800 87,325
- ------------------------------------------------------------------------
Interleaf, Inc.(a) 2,100 70,612
- ------------------------------------------------------------------------
Keynote Systems, Inc.(a) 700 51,625
- ------------------------------------------------------------------------
Medica Logic, Inc.(a) 600 12,600
- ------------------------------------------------------------------------
Mercury Interactive Corp.(a) 600 64,762
- ------------------------------------------------------------------------
MTI Technology Corp.(a) 700 25,812
- ------------------------------------------------------------------------
Navidec, Inc.(a) 1,800 21,600
- ------------------------------------------------------------------------
Nucentrix Broadband Networks, Inc.(a) 600 14,700
- ------------------------------------------------------------------------
Optio Software, Inc.(a) 1,100 25,850
- ------------------------------------------------------------------------
PC-Tel, Inc.(a) 400 21,000
- ------------------------------------------------------------------------
Peregrine Systems, Inc.(a) 1,000 84,190
- ------------------------------------------------------------------------
Primus Knowledge Solutions, Inc.(a) 700 31,719
- ------------------------------------------------------------------------
Radiant Systems, Inc.(a) 1,600 64,300
- ------------------------------------------------------------------------
Rational Software Corp.(a) 2,000 98,250
- ------------------------------------------------------------------------
S1 Corp.(a) 500 39,062
- ------------------------------------------------------------------------
Sterling Software, Inc.(a) 3,700 116,550
- ------------------------------------------------------------------------
Symantec Corp.(a) 2,000 117,250
- ------------------------------------------------------------------------
Tanning Technology Corp.(a) 1,400 82,512
- ------------------------------------------------------------------------
Telescan, Inc.(a) 1,300 32,094
- ------------------------------------------------------------------------
Titan Corp. (The)(a) 2,100 98,962
- ------------------------------------------------------------------------
Transaction Systems Architects, Inc. - Class A(a) 500 14,000
- ------------------------------------------------------------------------
Trizetto Group, Inc. (The)(a) 2,300 107,237
- ------------------------------------------------------------------------
Unigraphics Solutions, Inc.(a) 400 10,800
- ------------------------------------------------------------------------
1,729,919
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-39
<PAGE> 116
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
CONSUMER FINANCE - 1.59%
American Capital Strategies, Ltd. 3,600 $ 81,900
- ------------------------------------------------------------------------
AmeriCredit Corp.(a) 4,700 86,950
- ------------------------------------------------------------------------
Cash America International, Inc. 700 6,825
- ------------------------------------------------------------------------
175,675
- ------------------------------------------------------------------------
DISTRIBUTORS (FOOD & HEALTH) - 0.24%
Performance Food Group Co.(a) 1,100 26,812
- ------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.05%
Plug Power, Inc.(a) 200 5,650
- ------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 3.95%
American Power Conversion Corp.(a) 2,100 55,387
- ------------------------------------------------------------------------
Cree Research, Inc.(a) 1,700 145,137
- ------------------------------------------------------------------------
DII Group, Inc.(a) 1,700 120,647
- ------------------------------------------------------------------------
Pinnacle Systems, Inc.(a) 1,500 61,031
- ------------------------------------------------------------------------
Sawtek, Inc.(a) 800 53,250
- ------------------------------------------------------------------------
435,452
- ------------------------------------------------------------------------
ELECTRONICS (COMPONENT DISTRIBUTORS) - 0.83%
Power-One, Inc.(a) 2,000 91,625
- ------------------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.23%
Aeroflex, Inc.(a) 2,400 24,900
- ------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 3.29%
Alpha Industries, Inc.(a) 1,100 63,044
- ------------------------------------------------------------------------
Methode Electronics, Inc. - Class A 3,200 102,800
- ------------------------------------------------------------------------
Tektronix, Inc. 900 34,987
- ------------------------------------------------------------------------
Varian Inc.(a) 4,200 94,500
- ------------------------------------------------------------------------
Varian Semiconductor Equipment Associates, Inc.(a) 2,000 68,000
- ------------------------------------------------------------------------
363,331
- ------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 4.01%
American Xtal Technology, Inc.(a) 700 12,206
- ------------------------------------------------------------------------
Amkor Technology, Inc.(a) 1,800 50,850
- ------------------------------------------------------------------------
Celestica Inc. (Canada)(a) 1,300 72,150
- ------------------------------------------------------------------------
Fairchild Semiconductor Corp.(a) 300 8,925
- ------------------------------------------------------------------------
Micrel, Inc.(a) 1,100 62,631
- ------------------------------------------------------------------------
Microchip Technology, Inc.(a) 1,500 102,656
- ------------------------------------------------------------------------
QuickLogic Corp.(a) 2,300 37,950
- ------------------------------------------------------------------------
Zoran Corp.(a) 1,700 94,775
- ------------------------------------------------------------------------
442,143
- ------------------------------------------------------------------------
ENTERTAINMENT - 1.34%
SFX Entertainment, Inc.(a) 1,700 61,519
- ------------------------------------------------------------------------
ValueVision International, Inc.(a) 1,500 85,969
- ------------------------------------------------------------------------
147,488
- ------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
EQUIPMENT (SEMICONDUCTOR) - 1.27%
Cohu, Inc. 1,800 $ 55,800
- ------------------------------------------------------------------------
Novellus Systems, Inc.(a) 500 61,266
- ------------------------------------------------------------------------
Veeco Instruments Inc.(a) 500 23,406
- ------------------------------------------------------------------------
140,472
- ------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 0.31%
MicroFinancial, Inc. 900 10,519
- ------------------------------------------------------------------------
SEI Investments Co. 200 23,803
- ------------------------------------------------------------------------
34,322
- ------------------------------------------------------------------------
FOODS - 0.32%
American Italian Pasta Co. - Class A(a) 1,150 35,362
- ------------------------------------------------------------------------
Health Care (Drugs - Generic & Other) - 1.15%
Alpharma, Inc. - Class A 1,300 39,975
- ------------------------------------------------------------------------
Jones Pharma, Inc. 2,000 86,875
- ------------------------------------------------------------------------
126,850
- ------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.53%
LifePoint Hospitals, Inc.(a) 4,900 57,881
- ------------------------------------------------------------------------
HEALTH CARE (MANAGED CARE) - 0.27%
Trigon Healthcare, Inc.(a) 1,000 29,500
- ------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 0.68%
Cyberonics, Inc.(a) 800 12,750
- ------------------------------------------------------------------------
Lifecore Biomedical, Inc.(a) 1,300 27,462
- ------------------------------------------------------------------------
PolyMedica Corp.(a) 1,500 34,687
- ------------------------------------------------------------------------
74,899
- ------------------------------------------------------------------------
HEALTH CARE (SPECIALIZED SERVICES) - 1.16%
Advance Paradigm, Inc.(a) 1,200 25,875
- ------------------------------------------------------------------------
MAXIMUS, Inc.(a) 1,500 50,906
- ------------------------------------------------------------------------
Orthodontic Centers of America, Inc.(a) 1,900 22,681
- ------------------------------------------------------------------------
United Payors & United Providers, Inc.(a) 1,700 28,156
- ------------------------------------------------------------------------
127,618
- ------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.14%
Annuity and Life Reassurance (Holdings), Ltd.
(Bermuda) 1,800 47,025
- ------------------------------------------------------------------------
Clarica Life Insurance Co. (Canada) 2,800 50,440
- ------------------------------------------------------------------------
Nationwide Financial Services, Inc. - Class A 800 22,350
- ------------------------------------------------------------------------
UICI(a) 600 6,337
- ------------------------------------------------------------------------
126,152
- ------------------------------------------------------------------------
INSURANCE (PROPERTY-CASUALTY) - 0.52%
CNA Surety Corp. 1,500 19,500
- ------------------------------------------------------------------------
Radian Group Inc. 793 37,866
- ------------------------------------------------------------------------
57,366
- ------------------------------------------------------------------------
INVESTMENT MANAGEMENT - 0.62%
Affiliated Managers Group, Inc.(a) 1,700 68,744
- ------------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-40
<PAGE> 117
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
LEISURE TIME (PRODUCTS) - 0.17%
JAKKS Pacific, Inc.(a) 1,000 $ 18,688
- ----------------------------------------------------------------------
MACHINERY (DIVERSIFIED) - 0.73%
Applied Power, Inc. - Class A 2,200 80,850
- ----------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.29%
Spartech Corp. 1,000 32,250
- ----------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 1.33%
Alpine Group, Inc. (The)(a) 3,800 48,925
- ----------------------------------------------------------------------
Armor Holdings, Inc.(a) 2,500 32,813
- ----------------------------------------------------------------------
Mettler-Toledo International, Inc.(a) 1,700 64,919
- ----------------------------------------------------------------------
146,657
- ----------------------------------------------------------------------
NATURAL GAS - 0.29%
Kinder Morgan, Inc. 1,600 32,300
- ----------------------------------------------------------------------
OFFICE EQUIPMENT & SUPPLIES - 0.38%
School Specialty, Inc.(a) 2,800 42,350
- ----------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 3.04%
BJ Services Co.(a) 1,700 71,081
- ----------------------------------------------------------------------
Cooper Cameron Corp.(a) 1,500 73,406
- ----------------------------------------------------------------------
Key Energy Group, Inc.(a) 15,900 82,481
- ----------------------------------------------------------------------
Pride International, Inc.(a) 3,500 51,188
- ----------------------------------------------------------------------
Tidewater, Inc. 1,600 57,600
- ----------------------------------------------------------------------
335,756
- ----------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 2.48%
Basin Exploration, Inc.(a) 1,900 33,488
- ----------------------------------------------------------------------
Chieftain International, Inc.(a) 1,600 27,600
- ----------------------------------------------------------------------
Devon Energy Corp. 700 23,013
- ----------------------------------------------------------------------
Kerr-McGee Corp. - 5.50% Pfd. DECS 1,500 48,750
- ----------------------------------------------------------------------
Newfield Exploration Co.(a) 900 24,075
- ----------------------------------------------------------------------
Nuevo Energy Co.(a) 2,500 46,875
- ----------------------------------------------------------------------
Santa Fe Snyder Corp.(a) 2,500 20,000
- ----------------------------------------------------------------------
Spinnaker Exploration Co.(a) 3,500 49,438
- ----------------------------------------------------------------------
273,239
- ----------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.67%
AMRESCO Capital Trust, Inc. 1,350 11,475
- ----------------------------------------------------------------------
Apartment Investment & Management Co. - Class A. 700 27,869
- ----------------------------------------------------------------------
Colonial Properties Trust 700 16,231
- ----------------------------------------------------------------------
Correctional Properties Trust 1,500 18,375
- ----------------------------------------------------------------------
73,950
- ----------------------------------------------------------------------
RESTAURANTS - 0.57%
CEC Entertainment, Inc.(a) 2,225 63,134
- ----------------------------------------------------------------------
RETAIL (COMPUTERS & ELECTRONICS) - 1.22%
CDW Computer Centers, Inc.(a) 1,200 94,350
- ----------------------------------------------------------------------
InterTAN, Inc.(a) 1,550 40,494
- ----------------------------------------------------------------------
134,844
- ----------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
RETAIL (DISCOUNTERS) - 0.31%
Ames Department Stores, Inc.(a) 1,200 $ 34,575
- ----------------------------------------------------------------------
RETAIL (FOOD CHAINS) - 0.99%
BJ's Wholesale Club, Inc.(a) 1,400 51,100
- ----------------------------------------------------------------------
Grand Union Co. (The)(a) 2,500 25,313
- ----------------------------------------------------------------------
Wild Oats Markets, Inc.(a) 1,475 32,727
- ----------------------------------------------------------------------
109,140
- ----------------------------------------------------------------------
RETAIL (SPECIALTY) - 3.15%
CSK Auto Corp.(a) 1,500 26,250
- ----------------------------------------------------------------------
Hollywood Entertainment Corp.(a) 2,300 33,350
- ----------------------------------------------------------------------
Linens 'n Things, Inc.(a) 700 20,738
- ----------------------------------------------------------------------
Michaels Stores, Inc.(a) 1,800 51,300
- ----------------------------------------------------------------------
Rent-A-Center, Inc.(a) 2,000 39,625
- ----------------------------------------------------------------------
Rent-Way, Inc.(a) 1,876 35,058
- ----------------------------------------------------------------------
SciQuest.com, Inc.(a) 400 31,800
- ----------------------------------------------------------------------
Sunglass Hut International, Inc.(a) 2,000 22,500
- ----------------------------------------------------------------------
Venator Group, Inc.(a) 3,100 21,700
- ----------------------------------------------------------------------
Zale Corp.(a) 1,350 65,306
- ----------------------------------------------------------------------
347,627
- ----------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.91%
Men's Wearhouse, Inc. (The)(a) 1,700 49,938
- ----------------------------------------------------------------------
Too Inc.(a) 2,900 50,025
- ----------------------------------------------------------------------
99,963
- ----------------------------------------------------------------------
SAVINGS & LOAN COMPANIES - 0.42%
Bay View Capital Corp. 1,400 19,863
- ----------------------------------------------------------------------
Local Financial Corp.(a) 2,500 25,938
- ----------------------------------------------------------------------
45,801
- ----------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 2.75%
Circle.com(a) 1,000 12,313
- ----------------------------------------------------------------------
Lamar Advertising Co.(a) 1,050 63,591
- ----------------------------------------------------------------------
Snyder Communications, Inc.(a) 1,100 21,175
- ----------------------------------------------------------------------
TeleTech Holdings, Inc.(a) 3,400 114,591
- ----------------------------------------------------------------------
Young & Rubicam Inc. 1,300 91,975
- ----------------------------------------------------------------------
303,645
- ----------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 2.69%
Copart, Inc.(a) 1,500 65,250
- ----------------------------------------------------------------------
F.Y.I., Inc.(a) 900 30,600
- ----------------------------------------------------------------------
Iron Mountain Inc.(a) 2,050 80,591
- ----------------------------------------------------------------------
Pegasus Systems, Inc.(a) 700 42,219
- ----------------------------------------------------------------------
Quanta Services, Inc.(a) 1,200 33,900
- ----------------------------------------------------------------------
Regis Corp. 2,350 44,356
- ----------------------------------------------------------------------
296,916
- ----------------------------------------------------------------------
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-41
<PAGE> 118
<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
FS-42
<PAGE> 119
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.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-43
<PAGE> 120
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<S> <C> <C>
OPERATIONS: 1999 1998
----------- ----------
Net investment income (loss) $ (15,062) $ 8,126
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies and option contracts 8,448 (254,021)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and option contracts 2,014,708 294,948
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,008,094 49,053
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income -- (12,074)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 5,854,369 3,135,489
- --------------------------------------------------------------------------------
Net increase in net assets 7,862,463 3,172,468
================================================================================
NET ASSETS:
Beginning of period 3,172,468 --
- --------------------------------------------------------------------------------
End of period $11,034,931 $3,172,468
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 8,979,016 $3,134,630
- --------------------------------------------------------------------------------
Undistributed net investment income (loss) (8,290) (3,061)
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from investment
securities, foreign currencies and option contracts (245,451) (254,049)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
option contracts 2,309,656 294,948
- --------------------------------------------------------------------------------
$11,034,931 $3,172,468
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Capital Development Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is long-term
capital appreciation.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as yield,
type of issue, coupon rate and maturity date. Securities for which market
prices are not provided by any of the above methods are valued based upon
quotes furnished by independent sources and are valued at the last bid price
in the case of equity securities and in the case of debt obligations, the
mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-44
<PAGE> 121
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.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-45
<PAGE> 122
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $59 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $59
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $10,259,505 and $5,809,014, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $2,548,222
- -------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (261,458)
- -------------------------------------------------------------------------
Net unrealized appreciation of investment securities $2,286,764
=========================================================================
</TABLE>
Cost of investments for tax purposes is $8,629,182.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION
CONTRACTS
------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- --------
<S> <C> <C>
Beginning of year -- $ --
- -------------------------------------------------------------------------
Written 37 10,229
- -------------------------------------------------------------------------
Closed (32) (8,769)
- -------------------------------------------------------------------------
Exercised (3) (1,303)
- -------------------------------------------------------------------------
Expired (2) (157)
- -------------------------------------------------------------------------
End of year -- --
=========================================================================
</TABLE>
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-46
<PAGE> 123
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- -------------------
Shares Amount Shares Amount
-------- ---------- ------- ----------
<S> <C> <C> <C> <C>
Sold 746,789 $7,361,857 403,978 $3,617,838
- -------------------------------------------------------------------------------
Issued as reinvestment of dividends -- -- 1,426 12,074
- -------------------------------------------------------------------------------
Reacquired (163,001) (1,507,488) (60,954) (494,423)
- -------------------------------------------------------------------------------
583,788 $5,854,369 344,450 $3,135,489
===============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999, and the period May 1, 1998 (date
operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998(a)
------- -------
<S> <C> <C>
Net asset value, beginning of period $ 9.21 $10.00
- ---------------------------------------------------------------------------
Income from investment operations:
Net investment income (loss) (0.03) 0.03
- ---------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) 2.71 (0.78)
- ---------------------------------------------------------------------------
Total from investment operations 2.68 (0.75)
- ---------------------------------------------------------------------------
Less distributions:
Dividends from net investment income -- (0.04)
- ---------------------------------------------------------------------------
Net asset value, end of period $ 11.89 $ 9.21
===========================================================================
Total return(b) 29.10% (7.51)%
===========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $11,035 $3,172
===========================================================================
Ratio of expenses to average net assets(c) 1.23%(d) 1.21%(e)
===========================================================================
Ratio of net investment income (loss) to average net
assets(f) (0.32)%(d) 0.62%(e)
===========================================================================
Portfolio turnover rate 132% 45%
===========================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns is not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratio of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
3.42% and 5.80% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $4,763,466.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratio of net investment
income (loss) to average net assets prior to fee waivers and/or expense
reimbursement were (2.51)% and (3.97)% (annualized) for 1999 and 1998,
respectively.
AIM V.I. CAPITAL DEVELOPMENT FUND
FS-47
<PAGE> 124
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
FS-48
<PAGE> 125
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.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-49
<PAGE> 126
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
FS-50
<PAGE> 127
STATEMENT OF CHANGES IN NET ASSETS
For the period December 29, 1999 (date operations commenced)
through December 31, 1999
<TABLE>
<CAPTION>
1999
---------
<S> <C>
OPERATIONS:
Net investment income $ 163
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of investment
securities (574)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations (411)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 1,000,010
- ------------------------------------------------------------------------------
Net increase in net assets 999,599
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of period --
- ------------------------------------------------------------------------------
End of period $ 999,599
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 999,988
- ------------------------------------------------------------------------------
Undistributed net investment income 185
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of investment securities (574)
- ------------------------------------------------------------------------------
$ 999,599
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Dent Demographic Trends Fund (the "Fund") is a series portfolio of
AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. The Fund commenced operations December 29, 1999. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies. The Fund's investment objective is to achieve long-term growth of
capital.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are valued
on the basis of prices provided by an independent pricing service. Prices
provided by the pricing service may be determined without exclusive reliance
on quoted prices, and may reflect appropriate factors such as yield, type of
issue, coupon rate and maturity date. Securities for which market prices are
not provided by any of the above methods are valued based upon quotes
furnished by independent sources and are valued at the last bid price in the
case of equity securities and in the case of debt obligations, the mean
between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-51
<PAGE> 128
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
FS-52
<PAGE> 129
NOTE 6 - CAPITAL STOCK
Changes in capital stock outstanding during the period December 29, 1999 (date
operations commenced) through December 31, 1999 were as follows:
<TABLE>
<CAPTION>
1999
------------------
SHARES AMOUNT
------- ----------
<S> <C> <C>
Sold 100,001 $1,000,010
================================================================================
</TABLE>
NOTE 7 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the period December 29, 1999 (date operations commenced) through
December 31, 1999.
<TABLE>
<CAPTION>
1999
------
<S> <C>
Net asset value, beginning of period $10.00
- -------------------------------------------------------------------------
Income from investment operations:
Net investment income 0.00
- -------------------------------------------------------------------------
Less distributions:
Dividends from net investment income --
- -------------------------------------------------------------------------
Net asset value, end of period $10.00
=========================================================================
Total return(a) 0.00%
=========================================================================
Ratios/supplemental data:
Net assets, end of period (000s omitted) $1,000
=========================================================================
Ratio of expenses to average net assets(b):
With expense waiver and reimbursement 1.40%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement 12.58%
=========================================================================
Ratio of net investment income (loss) to average net assets(b):
With expense waiver and reimbursement 2.96%
- -------------------------------------------------------------------------
Without expense waiver and reimbursement (8.22)%
=========================================================================
Portfolio turnover rate --
=========================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are annualized and based on average net assets of $666,528.
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
FS-53
<PAGE> 130
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
AIM V.I. DIVERSIFIED INCOME FUND
FS-54
<PAGE> 131
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS & NOTES - 62.09%
AIR FREIGHT - 0.64%
Atlas Air, Inc., Sr. Unsec. Notes, 10.75%, 08/01/05 $ 620,000 $ 638,600
- -----------------------------------------------------------------------------
AIRLINES - 3.32%
Air 2 US - Series C, Equipment Trust Ctfs., 10.13%,
10/01/20 (Acquired 10/28/99; Cost $550,000)(a) 550,000 547,514
- -----------------------------------------------------------------------------
Airplanes Pass Through Trust - Series D, Gtd. Sub.
Bonds, 10.88%, 03/15/19 300,000 264,000
- -----------------------------------------------------------------------------
Delta Air Lines, Inc., Deb.,
9.00%, 05/15/16 825,000 853,396
- -----------------------------------------------------------------------------
10.38%, 12/15/22 600,000 705,090
- -----------------------------------------------------------------------------
Dunlop Standard Aerospace Holdings PLC (United
Kingdom), Sr. Unsec. Sub. Notes, 11.88%, 05/15/09 460,000 475,525
- -----------------------------------------------------------------------------
United Air Lines, Inc. - Series 95A2, Pass Through
Ctfs., 9.56%, 10/19/18 425,000 454,040
- -----------------------------------------------------------------------------
3,299,565
- -----------------------------------------------------------------------------
AUTO PARTS & EQUIPMENT - 0.66%
Advance Stores Co., Inc. - Series B, Sr. Unsec. Gtd.
Sub. Notes, 10.25%, 04/15/08 335,000 289,775
- -----------------------------------------------------------------------------
Exide Corp., Sr. Notes, 10.00%, 04/15/05 380,000 370,500
- -----------------------------------------------------------------------------
660,275
- -----------------------------------------------------------------------------
AUTOMOBILES - 0.44%
General Motors Corp., Putable Deb., 8.80%, 03/01/21 400,000 440,096
- -----------------------------------------------------------------------------
BANKS (MAJOR REGIONAL) - 0.73%
Midland Bank PLC (United Kingdom), Sub. Notes, 7.65%,
05/01/25 245,000 244,417
- -----------------------------------------------------------------------------
Regions Financial Corp., Putable Sub. Notes, 7.75%,
09/15/24 500,000 482,895
- -----------------------------------------------------------------------------
727,312
- -----------------------------------------------------------------------------
BANKS (MONEY CENTER) - 1.80%
Bayerische Landesbank Girozentrale (Germany), Unsec.
Sub. Notes, 5.88%, 12/01/08 100,000 89,812
- -----------------------------------------------------------------------------
First Union Corp., Putable Sub. Deb., 7.50%, 04/15/35 800,000 798,600
- -----------------------------------------------------------------------------
Republic New York Corp.,
Sub. Deb., 9.50%, 04/15/14 350,000 385,728
- -----------------------------------------------------------------------------
Sub. Notes, 9.70%, 02/01/09 470,000 518,673
- -----------------------------------------------------------------------------
1,792,813
- -----------------------------------------------------------------------------
BANKS (REGIONAL) - 1.27%
Mercantile Bancorp., Inc., Unsec. Sub. Notes, 7.30%,
06/15/07 825,000 807,799
- -----------------------------------------------------------------------------
Riggs Capital Trust II - Series C, Gtd. Bonds, 8.88%,
03/15/27 500,000 456,091
- -----------------------------------------------------------------------------
1,263,890
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
BROADCASTING (TELEVISION, RADIO & CABLE) - 5.69%
British Sky Broadcasting Group PLC (United Kingdom),
Sr. Unsec. Gtd. Yankee Notes, 8.20%, 07/15/09 $ 795,000 $ 765,606
- ------------------------------------------------------------------------------
Comcast Cable Communications, Unsec. Notes, 8.50%,
05/01/27 500,000 530,860
- ------------------------------------------------------------------------------
CSC Holdings Inc.,
Sr. Unsec. Deb., 7.88%, 02/15/18 400,000 382,784
- ------------------------------------------------------------------------------
Sr. Unsec. Deb., 7.63%, 07/15/18 1,400,000 1,306,620
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 7.88%, 12/15/07 500,000 493,275
- ------------------------------------------------------------------------------
Fox Family Worldwide, Inc., Sr. Unsec. Disc. Notes,
10.25%, 11/01/07(b) 840,000 554,400
- ------------------------------------------------------------------------------
Knology Holdings, Inc., Sr. Disc. Notes, 11.88%,
10/15/07(b) 1,000,000 672,500
- ------------------------------------------------------------------------------
Lenfest Communications, Inc., Sr. Unsec. Sub. Notes,
8.25%, 02/15/08 950,000 954,750
- ------------------------------------------------------------------------------
5,660,795
- ------------------------------------------------------------------------------
BUILDING MATERIALS - 0.11%
Blount Inc., Sr. Sub Notes, 13.00%, 08/01/09(c) 100,000 106,000
- ------------------------------------------------------------------------------
CHEMICALS - 0.16%
Lyondell Chemical Co., Sr. Gtd. Sub. Notes, 10.88%,
05/01/09 150,000 155,250
- ------------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.17%
Dialog Corp. PLC - Series A (United Kingdom), Sr. Sub.
Yankee Notes, 11.00%, 11/15/07 350,000 169,750
- ------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.66%
Lattice Semiconductor Corp., Conv. Notes, 4.75%,
11/01/06 (Acquired 12/03/99; Cost $690,000)(a) 500,000 659,520
- ------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.39%
Exodus Communications, Inc., Sr. Unsec. Notes, 11.25%,
07/01/08 375,000 390,937
- ------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 0.31%
Equinix Inc., Sr. Notes, 13.00%, 12/01/07(c)(d) 300,000 311,250
- ------------------------------------------------------------------------------
CONSUMER FINANCE - 1.55%
Capital One Financial Corp., Unsec. Notes, 7.25%,
05/01/06 530,000 500,643
- ------------------------------------------------------------------------------
Countrywide Capital III - Series B, Gtd. Bonds, 8.05%,
06/15/27 400,000 368,388
- ------------------------------------------------------------------------------
MBNA Capital I - Series A, Gtd. Bonds, 8.28%, 12/01/26 770,000 675,629
- ------------------------------------------------------------------------------
1,544,660
- ------------------------------------------------------------------------------
ELECTRIC COMPANIES - 3.11%
Cleveland Electric Illuminating Co. (The) - Series D,
Sr. Sec. Notes, 7.88%, 11/01/17 500,000 471,832
- ------------------------------------------------------------------------------
El Paso Electric Co. - Series E, Sec. First Mortgage
Bonds, 9.40%, 05/01/11 150,000 158,914
- ------------------------------------------------------------------------------
Niagara Mohawk Power Co. - Series H, Sr. Unsec. Disc.
Notes, 8.50%, 07/01/10(b) 2,000,000 1,498,240
- ------------------------------------------------------------------------------
Southern Energy, Inc., Sr. Notes, 7.90%, 07/15/09
(Acquired 12/03/99; Cost $980,670)(a) 1,000,000 964,160
- ------------------------------------------------------------------------------
3,093,146
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-55
<PAGE> 132
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ENTERTAINMENT - 1.55%
Time Warner Inc., Deb., 9.13%, 01/15/13 $1,400,000 $ 1,537,858
- ------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.13%
Heller Financial, Inc., Notes, 7.38%, 11/01/09
(Acquired 11/23/99; Cost $323,970)(a) 325,000 316,982
- ------------------------------------------------------------------------------
Source One Mortgage Services Corp., Deb., 9.00%,
06/01/12 180,000 196,063
- ------------------------------------------------------------------------------
Sumitomo Bank International Finance N.V. (Japan), Gtd.
Sub. Notes, 8.50%, 06/15/09 600,000 610,949
- ------------------------------------------------------------------------------
1,123,994
- ------------------------------------------------------------------------------
FOODS - 1.41%
ConAgra, Inc., Sr. Unsec. Putable Notes, 7.13%,
10/01/26 1,300,000 1,259,713
- ------------------------------------------------------------------------------
Vlasic Foods International Inc. - Series B, Sr. Unsec.
Sub. Notes, 10.25%, 07/01/09 150,000 143,625
- ------------------------------------------------------------------------------
1,403,338
- ------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 0.72%
Hollywood Casino Corp.,
Class A, 1st Mortgage, 13.00%, 08/01/06(c) 150,000 161,250
- ------------------------------------------------------------------------------
Sr. Sec. Gtd. Sub. Notes, 11.25%, 05/01/07(c) 125,000 131,250
- ------------------------------------------------------------------------------
Hollywood Park, Inc. - Series B, Sr. Gtd. Unsec. Sub.
Notes, 9.25%, 02/15/07 75,000 74,812
- ------------------------------------------------------------------------------
Venetian Casino Resort LLC, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 400,000 351,000
- ------------------------------------------------------------------------------
718,312
- ------------------------------------------------------------------------------
HEALTH CARE (HOSPITAL MANAGEMENT) - 0.16%
Triad Hospitals Holdings Inc. - Series B, Sr. Unsec.
Gtd. Sub. Notes, 11.00%, 05/15/09 150,000 156,000
- ------------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 0.37%
Procter & Gamble Co. (The), Putable Deb., 8.00%,
09/01/24 350,000 371,602
- ------------------------------------------------------------------------------
HOUSEWARES - 0.40%
Decora Industries, Inc. - Series B, Sr. Sec. Gtd.
Notes, 11.00%, 05/01/05 500,000 402,500
- ------------------------------------------------------------------------------
INSURANCE (LIFE/HEALTH) - 1.36%
Americo Life, Inc., Sr. Sub. Notes, 9.25%, 06/01/05 75,000 75,375
- ------------------------------------------------------------------------------
Conseco, Inc., Unsec. Notes,
6.80%, 06/15/05 235,000 219,539
- ------------------------------------------------------------------------------
9.00%, 10/15/06 200,000 205,846
- ------------------------------------------------------------------------------
Torchmark Corp., Notes, 7.88%, 05/15/23 950,000 849,139
- ------------------------------------------------------------------------------
1,349,899
- ------------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 1.38%
HSBC America Capital Trust II, Gtd. Bonds, 8.38%,
05/15/27 (Acquired 08/12/99; Cost $431,289)(a) 450,000 416,691
- ------------------------------------------------------------------------------
Lehman Brothers Holdings Inc.,
Notes, 8.50%, 08/01/15 360,000 368,860
- ------------------------------------------------------------------------------
Sr. Sub. Notes, 7.38%, 01/15/07 470,000 456,370
- ------------------------------------------------------------------------------
Sr. Notes, 8.80%, 03/01/15 130,000 135,915
- ------------------------------------------------------------------------------
1,377,836
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
IRON & STEEL - 0.29%
Acme Metal Inc., Sr. Unsec. Gtd. Notes, 10.88%,
12/15/07(e) $ 633,000 $ 129,765
- -------------------------------------------------------------------------------
GS Technologies Operating Co., Inc., Sr. Gtd. Notes,
12.00%, 09/01/04 350,000 162,750
- -------------------------------------------------------------------------------
292,515
- -------------------------------------------------------------------------------
LODGING - HOTELS - 0.87%
Hilton Hotels Corp., Conv. Sub. Notes, 5.00%, 05/15/06 125,000 96,250
- -------------------------------------------------------------------------------
John Q. Hammons Hotels, Inc., Sec. First Mortgage
Notes, 9.75%, 10/01/05 550,000 508,750
- -------------------------------------------------------------------------------
Stena Line A.B. (Sweden), Sr. Unsec. Yankee Notes,
10.63%, 06/01/08 430,000 260,150
- -------------------------------------------------------------------------------
865,150
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 0.10%
Glenoit Corp., Sr. Unsec. Gtd. Sub. Notes, 11.00%,
04/15/07 340,000 86,700
- -------------------------------------------------------------------------------
Mechala Group (Jamaica) Series B, Sr. Gtd. Sub. Notes,
12.75%, 12/30/99(f) 44,000 15,510
- -------------------------------------------------------------------------------
102,210
- -------------------------------------------------------------------------------
MANUFACTURING (SPECIALIZED) - 0.40%
MMI Products, Inc. - Series B, Sr. Unsec. Sub. Notes,
11.25%, 04/15/07 380,000 393,300
- -------------------------------------------------------------------------------
METALS MINING - 0.90%
Centaur Mining and Exploration Ltd. (Australia), Sr.
Gtd. Yankee Notes, 11.00%, 12/01/07 550,000 547,250
- -------------------------------------------------------------------------------
Rio Algom Ltd. (Canada), Unsec. Yankee Deb., 7.05%,
11/01/05 370,000 346,405
- -------------------------------------------------------------------------------
893,655
- -------------------------------------------------------------------------------
NATURAL GAS - 2.00%
Dynegy Inc., Sr. Unsec. Deb., 7.13%, 05/15/18 500,000 445,460
- -------------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 6.75%, 07/01/05 450,000 431,973
- -------------------------------------------------------------------------------
Nova Gas Transmission Ltd. (Canada), Yankee Deb.,
8.50%, 12/15/12 500,000 520,145
- -------------------------------------------------------------------------------
Sonat Inc., Unsec. Notes, 7.63%, 07/15/11 600,000 590,136
- -------------------------------------------------------------------------------
1,987,714
- -------------------------------------------------------------------------------
OIL & GAS (DRILLING & EQUIPMENT) - 0.57%
NRG Energy, Inc., Sr. Unsec. Notes, 7.50%, 06/01/09 500,000 460,350
- -------------------------------------------------------------------------------
Pride International, Inc., Sr. Unsec. Notes, 10.00%,
06/01/09 100,000 103,750
- -------------------------------------------------------------------------------
564,100
- -------------------------------------------------------------------------------
OIL & GAS (EXPLORATION & PRODUCTION) - 1.00%
ONEOK, Inc., Unsec. Notes, 7.75%, 08/15/06 400,000 395,996
- -------------------------------------------------------------------------------
Queen Sand Resources, Inc., Sr. Unsec. Gtd. Sub. Notes,
12.50%, 07/01/08 240,000 116,400
- -------------------------------------------------------------------------------
Talisman Energy Inc. (Canada), Yankee Deb., 7.13%,
06/01/07 500,000 480,475
- -------------------------------------------------------------------------------
992,871
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-56
<PAGE> 133
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
OIL & GAS (REFINING & MARKETING) - 0.29%
Texas Petrochemical Corp., Sr. Unsec. Sub. Notes,
11.13%, 07/01/06 $ 330,000 $ 288,750
- -------------------------------------------------------------------------------
PHOTOGRAPHY/IMAGING - 0.06%
Polaroid Corp., Sr. Unsec. Notes, 11.50%, 02/15/06 60,000 59,700
- -------------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.69%
AES Corp., Sr. Notes, 8.00%, 12/31/08 750,000 688,125
- -------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 1.59%
News America Holdings, Inc.
Sr. Gtd. Deb., 9.25%, 02/01/13 1,000,000 1,089,900
- -------------------------------------------------------------------------------
Sr. Unsec. Gtd. Putable Bonds, 7.43%, 10/01/26 500,000 491,105
- -------------------------------------------------------------------------------
1,581,005
- -------------------------------------------------------------------------------
RAILROADS - 1.68%
CSX Corp., Sr. Unsec. Putable Deb.,
6.95%, 05/01/27 300,000 298,047
- -------------------------------------------------------------------------------
7.25%, 05/01/27 750,000 736,103
- -------------------------------------------------------------------------------
Norfolk Southern Corp., Notes, 7.05%, 05/01/37 650,000 637,150
- -------------------------------------------------------------------------------
1,671,300
- -------------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.97%
Health Care REIT, Inc., Unsec. Notes,
7.57%, 04/15/00 300,000 298,602
- -------------------------------------------------------------------------------
Spieker Properties, Inc., Unsec. Deb.,
7.35%, 12/01/17 750,000 662,033
- -------------------------------------------------------------------------------
960,635
- -------------------------------------------------------------------------------
RETAIL (DRUG STORES) - 0.15%
Rite Aid Corp., Conv. Unsec. Sub. Notes,
5.25%, 09/15/02 220,000 150,150
- -------------------------------------------------------------------------------
RETAIL (GENERAL MERCHANDISE) - 0.17%
Plainwell Inc. - Series B, Sr. Unsec. Sub. Notes,
11.00%, 03/01/08 330,000 173,250
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 1.68%
Amazon.com, Inc., Conv. Deb., 4.75%, 02/01/09 (Acquired
01/29/99; Cost $501,875)(a) 500,000 568,125
- -------------------------------------------------------------------------------
CSK Auto Inc. - Series A, Sr. Gtd. Sub. Deb,
11.00%, 11/01/06 260,000 265,200
- -------------------------------------------------------------------------------
Neff Corp., Sr. Unsec. Gtd. Sub. Notes,
10.25%, 06/01/08 330,000 319,275
- -------------------------------------------------------------------------------
Rent-A-Center, Inc., Sr. Unsec. Gtd. Sub. Notes,
11.00%, 08/15/08 500,000 516,250
- -------------------------------------------------------------------------------
1,668,850
- -------------------------------------------------------------------------------
RETAIL (SPECIALTY-APPAREL) - 0.70%
Big 5 Corp. - Series B, Sr. Unsec. Notes,
10.88%, 11/15/07 500,000 495,000
- -------------------------------------------------------------------------------
J Crew Operating Corp., Sr. Sub. Notes,
10.38%, 10/15/07 240,000 202,800
- -------------------------------------------------------------------------------
697,800
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
SAVINGS & LOAN COMPANIES - 1.78%
Dime Capital Trust I - Series A, Gtd. Bonds,
9.33%, 05/06/27 $ 420,000 $ 396,026
- -------------------------------------------------------------------------------
Sovereign Bancorp, Inc., Medium Term Sub. Notes, 8.00%,
03/15/03 800,000 764,008
- -------------------------------------------------------------------------------
St. Paul Bancorp, Inc., Sr. Unsec. Notes,
7.13%, 02/15/04 245,000 238,811
- -------------------------------------------------------------------------------
Washington Mutual, Inc.,
Gtd. Bonds, 8.38%, 06/01/27 190,000 181,549
- -------------------------------------------------------------------------------
Notes, 7.50%, 08/15/06 195,000 194,078
- -------------------------------------------------------------------------------
1,774,472
- -------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.43%
Interpublic Group of Companies, Inc. (The), Conv.
Notes, 1.87%, 06/01/06 (Acquired 05/26/99;
Cost $92,650)(a) 110,000 124,988
- -------------------------------------------------------------------------------
MDC Communications Corp. (Canada), Sr. Unsec. Sub.
Yankee Notes, 10.50%, 12/01/06 300,000 297,750
- -------------------------------------------------------------------------------
422,738
- -------------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.18%
CUC International, Inc., Conv. Sub. Notes, 3.00%,
02/15/02 73,000 73,730
- -------------------------------------------------------------------------------
Hydrochem Industrial Service Co. - Series B, Sr. Gtd.
Sub. Notes, 10.38%, 08/01/07 140,000 120,750
- -------------------------------------------------------------------------------
Laidlaw Inc. (Canada),
Unsec. Yankee Deb., 6.70%, 05/01/08 500,000 425,585
- -------------------------------------------------------------------------------
Unsec. Yankee Notes, 7.65%, 05/15/06 600,000 557,430
- -------------------------------------------------------------------------------
1,177,495
- -------------------------------------------------------------------------------
SERVICES (EMPLOYMENT) - 0.37%
MSX International, Inc., Sr. Unsec. Gtd. Sub. Notes,
11.38%, 01/15/08 380,000 364,800
- -------------------------------------------------------------------------------
SHIPPING - 0.58%
Hutchison Delta Finance Ltd. - Series REGS (Cayman
Islands), Conv. Unsec. Notes, 7.00%, 11/25/01 500,000 580,000
- -------------------------------------------------------------------------------
SOVEREIGN DEBT - 2.52%
Ministry Finance Russia (Vneshtorgbank) (Russia), Deb.,
3.00%, 05/14/06 9,000 2,999
- -------------------------------------------------------------------------------
Province of Manitoba - Series A2 (Canada), Putable
Yankee Deb., 7.75%, 07/17/16 950,000 972,753
- -------------------------------------------------------------------------------
Province of Quebec - Series A (Canada), Medium Term
Putable Yankee Notes,
5.74%, 03/02/26 750,000 743,715
- -------------------------------------------------------------------------------
6.29%, 03/06/26 800,000 786,592
- -------------------------------------------------------------------------------
2,506,059
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 1.83%
Clearnet Communications, Inc. (Canada), Sr. Unsec.
Disc. Yankee Notes, 14.75%, 12/15/05(b) 110,000 108,900
- -------------------------------------------------------------------------------
US Unwired Inc., Sr. Disc. Notes,
13.38%, 11/01/09(b)(c) 1,100,000 643,500
- -------------------------------------------------------------------------------
WebLink Wireless, Inc., Sr. Disc. Sub. Notes,
11.25%, 02/01/08(b) 750,000 266,250
- -------------------------------------------------------------------------------
Worldwide Fiber Inc. (Canada), Sr. Notes,
12.50%, 12/15/05 210,000 221,550
- -------------------------------------------------------------------------------
12.00%, 08/01/09(c) 560,000 581,000
- -------------------------------------------------------------------------------
1,821,200
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-57
<PAGE> 134
<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>
AIM V.I. DIVERSIFIED INCOME FUND
FS-58
<PAGE> 135
<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
FS-59
<PAGE> 136
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER EQUITY
INTERESTS - 2.09%
BANKS (MAJOR REGIONAL) - 0.50%
Societe Generale (France) 2,150 $ 499,853
- ------------------------------------------------------------------------------
BANKS (REGIONAL) - 1.21%
First Republic Capital Corp. - Series A-Pfd. (Acquired
05/26/99; Cost $750,000)(a) 750 690,000
- ------------------------------------------------------------------------------
Westpac Banking Corp., STRYPES Trust - $3.135 Conv.
Pfd. 16,000 513,000
- ------------------------------------------------------------------------------
1,203,000
- ------------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.00%
Knology Inc. - Wts., expiring 10/22/07
(Acquired 03/12/98; Cost $0)(a)(i) 1,000 2,750
- ------------------------------------------------------------------------------
Wireless One, Inc. - Wts., expiring 10/19/00(i) 420 0
- ------------------------------------------------------------------------------
2,750
- ------------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.00%
Electronic Retailing Systems International, Inc. -
Wts., expiring 02/01/04(i) 590 590
- ------------------------------------------------------------------------------
IRON & STEEL - 0.00%
Gulf States Steel, Inc. - Wts., expiring 04/15/03(i) 230 2
- ------------------------------------------------------------------------------
PUBLISHING (NEWSPAPERS) - 0.11%
Tribune Co. - $3.14 Conv. Pfd. 3.14%, 06/01/00 700 105,963
- ------------------------------------------------------------------------------
SOVEREIGN DEBT - 0.02%
Republic of Argentina - Wts. (Argentina),
expiring 02/25/00(i) 198 2,698
- ------------------------------------------------------------------------------
United Mexican States - Wts. (Mexico),
expiring 02/18/00(i) 180 16,672
- ------------------------------------------------------------------------------
19,370
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 0.04%
Clearnet Communications Inc. -
Class A-ADR (Canada)(i) 891 30,628
- ------------------------------------------------------------------------------
Loral Space & Communications Ltd.(i) 351 8,534
- ------------------------------------------------------------------------------
39,162
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS
(LONG DISTANCE) - 0.17%
Tele1 Europe B.V. - Wts. (Netherlands),
expiring 05/15/08(c)(i) 400 68,100
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. - Wts.
(Netherlands), expiring 05/15/08(i) 250 100,063
- ------------------------------------------------------------------------------
168,163
- ------------------------------------------------------------------------------
TELEPHONE - 0.04%
Esat Telecom Group PLC - Wts. (Ireland),
expiring 02/01/07(i) 470 34,075
- ------------------------------------------------------------------------------
Total Common Stocks & Other Equity Interests
(Cost $1,628,916) 2,072,928
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ASSET-BACKED SECURITIES - 1.44%
CONSUMER FINANCE - 0.30%
Green Tree Home Equity Loan Trust - Series 1999-D-
Class A5 Bond, 7.88%, 09/15/30 $ 300,000 $ 303,076
- -----------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.18%
Contimortgage Home Equity Loan Trust, Sub. Series
1999-2-Class B Notes, 8.50%, 04/25/29 200,000 180,094
- -----------------------------------------------------------------------------
RETAIL (HOME SHOPPING) - 0.50%
Fingerhut Master Trust, Sub. Series 1998-2-Class C
Floating Rate Notes, 7.41%, 02/15/07 500,000 494,577
- -----------------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 0.46%
Aircraft Finance Trust - Series 1999-1A-Class A, Sub.
Bonds, 8.00%, 05/15/24 500,000 456,553
- -----------------------------------------------------------------------------
Total Asset-Backed Securities
(Cost $1,473,598) 1,434,300
- -----------------------------------------------------------------------------
U.S. GOVERNMENT AGENCY SECURITIES - 0.94%
FEDERAL HOME LOAN MORTGAGE CORP. ("FHLMC") - 0.03%
Pass Through Ctfs., 8.50%, 03/01/10 28,676 29,590
- -----------------------------------------------------------------------------
FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") -
0.91%
7.50%, 04/01/29 to 10/01/29 917,354 908,366
- -----------------------------------------------------------------------------
Total U.S. Government Agency Securities
(Cost $946,021) 937,956
- -----------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 8.03%
U.S. TREASURY NOTES - 7.99%
5.50%, 07/31/01 400,000 395,900
- -----------------------------------------------------------------------------
4.25%, 11/15/03 300,000 278,739
- -----------------------------------------------------------------------------
7.25%, 08/15/04 5,000,000 5,157,000
- -----------------------------------------------------------------------------
5.88%, 11/15/04 1,000,000 980,310
- -----------------------------------------------------------------------------
6.88%, 05/15/06 250,000 254,263
- -----------------------------------------------------------------------------
5.63%, 05/15/08 675,000 635,033
- -----------------------------------------------------------------------------
4.75%, 11/15/08 280,000 246,999
- -----------------------------------------------------------------------------
7,948,244
- -----------------------------------------------------------------------------
U.S. TREASURY BONDS - 0.04%
6.38%, 08/15/27 40,000 38,414
- -----------------------------------------------------------------------------
Total U.S. Treasury Securities (Cost $8,160,540) 7,986,658
- -----------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 2.90%
STIC Liquid Assets Portfolio(j) 1,443,333 1,443,333
- -----------------------------------------------------------------------------
STIC Prime Portfolio(j) 1,443,333 1,443,333
- -----------------------------------------------------------------------------
Total Money Market Funds (Cost $2,886,666) 2,886,666
- -----------------------------------------------------------------------------
TOTAL INVESTMENTS - 98.03% (Cost $102,304,290) 97,547,117
=============================================================================
OTHER ASSETS LESS LIABILITIES - 1.97% 1,961,461
=============================================================================
NET ASSETS - 100.00% $99,508,578
=============================================================================
</TABLE>
AIM V.I. DIVERSIFIED INCOME FUND
FS-60
<PAGE> 137
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
FS-61
<PAGE> 138
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $102,304,290) $97,547,117
- ---------------------------------------------------------------------
Foreign currency, at value (cost $723,469) 712,901
- ---------------------------------------------------------------------
Receivables for:
Investments sold 947
- ---------------------------------------------------------------------
Forward currency contracts 108,166
- ---------------------------------------------------------------------
Forward currency contracts closed 32,061
- ---------------------------------------------------------------------
Capital stock sold 66,630
- ---------------------------------------------------------------------
Dividends and interest 1,878,715
- ---------------------------------------------------------------------
Investment for deferred compensation plan 28,680
- ---------------------------------------------------------------------
Other assets 340
- ---------------------------------------------------------------------
Total assets 100,375,557
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 609,856
- ---------------------------------------------------------------------
Forward currency contracts 60,337
- ---------------------------------------------------------------------
Forward currency contracts closed 2,052
- ---------------------------------------------------------------------
Capital stock reacquired 15,064
- ---------------------------------------------------------------------
Deferred compensation plan 28,680
- ---------------------------------------------------------------------
Accrued advisory fees 51,548
- ---------------------------------------------------------------------
Accrued administrative service fees 20,327
- ---------------------------------------------------------------------
Accrued operating expenses 79,115
- ---------------------------------------------------------------------
Total liabilities 866,979
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $99,508,578
=====================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 9,892,323
=====================================================================
Net asset value, offering and redemption price per share $ 10.06
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $ 7,310,562
- -------------------------------------------------------------------------------
Dividends (net of $1,894 foreign withholding tax) 134,048
- -------------------------------------------------------------------------------
Total investment income 7,444,610
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 556,418
- -------------------------------------------------------------------------------
Administrative services fees 67,038
- -------------------------------------------------------------------------------
Custodian fees 48,004
- -------------------------------------------------------------------------------
Directors' fees 7,655
- -------------------------------------------------------------------------------
Other 90,853
- -------------------------------------------------------------------------------
Total expenses 769,968
- -------------------------------------------------------------------------------
Less: Expenses paid indirectly (644)
- -------------------------------------------------------------------------------
Net expenses 769,324
- -------------------------------------------------------------------------------
Net investment income 6,675,286
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities (5,242,949)
- -------------------------------------------------------------------------------
Foreign currencies (38,715)
- -------------------------------------------------------------------------------
Forward currency contracts 540,020
- -------------------------------------------------------------------------------
(4,741,644)
- -------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (3,362,627)
- -------------------------------------------------------------------------------
Foreign currencies (9,253)
- -------------------------------------------------------------------------------
Forward currency contracts (88,248)
- -------------------------------------------------------------------------------
(3,460,128)
- -------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies and
forward currency contracts (8,201,772)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $(1,526,486)
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. DIVERSIFIED INCOME FUND
FS-62
<PAGE> 139
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 6,675,286 $ 6,761,255
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment
securities, foreign currencies and forward
currency contracts (4,741,644) (884,777)
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities, foreign
currencies and forward currency contracts (3,460,128) (2,586,149)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (1,526,486) 3,290,329
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (6,334,513) (4,724,444)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains -- (1,507,363)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 10,924,224 10,068,179
- ------------------------------------------------------------------------------
Net increase in net assets 3,063,225 7,126,701
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 96,445,353 89,318,652
- ------------------------------------------------------------------------------
End of year $ 99,508,578 $96,445,353
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $105,971,017 $90,723,425
- ------------------------------------------------------------------------------
Undistributed net investment income 5,259,129 5,805,150
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies and
forward currency contracts (7,009,298) (311,599)
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities, foreign currencies and
forward currency contracts (4,712,270) 228,377
- ------------------------------------------------------------------------------
$ 99,508,578 $96,445,353
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Diversified Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to seek
to achieve a high level of current income. The Fund will seek to achieve its
objective by investing primarily in a diversified portfolio of foreign and
U.S. government and corporate debt securities, including lower rated high
yield debt securities (commonly known as "junk bonds"). These high yield bonds
may involve special risks in addition to the risks associated with investment
in higher rated debt securities. High yield bonds may be more susceptible to
real or perceived adverse economic and competitive industry conditions than
higher grade bonds. Also, the secondary market in which high yield bonds are
traded may be less liquid than the market for higher grade bonds.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be
AIM V.I. DIVERSIFIED INCOME FUND
FS-63
<PAGE> 140
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each
day at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$886,794, undistributed net realized gains decreased by $1,956,055 and
paid-in capital increased by $2,842,849 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
The Fund has a capital loss carryforward of $5,553,324 as of December 31,
1999 which may be carried forward to offset future taxable gains, if any,
which expires in varying increments, if not previously utilized, in the year
2007.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
Outstanding foreign currency contracts as of December 31, 1999 were as
follows:
<TABLE>
<CAPTION>
CONTRACT TO UNREALIZED
SETTLEMENT -------------------- APPRECIATION
DATE DELIVER RECEIVE VALUE (DEPRECIATION)
---------- --------- ---------- ---------- --------------
<S> <C> <C> <C> <C> <C>
02/04/00 CAD 4,300,000 $2,932,751 $2,981,814 (49,063)
--------------------------------------------------------------
02/28/00 EUR 2,000,000 2,077,000 2,022,092 54,908
--------------------------------------------------------------
02/28/00 NZD 1,000,000 511,720 522,994 (11,274)
--------------------------------------------------------------
01/24/00 SEK 9,600,000 1,183,257 1,129,999 53,258
--------------------------------------------------------------
$6,704,728 $6,656,899 $ 47,829
==============================================================
</TABLE>
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.60% of
the first $250 million of the Fund's average daily net assets, plus 0.55% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $67,038 of which AIM retained
$50,901 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,569
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $644 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $644
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
AIM V.I. DIVERSIFIED INCOME FUND
FS-64
<PAGE> 141
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $74,328,381 and $79,528,233, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 1,306,434
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (6,088,425)
- --------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investment
securities $(4,781,991)
==========================================================================
</TABLE>
Cost of investments for tax purposes is $ 102,329,108.
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 2,074,968 $ 22,313,329 2,291,048 $ 26,553,679
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 626,559 6,334,513 569,635 6,231,807
- ------------------------------------------------------------------------------
Issued in connection with
acquisitions* 1,744,335 18,512,585 -- --
- ------------------------------------------------------------------------------
Reacquired (3,372,508) (36,236,203) (1,956,150) (22,717,307)
- ------------------------------------------------------------------------------
1,073,354 $ 10,924,224 904,533 $ 10,068,179
==============================================================================
</TABLE>
* As of the close of business on October 15, 1999, the Fund acquired all the
net assets GT Global Variable Strategic Income Fund ("Variable Strategic
Income Fund") and GT Global Variable Global Government Income Fund
("Variable Global Government Income Fund") pursuant to a plan of
reorganization approved by Variable Strategic Income Fund's shareholders and
Variable Global Government Income Fund's shareholders on August 25, 1999.
The acquisitions were accomplished by a tax-free exchange of 1,744,335
shares of the Fund for 1,088,436 shares of Variable Strategic Income Fund
and 587,315 shares of Variable Global Government Income Fund outstanding as
of the close of business on October 15, 1999. Variable Strategic Income
Fund's net assets at that date were $12,226,436, including ($992,073) of
unrealized depreciation, and Variable Global Government Income Fund's net
assets at that date were $6,286,149, including ($488,448) of unrealized
depreciation, were combined with those of the Fund. The net assets of the
Fund immediately before the acquisition were $85,340,921.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JANUARY 31,
1999 1998 1997 1996 1995 1995
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12 $ 10.46
- ------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.64 0.75 0.73 0.73 0.69 0.76
- ------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) (0.85) (0.35) 0.24 0.28 0.94 (1.42)
- ------------------------------------------------------------------------------------------
Total from investment
operations (0.21) 0.40 0.97 1.01 1.63 (0.66)
- ------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.67) (0.57) (0.01) (0.68) (0.75) (0.68)
- ------------------------------------------------------------------------------------------
Distributions from net
realized capital
gains -- (0.18) -- -- -- --
- ------------------------------------------------------------------------------------------
Total distributions (0.67) (0.75) (0.01) (0.68) (0.75) (0.68)
- ------------------------------------------------------------------------------------------
Net asset value, end of
period $ 10.06 $ 10.94 $ 11.29 $ 10.33 $ 10.00 $ 9.12
==========================================================================================
Total return(a) (1.92)% 3.58% 9.39% 10.19% 18.11% (6.35)%
==========================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $99,509 $96,445 $89,319 $63,624 $44,630 $25,271
==========================================================================================
Ratio of expenses to
average net assets 0.83%(b) 0.77% 0.80% 0.86% 0.88%(c) 0.91%(d)
==========================================================================================
Ratio of net investment
income to average net
assets 7.20%(b) 6.99% 6.90% 7.09% 7.65%(c) 8.07%(d)
==========================================================================================
Portfolio turnover rate 83% 50% 52% 76% 72% 100%
==========================================================================================
</TABLE>
(a) Total returns are not annualized for periods less than one year.
(b) Ratios are based on average net assets of $92,736,295.
(c) Annualized.
(d) After fee waivers and/or expense reimbursement. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.03% and 7.95%, respectively.
AIM V.I. DIVERSIFIED INCOME FUND
FS-65
<PAGE> 142
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
FS-66
<PAGE> 143
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 32.42%
BANKS (MONEY CENTER) - 1.88%
Bank of America Corp. 11,500 $ 577,156
- ---------------------------------------------------------------------------
BEVERAGES (ALCOHOLIC) - 3.07%
Anheuser-Busch Cos, Inc. 9,382 664,949
- ---------------------------------------------------------------------------
Brown-Forman Corp. - Class B 4,900 280,525
- ---------------------------------------------------------------------------
945,474
- ---------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 0.94%
Tellabs, Inc.(a) 4,500 288,844
- ---------------------------------------------------------------------------
ELECTRIC COMPANIES - 1.60%
Southern Co. (The) 21,000 493,500
- ---------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 1.55%
Emerson Electric Co. 8,300 476,212
- ---------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.71%
Intel Corp. 6,400 526,800
- ---------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 1.20%
American General Corp. 4,850 367,994
- ---------------------------------------------------------------------------
FOODS - 1.76%
Bestfoods 10,300 541,394
- ---------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 2.84%
Bristol-Myers Squibb Co. 13,600 872,950
- ---------------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.60%
Procter & Gamble, Co. (The) 4,500 493,031
- ---------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.37%
Tyco International Ltd. 10,800 419,850
- ---------------------------------------------------------------------------
OIL (INTERNATIONAL INTEGRATED) - 2.68%
Exxon Mobil Corp. 10,221 823,429
- ---------------------------------------------------------------------------
PUBLISHING - 3.38%
McGraw-Hill Cos., Inc. (The) 16,860 1,038,998
- ---------------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 3.23%
Equity Office Properties Trust 23,000 566,375
- ---------------------------------------------------------------------------
Equity Residential Properties Trust 10,000 426,875
- ---------------------------------------------------------------------------
993,250
- ---------------------------------------------------------------------------
TELEPHONE - 2.60%
Bell Atlantic Corp. 13,000 800,313
- ---------------------------------------------------------------------------
TOBACCO - 1.01%
Philip Morris Cos. Inc. 13,450 311,872
- ---------------------------------------------------------------------------
Total Domestic Common Stocks (Cost $8,134,041) 9,971,067
- ---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY
INTERESTS - 48.56%
AUSTRALIA - 2.25%
Foster's Brewing Group Ltd. (Beverages - Alcoholic) 117,000 $ 335,918
- -------------------------------------------------------------------------------
National Australia Bank Ltd. - ADR (Banks - Major
Regional) 23,300 356,679
- -------------------------------------------------------------------------------
692,597
- -------------------------------------------------------------------------------
BELGIUM - 0.02%
Fortis (B) - CVG (Financial - Diversified)(a) 1,932 6,670
- -------------------------------------------------------------------------------
FRANCE - 3.75%
Compagnie de Saint-Gobain (Manufacturing -
Diversified)(a) 2,100 394,599
- -------------------------------------------------------------------------------
Societe Television Francaise 1 (Broadcasting -
Television, Radio & Cable) 1,450 758,863
- -------------------------------------------------------------------------------
1,153,462
- -------------------------------------------------------------------------------
GERMANY - 2.68%
MobilCom A.G. (Telecommunications -
Cellular/Wireless) 5,800 496,180
- -------------------------------------------------------------------------------
Porsche A.G. - Pfd. (Automobiles) 120 328,505
- -------------------------------------------------------------------------------
824,685
- -------------------------------------------------------------------------------
HONG KONG - 1.28%
Hutchison Whampoa Ltd. (Retail - Food Chains) 27,000 392,487
- -------------------------------------------------------------------------------
ITALY - 2.72%
Seat Pagine Gialle S.p.A. (Publishing) 255,000 836,662
- -------------------------------------------------------------------------------
JAPAN - 10.60%
Aeon Credit Service Ltd. (Consumer Finance) 4,200 346,282
- -------------------------------------------------------------------------------
Fujitsu Ltd. (Electrical Equipment) 19,000 866,977
- -------------------------------------------------------------------------------
JAFCO Co., Ltd. (Financial - Diversified) 2,000 714,810
- -------------------------------------------------------------------------------
Rohm Co. Ltd. (Electronics - Component
Distributors) 1,900 781,395
- -------------------------------------------------------------------------------
Toshiba Corp. (Electrical Equipment) 72,000 549,914
- -------------------------------------------------------------------------------
3,259,378
- -------------------------------------------------------------------------------
NETHERLANDS - 9.29%
ING Groep N.V. - ADR (Insurance Brokers) 8,638 521,101
- -------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Electrical Equipment) 2,900 394,025
- -------------------------------------------------------------------------------
Koninklijke KPN N.V. - ADR (Telecommunications -
Long Distance) 11,005 1,073,263
- -------------------------------------------------------------------------------
Royal Dutch Petroleum Co. - New York Shares (Oil -
International Integrated) 14,160 867,194
- -------------------------------------------------------------------------------
2,855,583
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-67
<PAGE> 144
<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
FS-68
<PAGE> 145
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,568,267) $30,100,961
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $461,718) 461,470
- ---------------------------------------------------------------------
Receivables for:
Dividends and interest 165,833
- ---------------------------------------------------------------------
Forward currency contracts open 19,199
- ---------------------------------------------------------------------
Forward currency contracts closed 28,911
- ---------------------------------------------------------------------
Other assets 169
- ---------------------------------------------------------------------
Total assets 30,776,543
- ---------------------------------------------------------------------
LIABILITIES:
Accrued advisory fees 13,732
- ---------------------------------------------------------------------
Accrued administrative services fees 4,109
- ---------------------------------------------------------------------
Accrued operating expenses 2,576
- ---------------------------------------------------------------------
Total liabilities 20,417
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $30,756,126
=====================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 2,273,784
- ---------------------------------------------------------------------
Net asset value, offering and redemption price per share $ 13.53
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $64,558 foreign withholding tax) $ 855,121
- -------------------------------------------------------------------------------
Interest 736,720
- -------------------------------------------------------------------------------
Security lending income 6,756
- -------------------------------------------------------------------------------
Total investment income 1,598,597
- -------------------------------------------------------------------------------
EXPENSES:
Advisory fees 436,438
- -------------------------------------------------------------------------------
Administrative services fees 32,370
- -------------------------------------------------------------------------------
Custodian fees 26,648
- -------------------------------------------------------------------------------
Directors' fees and expenses 7,543
- -------------------------------------------------------------------------------
Interest expense 5,420
- -------------------------------------------------------------------------------
Other 89,336
- -------------------------------------------------------------------------------
Total expenses 597,755
- -------------------------------------------------------------------------------
Less: Expense reductions (2,556)
- -------------------------------------------------------------------------------
Advisory fee waivers (11,500)
- -------------------------------------------------------------------------------
Net expenses 583,699
- -------------------------------------------------------------------------------
Net investment income 1,014,898
- -------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS:
Net realized gain (loss) from:
Investment securities 4,300,208
- -------------------------------------------------------------------------------
Foreign currencies (96,735)
- -------------------------------------------------------------------------------
Forward currency contracts 37,710
- -------------------------------------------------------------------------------
4,241,183
- -------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities (6,198,458)
- -------------------------------------------------------------------------------
Foreign currencies (11,357)
- -------------------------------------------------------------------------------
Forward currency contracts 16,295
- -------------------------------------------------------------------------------
(6,193,520)
- -------------------------------------------------------------------------------
Net gain (loss) on investment securities, foreign currencies and
forward currency contracts (1,952,337)
- -------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $ (937,439)
===============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-69
<PAGE> 146
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,014,898 $ 1,373,112
- ------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and forward currency contracts 4,241,183 7,246,776
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities, foreign
currencies and forward currency contracts (6,193,520) 1,012,021
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (937,439) 9,631,909
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,196,434) (1,163,351)
- ------------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (11,580,778) (689,824)
- ------------------------------------------------------------------------------
Net increase (decrease) from capital stock
transactions (11,109,484) (2,554,737)
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets (24,824,135) 5,223,997
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 55,580,261 50,356,264
- ------------------------------------------------------------------------------
End of year $ 30,756,126 $55,580,261
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $ 24,707,801 $35,751,068
- ------------------------------------------------------------------------------
Undistributed net investment income (64,629) 721,621
- ------------------------------------------------------------------------------
Undistributed net realized gain from investment
securities, foreign currencies and forward
currency contracts 566,043 7,367,141
- ------------------------------------------------------------------------------
Unrealized appreciation of investment securities,
foreign currencies and forward currency contracts 5,546,911 11,740,431
- ------------------------------------------------------------------------------
$ 30,756,126 $55,580,261
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Growth and Income Fund (the "Fund"), (formerly named the GT
Global Variable Growth & Income Fund), is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Prior to October 18, 1999, the Fund was a
series portfolio of GT Global Variable Investment Trust (the "Trust")
organized as a Delaware business trust registered under the 1940 Act. Pursuant
to an agreement and plan of reorganization between the Company and the Trust,
the Fund was reorganized as a portfolio of the Company effective October 18,
1999. Matters affecting each portfolio will be voted on exclusively by the
shareholders of such portfolio. The assets, liabilities and operations of each
portfolio are accounted for separately. Information presented in these
financial statements pertains only to the Fund. Currently, shares of the Fund
are sold only to insurance company separate accounts to fund the benefits of
variable annuity contracts and variable life insurance policies. The Fund's
investment objective is to achieve long-term growth of capital with current
income.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at
the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates. The following is a summary of the significant accounting policies
followed by the Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-70
<PAGE> 147
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.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-71
<PAGE> 148
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period. Prior
to May 28, 1999, the Fund, along with certain other funds advised and/or
administered by AIM, had a line of credit with BankBoston and State Street
Bank & Trust Company. The arrangements with the banks allowed the Fund and
certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000 subject to limits set by its
prospectus for borrowings.
During the year ended December 31, 1999, the average outstanding daily
balance of bank loans for the Fund was $108,145 with a weighted average
interest rate of 5.15%. Interest expense for the Fund for the year ended
December 31, 1999 was $5,420.
NOTE 6 - PORTFOLIO SECURITIES LOANED
At December 31, 1999, there were no securities on loan to brokers. For the
year ended December 31, 1999, the Fund received fees of $6,756 for securities
lending.
For international securities, cash collateral is received by the fund against
loaned securities in an amount at least equal to 105% of the market value of
the loaned securities at the inception of each loan. The collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the market
value of the loaned securities during the period of the loan. The cash
collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $38,788,743 and $60,327,220, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $ 6,549,086
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,079,412)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $ 5,469,674
==========================================================================
</TABLE>
Cost of investments for tax purposes is $24,631,287.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-72
<PAGE> 149
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.
AIM V.I. GLOBAL GROWTH AND INCOME FUND
FS-73
<PAGE> 150
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
FS-74
<PAGE> 151
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC COMMON STOCKS - 52.45%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.22%
UnitedGlobalCom Inc. - Class A(a) 9,000 $ 635,625
- ------------------------------------------------------------------
Univision Communications, Inc. - Class A(a) 6,300 643,781
- ------------------------------------------------------------------
1,279,406
- ------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 6.24%
Aether Systems, Inc.(a) 3,900 279,337
- ------------------------------------------------------------------
ANTEC Corp.(a) 4,400 160,600
- ------------------------------------------------------------------
Copper Mountain Networks, Inc.(a) 3,100 151,125
- ------------------------------------------------------------------
Covad Communications Group, Inc.(a) 1,350 75,516
- ------------------------------------------------------------------
JDS Uniphase Corp.(a) 800 129,050
- ------------------------------------------------------------------
Juniper Networks, Inc.(a) 800 272,000
- ------------------------------------------------------------------
Lucent Technologies Inc. 10,400 778,050
- ------------------------------------------------------------------
Sycamore Networks, Inc.(a) 600 184,800
- ------------------------------------------------------------------
Tellabs, Inc.(a) 4,400 282,425
- ------------------------------------------------------------------
Williams Communications Group, Inc.(a) 5,900 170,731
- ------------------------------------------------------------------
2,483,634
- ------------------------------------------------------------------
COMPUTERS (NETWORKING) - 5.00%
Cisco Systems, Inc.(a) 2,500 267,812
- ------------------------------------------------------------------
Foundry Networks, Inc.(a) 1,200 362,025
- ------------------------------------------------------------------
Redback Networks, Inc.(a) 7,300 1,295,750
- ------------------------------------------------------------------
Rhythms NetConnections, Inc.(a) 2,000 62,000
- ------------------------------------------------------------------
1,987,587
- ------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.35%
GRIC Communication, Inc.(a) 5,500 139,562
- ------------------------------------------------------------------
ELECTRIC COMPANIES - 6.96%
Allegheny Energy, Inc. 8,000 215,500
- ------------------------------------------------------------------
DQE, Inc. 7,700 266,612
- ------------------------------------------------------------------
Edison International 14,500 379,719
- ------------------------------------------------------------------
Energy East Corp. 11,000 228,937
- ------------------------------------------------------------------
FirstEnergy Corp. 4,500 102,094
- ------------------------------------------------------------------
FPL Group, Inc. 5,600 239,750
- ------------------------------------------------------------------
IPALCO Enterprises, Inc. 4,000 68,250
- ------------------------------------------------------------------
NiSource, Inc. 10,200 182,325
- ------------------------------------------------------------------
NSTAR 2,510 101,655
- ------------------------------------------------------------------
Pinnacle West Capital Corp. 8,700 265,894
- ------------------------------------------------------------------
Southern Co. (The) 11,600 272,600
- ------------------------------------------------------------------
Teco Energy, Inc. 11,400 211,612
- ------------------------------------------------------------------
Texas Utilities Co. 6,540 232,579
- ------------------------------------------------------------------
2,767,527
- ------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 0.10%
Conexant Systems, Inc.(a) 600 $ 39,825
- ---------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.71%
SDL, Inc.(a) 1,300 283,400
- ---------------------------------------------------------------------
ENTERTAINMENT - 0.40%
Time Warner Inc. 2,200 159,363
- ---------------------------------------------------------------------
NATURAL GAS - 2.82%
Enron Corp. 7,800 346,125
- ---------------------------------------------------------------------
Public Service Co. of North Carolina, Inc. 3,900 126,019
- ---------------------------------------------------------------------
Williams Companies, Inc. (The) 21,300 650,981
- ---------------------------------------------------------------------
1,123,125
- ---------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 1.30%
AES Corp.(a) 4,100 306,475
- ---------------------------------------------------------------------
MidAmerican Energy Holdings Co.(a) 6,200 208,863
- ---------------------------------------------------------------------
515,338
- ---------------------------------------------------------------------
REAL ESTATE INVESTMENT TRUSTS - 0.38%
Alexandria Real Estate Equities, Inc. 4,700 149,519
- ---------------------------------------------------------------------
SERVICES (COMMERCIAL & CONSUMER) - 1.77%
Convergys Corp.(a) 16,300 501,225
- ---------------------------------------------------------------------
Quanta Services, Inc.(a) 7,200 203,400
- ---------------------------------------------------------------------
704,625
- ---------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 0.72%
Clarent Corp.(a) 3,700 287,675
- ---------------------------------------------------------------------
TELECOMMUNICATIONS - 2.93%
Broadwing Inc.(a) 31,624 1,166,135
- ---------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 4.17%
Infonet Services Corp. - Class B(a) 6,900 181,125
- ---------------------------------------------------------------------
Phone.com, Inc.(a) 5,200 602,875
- ---------------------------------------------------------------------
TeleCorp PCS, Inc.(a) 5,600 212,800
- ---------------------------------------------------------------------
Tritel, Inc.(a) 8,400 266,175
- ---------------------------------------------------------------------
Triton PCS Holdings, Inc. - Class A(a) 4,100 186,550
- ---------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 3,100 206,925
- ---------------------------------------------------------------------
1,656,450
- ---------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.50%
AT&T Corp. 5,700 289,275
- ---------------------------------------------------------------------
Global TeleSystems Group, Inc.(a) 3,600 124,650
- ---------------------------------------------------------------------
MCI WorldCom, Inc.(a) 18,431 977,968
- ---------------------------------------------------------------------
1,391,893
- ---------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-75
<PAGE> 152
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
TELEPHONE - 11.88%
Bell Atlantic Corp. 4,800 $ 295,500
- -------------------------------------------------------------------------------
BellSouth Corp. 4,200 196,613
- -------------------------------------------------------------------------------
CenturyTel, Inc. 11,800 559,025
- -------------------------------------------------------------------------------
GTE Corp. 3,200 225,800
- -------------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(a) 8,000 471,000
- -------------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(a) 4,300 357,169
- -------------------------------------------------------------------------------
Qwest Communications International, Inc.(a) 15,000 645,000
- -------------------------------------------------------------------------------
SBC Communications, Inc. 31,397 1,530,604
- -------------------------------------------------------------------------------
Time Warner Telecom, Inc.(a) 8,900 444,444
- -------------------------------------------------------------------------------
4,725,155
- -------------------------------------------------------------------------------
Total Domestic Common Stocks
(Cost $10,261,302) 20,860,219
- -------------------------------------------------------------------------------
FOREIGN STOCKS - 27.23%
ARGENTINA - 0.43%
El Sitio, Inc. (Computers-Software & Services)(a) 4,600 169,050
- -------------------------------------------------------------------------------
AUSTRALIA - 0.33%
Telstra Corp. Ltd. (Telephone) 19,380 105,426
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. - Installment Receipts (Telephone)(a) 7,200 25,402
- -------------------------------------------------------------------------------
130,828
- -------------------------------------------------------------------------------
AUSTRIA - 0.45%
Oesterreichische Elektrizitaetswirtschafts A.G. -
Class A (Electric Companies) 1,270 178,308
- -------------------------------------------------------------------------------
BELGIUM - 0.41%
Electrabel S.A. (Electric Companies) 500 163,548
- -------------------------------------------------------------------------------
BERMUDA - 0.88%
Global Crossing Ltd. (Telecommunications -
Long Distance)(a) 6,985 349,250
- -------------------------------------------------------------------------------
CANADA - 1.37%
AT&T Canada, Inc. (Telephone)(a) 7,400 297,850
- -------------------------------------------------------------------------------
BCT.Telus Communications, Inc. (Telephone) 4,955 120,674
- -------------------------------------------------------------------------------
BCT.Telus Communications, Inc. - Class A (Telephone) 1,651 39,865
- -------------------------------------------------------------------------------
Westcoast Energy, Inc. (Natural Gas) 5,500 88,344
- -------------------------------------------------------------------------------
546,733
- -------------------------------------------------------------------------------
DENMARK - 0.62%
Tele Danmark A.S. - ADR (Telephone) 6,500 245,375
- -------------------------------------------------------------------------------
FINLAND - 3.16%
Nokia Oyj - ADR (Communications Equipment) 4,700 893,000
- -------------------------------------------------------------------------------
Sonera Oyj (Telecommunications - Cellular/Wireless) 5,300 362,991
- -------------------------------------------------------------------------------
1,255,991
- -------------------------------------------------------------------------------
FRANCE - 2.17%
France Telecom S.A. - ADR (Telecommunications) 4,000 534,000
- -------------------------------------------------------------------------------
Suez Lyonnaise des Eaux S.A. (Manufacturing -
Diversified) 1,100 176,139
- -------------------------------------------------------------------------------
Vivendi (Manufacturing - Diversified) 1,700 153,388
- -------------------------------------------------------------------------------
863,527
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
GERMANY - 1.34%
Mannesmann A.G. (Machinery - Diversified) 1,181 $ 284,626
- ------------------------------------------------------------------------------
RWE A.G. (Electric Companies) 2,825 110,601
- ------------------------------------------------------------------------------
Viag A.G. (Manufacturing - Diversified) 7,500 137,380
- ------------------------------------------------------------------------------
532,607
- ------------------------------------------------------------------------------
GREECE - 0.08%
Panafon Hellenic Telecom S.A. - GDR
(Telecommunications - Cellular/Wireless)
(Acquired 11/20/98; Cost $21,696)(b) 2,400 30,960
- ------------------------------------------------------------------------------
HUNGARY - 0.37%
Magyar Tavkozlesi Rt - ADR (Telecommunications -
Long Distance) 4,100 147,600
- ------------------------------------------------------------------------------
IRELAND - 1.67%
eircom PLC (Telecommunication - Long Distance) 152,500 664,584
- ------------------------------------------------------------------------------
ISRAEL - 0.62%
Partner Communications Co. Ltd. - ADR
(Telecommunications - Cellular/Wireless)(a) 9,600 248,400
- ------------------------------------------------------------------------------
ITALY - 2.59%
ACEA S.p.A. (Water Utilities)(a) 38,400 533,338
- ------------------------------------------------------------------------------
AEM S.p.A. (Electric Companies) 55,000 220,312
- ------------------------------------------------------------------------------
Enel S.p.A. (Electric Companies)(a) 29,900 125,186
- ------------------------------------------------------------------------------
Societa Nordelettrica S.p.A. (Electric Companies) 49,000 150,414
- ------------------------------------------------------------------------------
1,029,250
- ------------------------------------------------------------------------------
JAPAN - 0.95%
Nippon Telegraph & Telephone Corp. (Telephone) 12 205,630
- ------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. - ADR (Telephone) 2,000 172,250
- ------------------------------------------------------------------------------
377,880
- ------------------------------------------------------------------------------
MEXICO - 0.20%
Nuevo Grupo Iusacell S.A. de C.V.-ADR
(Telecommunications - Cellular/Wireless)(a) 5,300 79,169
- ------------------------------------------------------------------------------
NETHERLANDS - 3.06%
KPNQWest N.V. (Telecommunications -
Long Distance)(a) 6,700 445,726
- ------------------------------------------------------------------------------
Libertel N.V. (Telecommunications-Cellular/Wireless)(a) 7,800 204,108
- ------------------------------------------------------------------------------
Versatel Telecom International N.V.
(Telecommunications - Long Distance)(a) 16,100 567,135
- ------------------------------------------------------------------------------
1,216,969
- ------------------------------------------------------------------------------
SOUTH KOREA - 0.81%
Korea Telecom Corp. - ADR (Telephone) 4,312 322,322
- ------------------------------------------------------------------------------
SPAIN - 3.02%
Autopistas Concesionaria Espanola S.A.
(Services - Commercial & Consumer) 4,095 39,772
- ------------------------------------------------------------------------------
Endesa S.A. (Electric Companies) 7,600 150,762
- ------------------------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 25,464 635,580
- ------------------------------------------------------------------------------
Terra Networks, S.A. (Computers - Software &
Services)(a) 6,900 376,739
- ------------------------------------------------------------------------------
1,202,853
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-76
<PAGE> 153
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
UNITED KINGDOM - 2.70%
COLT Telecom Group PLC (Communications Equipment)(a) 2,000 $ 102,340
- -------------------------------------------------------------------------------
Kelda Group PLC (Water Utilities) 26,174 147,921
- -------------------------------------------------------------------------------
National Grid Group PLC (Electric Companies) 13,113 99,728
- -------------------------------------------------------------------------------
PowerGen PLC (Electric Companies) 14,485 104,081
- -------------------------------------------------------------------------------
PowerGen PLC - ADR (Electric Companies) 4,800 151,800
- -------------------------------------------------------------------------------
Scottish Power PLC (Electric Companies) 22,750 172,284
- -------------------------------------------------------------------------------
Thus PLC (Telecommunications - Long Distance)(a) 22,300 140,791
- -------------------------------------------------------------------------------
United Utilities PLC (Water Utilities) 15,000 155,859
- -------------------------------------------------------------------------------
1,074,804
- -------------------------------------------------------------------------------
Total Foreign Stocks (Cost $6,402,949) 10,830,008
- -------------------------------------------------------------------------------
DOMESTIC CONVERTIBLE PREFERRED STOCKS - 4.14%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.36%
MediaOne Group, Inc.-$3.04 Conv. Pfd. 3,000 144,000
- -------------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 0.88%
PSINet, Inc. - Series C, $3.375 Conv. Pfd. 6,000 350,250
- -------------------------------------------------------------------------------
ELECTRIC COMPANIES - 0.77%
Calpine Capital Trust-$2.875 Conv. Pfd. 4,700 303,737
- -------------------------------------------------------------------------------
NATURAL GAS - 0.85%
El Paso Energy Cap Trust, Inc. - $2.375 Conv. Pfd. 6,700 337,513
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS - 0.12%
Broadwing Inc. - Series B, $3.375 Conv. Pfd. 820 48,585
- -------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 0.87%
WinStar Communications, Inc. -Series F,
$72.50 Conv. Pfd. 260 346,450
- -------------------------------------------------------------------------------
TELEPHONE - 0.29%
NEXTLINK Communications - $3.25 Conv. Pfd. (Acquired
03/26/98; Cost $30,000)(b) 600 115,125
- -------------------------------------------------------------------------------
Total Domestic Convertible Preferred Stocks (Cost
$1,448,282) 1,645,660
- -------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL
AMOUNT
<S> <C> <C>
U.S. DOLLAR DENOMINATED BONDS &
NOTES - 6.02%
BROADCASTING (TELEVISION, RADIO & CABLE) - 0.26%
Comcast Corp., Sr. Sub. Deb., 9.50%, 01/15/08 $ 100,000 102,875
- -------------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 0.89%
Candescent Technology Corp., Sr. Conv. Sub. Deb., 7.00%,
05/01/03 (Acquired 04/17/98-11/30/98; Cost $431,218)(b) 452,000 352,560
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
ELECTRIC COMPANIES - 0.93%
El Paso Electric Co. - Series E, Sec. First Mortgage
Bonds, 9.40%, 05/01/11 $ 100,000 $ 105,943
- -----------------------------------------------------------------------------
Indiana Michigan Power Co. - Series F, Sec. Lease
Obligation Bonds, 9.82%, 12/07/22 93,396 103,341
- -----------------------------------------------------------------------------
Western Resources, Inc., Sr. Unsec. Notes,
6.25%, 08/15/03 75,000 70,913
7.13%, 08/01/09 100,000 90,482
- -----------------------------------------------------------------------------
370,679
- -----------------------------------------------------------------------------
NATURAL GAS - 1.25%
Dynegy Inc., Sr. Unsec. Deb., 7.13%, 05/15/18 100,000 89,092
- -----------------------------------------------------------------------------
Enron Corp., Sr. Sub. Deb., 8.25%, 09/15/12 400,000 406,304
- -----------------------------------------------------------------------------
495,396
- -----------------------------------------------------------------------------
POWER PRODUCERS (INDEPENDENT) - 0.67%
AES Corp.,
Sr. Notes, 8.00%, 12/31/08 100,000 91,750
Sr. Unsec. Sub. Notes, 10.25%, 07/15/06 100,000 102,000
- -----------------------------------------------------------------------------
Arizona Public Service Co., Deb., 8.00%, 12/30/15 75,000 73,698
- -----------------------------------------------------------------------------
267,448
- -----------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 1.08%
AT&T Corp., Sr. Notes, 7.75%, 03/01/07 150,000 153,171
- -----------------------------------------------------------------------------
Global TeleSystems Group, Inc., Conv. Notes,
8.75%, 06/30/00 80,000 277,700
- -----------------------------------------------------------------------------
430,871
- -----------------------------------------------------------------------------
TELEPHONE - 0.94%
NTL Inc., Conv. Sub. Notes, 5.75%, 12/15/09 (Acquired
12/17/99; Cost $180,000)(b) 180,000 194,400
- -----------------------------------------------------------------------------
SBC Communications, Inc., Deb., 7.38%, 07/15/43 200,000 179,908
- -----------------------------------------------------------------------------
374,308
- -----------------------------------------------------------------------------
Total U.S. Dollar Denominated Bonds & Notes
(Cost $2,452,442) 2,394,137
- -----------------------------------------------------------------------------
NON-U.S. DOLLAR DENOMINATED BONDS & NOTES - 3.06%(c)
CANADA - 0.93%
Canadian Oil Debco Inc. (Oil & Gas-Exploration &
Production), Deb., 11.00%, 10/31/00 CAD 100,000 71,624
- -----------------------------------------------------------------------------
Clearnet Communications, Inc. (Telecommunications -
Cellular/Wireless), Sr. Unsec. Disc. Notes,
10.75%, 02/15/09(d) CAD 300,000 121,596
- -----------------------------------------------------------------------------
Teleglobe Canada Inc. (Telephone), Unsec. Deb., 8.35%,
06/20/03 CAD 100,000 70,942
- -----------------------------------------------------------------------------
TransCanada Pipelines - Series Q (Natural Gas), Deb.,
10.63%, 10/20/09 CAD 125,000 106,873
- -----------------------------------------------------------------------------
371,035
- -----------------------------------------------------------------------------
FRANCE - 0.39%
France Telecom (Telephone), Conv. Bonds,
2.00%, 01/01/04 FRF 603,520 153,473
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GLOBAL UTILITIES FUND
FS-77
<PAGE> 154
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
UNITED KINGDOM - 1.74%
COLT Telecom Group PLC (Communications Equipment),
Conv. Bonds, 2.00%, 12/16/06 (Acquired 12/09/99; Cost
$153,930)(b) EUR 150,000 $ 162,479
- ------------------------------------------------------------------------------
National Grid Co. PLC (Electric Companies),
Conv. Bonds, 4.25%, 02/17/08
(Acquired 02/05/98; Cost $397,800)(b) GBP 240,000 467,456
- ------------------------------------------------------------------------------
Series RG, Conv. Bonds, 4.25%, 04/17/08 GBP 32,000 62,328
- ------------------------------------------------------------------------------
692,263
- ------------------------------------------------------------------------------
Total Non-U.S. Dollar Denominated Bonds & Notes (Cost
$1,110,879) 1,216,771
- ------------------------------------------------------------------------------
<CAPTION>
SHARES
<S> <C> <C>
MONEY MARKET FUNDS - 7.24%
STIC Liquid Assets Portfolio(e) 1,441,160 1,441,160
- ------------------------------------------------------------------------------
STIC Prime Portfolio(e) 1,441,160 1,441,160
- ------------------------------------------------------------------------------
Total Money Market Funds (Cost $2,882,320) 2,882,320
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS--100.14%
(Cost $24,558,174) 39,829,115
- ------------------------------------------------------------------------------
LIABILITIES LESS OTHER ASSETS--(0.14%) (56,849)
- ------------------------------------------------------------------------------
NET ASSETS--100.00% $39,772,266
- ------------------------------------------------------------------------------
</TABLE>
INVESTMENT ABBREVIATIONS:
ADR - American Depository Receipt
CAD - Canadian Dollars
Conv. - Convertible
Deb. - Debentures
Disc. - Discounted
EUR - Euro
FRF - French Franc
GBP - British Pound Sterling
GDR - Global Depositary Receipt
Gtd. - Guaranteed
Pfd. - Preferred
Sec. - Secured
Sr. - Senior
Sub. - Subordinated
Unsec. - Unsecured
Unsub. - Unsubordinated
NOTES TO SCHEDULE OF INVESTMENTS:
(a) Non-income producing security.
(b) Restricted security. May be resold to qualified institutional buyers in
accordance with the provisions of Rule 144A under the Securities Act of
1933, as amended. The valuation of these securities has been determined in
accordance with procedures established by the Board of Directors. The
aggregate market value of these securities at 12/31/99 was $1,322,980 which
represented 3.33% of the Fund's net assets.
(c) Foreign denominated security. Par value and coupon are denominated in
currency indicated.
(d) Step bond issued at discount. The interest rate represents the coupon rate
at which the bond will accrue at a specified future date.
(e) The money market fund has the same investment advisor as the Fund.
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-78
<PAGE> 155
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $24,558,174) $39,829,115
- ---------------------------------------------------------------------
Foreign currencies, at value (cost $22,668) 19,600
- ---------------------------------------------------------------------
Receivables for:
Capital stock sold 16,293
- ---------------------------------------------------------------------
Dividends and interest 105,615
- ---------------------------------------------------------------------
Investment for deferred compensation plan 24,627
- ---------------------------------------------------------------------
Total assets 39,995,250
- ---------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 68,535
- ---------------------------------------------------------------------
Capital stock reacquired 70,147
- ---------------------------------------------------------------------
Deferred compensation plan 24,627
- ---------------------------------------------------------------------
Accrued advisory fees 20,900
- ---------------------------------------------------------------------
Accrued administrative service fees 11,658
- ---------------------------------------------------------------------
Accrued operating expenses 27,117
- ---------------------------------------------------------------------
Total liabilities 222,984
- ---------------------------------------------------------------------
Net assets applicable to shares outstanding $39,772,266
=====================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ---------------------------------------------------------------------
Outstanding 1,744,266
=====================================================================
Net asset value, offering and redemption price per share $ 22.80
=====================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $14,857 foreign withholding tax) $ 443,325
- ---------------------------------------------------------------------
Interest 446,558
- ---------------------------------------------------------------------
Total investment income 889,883
- ---------------------------------------------------------------------
EXPENSES:
Advisory fees 202,137
- ---------------------------------------------------------------------
Administrative services fees 58,645
- ---------------------------------------------------------------------
Custodian fees 29,266
- ---------------------------------------------------------------------
Directors' fees 7,321
- ---------------------------------------------------------------------
Other 58,242
- ---------------------------------------------------------------------
Total expenses 355,611
- ---------------------------------------------------------------------
Less: Expenses paid indirectly (210)
- ---------------------------------------------------------------------
Net expenses 355,401
- ---------------------------------------------------------------------
Net investment income 534,482
- ---------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES AND FOREIGN CURRENCIES
Net realized gain (loss) from:
Investment securities 2,020,449
- ---------------------------------------------------------------------
Foreign currencies (23,553)
- ---------------------------------------------------------------------
1,996,896
- ---------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 7,368,770
- ---------------------------------------------------------------------
Foreign currencies (2,769)
- ---------------------------------------------------------------------
7,366,001
- ---------------------------------------------------------------------
Net gain on investment securities and foreign currencies 9,362,897
- ---------------------------------------------------------------------
Net increase in net assets resulting from operations $9,897,379
=====================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GLOBAL UTILITIES FUND
FS-79
<PAGE> 156
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 534,482 $ 610,580
- --------------------------------------------------------------------------------
Net realized gain (loss) from investment securities,
foreign currencies, futures and option contracts 1,996,896 (59,962)
- --------------------------------------------------------------------------------
Change in net unrealized appreciation of investment
securities and foreign currencies 7,366,001 3,278,654
- --------------------------------------------------------------------------------
Net increase in net assets resulting from operations 9,897,379 3,829,272
- --------------------------------------------------------------------------------
Dividends to shareholders from net investment income (618,958) (450,038)
- --------------------------------------------------------------------------------
Distributions from net realized gains -- (187,121)
- --------------------------------------------------------------------------------
Net increase from capital stock transactions 2,360,217 2,862,654
- --------------------------------------------------------------------------------
Net increase in net assets 11,638,638 6,054,767
- --------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 28,133,628 22,078,861
- --------------------------------------------------------------------------------
End of year $39,772,266 $28,133,628
================================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $22,058,910 $19,698,693
- --------------------------------------------------------------------------------
Undistributed net investment income 478,129 608,138
- --------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities, foreign currencies, futures
and option contracts 1,966,978 (75,451)
- --------------------------------------------------------------------------------
Unrealized appreciation of investment securities and
foreign currencies 15,268,249 7,902,248
- --------------------------------------------------------------------------------
$39,772,266 $28,133,628
================================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Global Utilities Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to
achieve a high level of current income, and as a secondary objective the Fund
seeks to achieve capital appreciation, by investing primarily in the common
stocks of public utility companies (either domestic or foreign).
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. GLOBAL UTILITIES FUND
FS-80
<PAGE> 157
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$45,533 and undistributed net realized gains increased by $45,533 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains, if
any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are translated
into U.S. dollar amounts on the respective dates of such transactions. The
Fund does not separately account for that portion of the results of
operations resulting from changes in foreign exchange rates on investments
and the fluctuations arising from changes in market prices of securities
held. Such fluctuations are included with the net realized and unrealized
gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation to
purchase or sell a specific currency for an agreed-upon price at a future
date. The Fund may enter into a foreign currency contract to attempt to
minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency contract
for the purchase or sale of a security denominated in a foreign currency in
order to "lock in" the U.S. dollar price of that security. The Fund could be
exposed to risk if counterparties to the contracts are unable to meet the
terms of their contracts or if the value of the foreign currency changes
unfavorably.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM, has
agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the year
ended December 31, 1999, the Fund paid AIM $58,645 of which AIM retained
$51,234 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and AIM
Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,470
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $210 under an expense offset arrangement. The effect of the
above arrangement resulted in a reduction of the Fund's total expenses of $210
during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred compensation
plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $14,873,790 and $12,930,318, respectively.
The amount of unrealized appreciation (depreciation) of investment securities,
for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $15,958,031
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (688,644)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $15,269,387
==========================================================================
</TABLE>
Cost of investments for tax purposes is $24,559,728.
AIM V.I. GLOBAL UTILITIES FUND
FS-81
<PAGE> 158
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
-------------------- --------------------
SHARES AMOUNT SHARES AMOUNT
-------- ---------- -------- ----------
<S> <C> <C> <C> <C>
Sold 482,016 $8,991,351 516,028 $8,375,181
- -------------------------------------------------------------------
Issued as reinvestment
of dividends 28,722 618,958 37,858 637,159
- -------------------------------------------------------------------
Reacquired (386,649) (7,250,092) (380,439) (6,149,686)
- -------------------------------------------------------------------
124,089 $2,360,217 173,447 $2,862,654
===================================================================
</TABLE>
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------ JANUARY 31,
1999(A) 1998 1997 1996 1995 1995
------- ------- ------- ------- ------ -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 17.36 $ 15.26 $ 12.55 $11.64 $9.69 $10.00
- ------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.32 0.35 0.32 0.40 0.29 0.27
- ------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 5.49 2.15 2.40 0.99 1.98 (0.33)
- ------------------------------------------------------------------------------------------------
Total from investment
operations 5.81 2.50 2.72 1.39 2.27 (0.06)
- ------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.37) (0.28) -- (0.41) (0.31) (0.25)
- ------------------------------------------------------------------------------------------------
Distributions from net
realized gains -- (0.12) (0.01) (0.07) (0.01) --
- ------------------------------------------------------------------------------------------------
Total distributions (0.37) (0.40) (0.01) (0.48) (0.32) (0.25)
- ------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 22.80 $ 17.36 $ 15.26 $12.55 $11.64 $ 9.69
================================================================================================
Total return(b) 33.56% 16.49% 21.63% 12.07% 23.73% (0.56)%
================================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $39,772 $28,134 $22,079 $13,576 $8,394 $2,958
================================================================================================
Ratio of expenses to
average net assets 1.14%(c) 1.11% 1.28% 1.40%(d) 1.47%(d)(e) 1.31%(e)(f)
================================================================================================
Ratio of net investment
income to average net
assets 1.72%(c) 2.46% 2.81% 3.56%(d) 3.76%(d)(e) 4.39%(e)(f)
================================================================================================
Portfolio turnover rate 45% 32% 28% 47% 58% 69%
================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Totals returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $31,098,057.
(d) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.55% and 3.42% for 1996 and 2.44%
(annualized) and 2.79% (annualized) for 1995.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 2.80% (annualized) and 2.90% (annualized),
respectively.
AIM V.I. GLOBAL UTILITIES FUND
FS-82
<PAGE> 159
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
FS-83
<PAGE> 160
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
FS-84
<PAGE> 161
<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.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-85
<PAGE> 162
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
FS-86
<PAGE> 163
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,628,296 $ 2,530,613
- ------------------------------------------------------------------------------
Net realized gain (loss) from investment securities (1,304,878) 241,993
- ------------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities (3,043,863) 445,919
- ------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations (720,445) 3,218,525
- ------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (2,511,433) (1,611,964)
- ------------------------------------------------------------------------------
Net increase from capital stock transactions 15,808,419 22,778,324
- ------------------------------------------------------------------------------
Net increase in net assets 12,576,541 24,384,885
- ------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 58,184,681 33,799,796
- ------------------------------------------------------------------------------
End of year $70,761,222 $58,184,681
==============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $70,864,760 $54,757,995
- ------------------------------------------------------------------------------
Undistributed net investment income 3,602,402 2,488,745
- ------------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (1,574,251) (245,110)
- ------------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (2,131,689) 1,183,051
- ------------------------------------------------------------------------------
$70,761,222 $58,184,681
==============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Government Securities Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to
achieve a high level of current income consistent with reasonable concern for
safety of principal by investing in debt securities issued, guaranteed or
otherwise backed by the United States Government.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of
AIM V.I. GOVERNMENT SECURITIES FUND
FS-87
<PAGE> 164
the NYSE which would not be reflected in the computation of the Fund's
net asset value. If events materially affecting the value of such securities
occur during such period, then these securities will be valued at their fair
value as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. The Fund may engage in dollar roll
transactions with respect to mortgage backed securities issued by GNMA,
FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage
backed security held in the Fund to a financial institution such as a bank
or broker-dealer, and simultaneously agrees to repurchase a substantially
similar security (same type, coupon and maturity) from the institution at a
later date at an agreed upon price. The mortgage backed securities that are
repurchased will bear the same interest rate as those sold, but generally
will be collateralized by different pools of mortgages with prepayment
histories. During the period between the sale and repurchase, the Fund will
not be entitled to receive interest and principal payments on securities
sold. Proceeds of the sale will be invested in short-term instruments, and
the income from these investments, together with any additional fee income
received on the sale, could generate income for the Fund exceeding the
yield on the security sold.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities in a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale
of the securities may be restricted pending a determination by the other
party, or its trustee or receiver, whether to enforce the Fund's obligation
to repurchase the securities.
Realized gains or losses on sales are computed on the basis of specific
identification of the securities sold. Interest income is recorded as earned
from settlement date and is recorded on the accrual basis. Dividend income is
recorded on the ex-dividend date. On December 31, 1999, undistributed net
investment income was decreased by $3,206, undistributed net realized gains
decreased by $24,263 and paid-in capital increased by $27,469 as a result of
differing book/tax treatment of paydown gains (losses) and other
reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $1,524,195 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate
of 0.50% on the first $200 million of the Fund's average daily net assets,
plus 0.45% of the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $98,225 of which AIM retained
$44,501 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,666
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 4 - BORROWINGS
Reverse repurchase agreements involve the sale of securities held by the Fund,
with an agreement that the Fund will repurchase such securities at an agree-
upon price and date. Proceeds from reverse repurchase agreements are treated
as borrowings. The Fund will use the proceeds of a reverse repurchase
agreement (which are considered to be borrowings under the 1940 Act) to
purchase other permitted securities either maturing, or under an agreement to
resell, at a date simultaneous with or prior to the expiration of the reverse
repurchase agreement. The Fund will enter into a reverse repurchase agreement
only when the interest income to be earned from the investment of proceeds of
the transaction is greater than the interest expense of the transaction. The
agreements are collateralized by the underlying securities and are carried at
the amount at which the securities will subsequently be repurchased as
specified in the agreements. The maximum amount outstanding during the year
ended December 31, 1999 was $4,078,750, while borrowings averaged $1,626,949
per day with a weighted average interest rate of 3.77%.
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-88
<PAGE> 165
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.
AIM V.I. GOVERNMENT SECURITIES FUND
FS-89
<PAGE> 166
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
AIM V.I. GROWTH FUND
FS-90
<PAGE> 167
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
FS-91
<PAGE> 168
<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.
AIM V.I. GROWTH FUND
FS-92
<PAGE> 169
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments at market value (cost $447,293,042) $705,388,391
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $461,827) 461,723
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 1,990,444
- ----------------------------------------------------------------------
Variation margin 56,950
- ----------------------------------------------------------------------
Dividends and interest 461,605
- ----------------------------------------------------------------------
Investment for deferred compensation plan 31,028
- ----------------------------------------------------------------------
Other assets 1,794
- ----------------------------------------------------------------------
Total assets 708,391,935
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 248,419
- ----------------------------------------------------------------------
Investments purchased 450,371
- ----------------------------------------------------------------------
Deferred compensation plan 31,028
- ----------------------------------------------------------------------
Options written (Premiums received $1,540,128) 2,964,913
- ----------------------------------------------------------------------
Accrued advisory fees 348,576
- ----------------------------------------------------------------------
Accrued administrative services fees 183,516
- ----------------------------------------------------------------------
Accrued operating expenses 69,432
- ----------------------------------------------------------------------
Total liabilities 4,296,255
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $704,095,680
======================================================================
CAPITAL STOCK, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 21,831,388
======================================================================
Net asset value, offering and redemption price per share $ 32.25
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $23,617 foreign withholding tax) $ 2,486,344
- -------------------------------------------------------------------------
Interest 1,239,393
- --------------------------------------------------------------------------
Total investment income 3,725,737
- --------------------------------------------------------------------------
EXPENSES:
Advisory fees 3,026,404
- --------------------------------------------------------------------------
Administrative services fees 328,584
- --------------------------------------------------------------------------
Custodian fees 73,045
- --------------------------------------------------------------------------
Directors' fees 7,337
- --------------------------------------------------------------------------
Other 109,536
- --------------------------------------------------------------------------
Total expenses 3,544,906
- --------------------------------------------------------------------------
Less: Expenses paid indirectly (3,198)
- --------------------------------------------------------------------------
Net expenses 3,541,708
- --------------------------------------------------------------------------
Net investment income 184,029
- --------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT
SECURITIES, FOREIGN CURRENCIES AND FUTURES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 38,221,411
- --------------------------------------------------------------------------
Foreign currencies (110,061)
- --------------------------------------------------------------------------
Futures contracts 508,914
- --------------------------------------------------------------------------
Option contracts (12,194,041)
- --------------------------------------------------------------------------
26,426,223
- --------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 137,668,951
- --------------------------------------------------------------------------
Foreign currencies (5,504)
- --------------------------------------------------------------------------
Futures contracts 714,213
- --------------------------------------------------------------------------
Option contracts (1,101,525)
- --------------------------------------------------------------------------
137,276,135
- --------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
futures and option contracts 163,702,358
- --------------------------------------------------------------------------
Net increase in net assets resulting from operations $163,886,387
=========================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH FUND
FS-93
<PAGE> 170
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
AIM V.I. GROWTH FUND
FS-94
<PAGE> 171
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income decreased by
$110,548 and undistributed net realized gains increased by $110,548 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Futures Contracts - The Fund may purchase or sell futures contracts as a
hedge against changes in market conditions. Initial margin deposits
required upon entering into futures contracts are satisfied by the
segregation of specific securities as collateral for the account of the
broker (the Fund's agent in acquiring the futures position). During the
period the futures contracts are open, changes in the value of the
contracts are recognized as unrealized gains or losses by "marking to
market" on a daily basis to reflect the market value of the contracts at
the end of each day's trading. Variation margin payments are made or
received depending upon whether unrealized gains or losses are incurred.
When the contracts are closed, the Fund recognizes a realized gain or loss
equal to the difference between the proceeds from, or cost of, the closing
transaction and the Fund's basis in the contract. Risks include the
possibility of an illiquid market and that a change in value of the
contracts may not correlate with changes in the value of the securities
being hedged.
H. Covered Call Options - The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset
and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
I. Put Options - The Fund may purchase put options. By purchasing a put
option, the Fund obtains the right (but not the obligation) to sell the
option's underlying instrument at a fixed strike price. In return for this
right, the Fund pays an option premium. The option's underlying instrument
may be a security or a futures contract. Put options may be used by the
Fund to hedge securities it owns by locking in a minimum price at which the
Fund can sell. If security prices fall, the put option could be exercised
to offset all or a portion of the Fund's resulting losses. At the same
time, because the maximum the Fund has at risk is the cost of the option,
purchasing put options does not eliminate the potential for the Fund to
profit from an increase in the value of the securities hedged.
AIM V.I. GROWTH FUND
FS-95
<PAGE> 172
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>
AIM V.I. GROWTH FUND
FS-96
<PAGE> 173
NOTE 8 - FUTURES CONTRACTS
On December 31, 1999, $1,397,000 principal amount of U.S. Treasury obligations
was pledged as collateral to cover margin requirements for open futures
contracts. Open futures contracts were as follows:
<TABLE>
<CAPTION>
NO. OF MONTH/ UNREALIZED
CONTRACT CONTRACTS COMMITMENT APPRECIATION
- -------- --------- ------------ ------------
<S> <C> <C> <C>
S&P 500 Index 67 March 00/Buy $714,213
- --------------------------------------------------
</TABLE>
NOTE 9 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 8,907,542 $247,736,478 2,345,258 $52,301,342
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 820,552 24,436,055 1,005,621 23,310,293
- -----------------------------------------------------------------------------
Reacquired (2,893,968) (79,441,936) (1,407,943) (30,783,002)
- -----------------------------------------------------------------------------
6,834,126 $192,730,597 1,942,936 $44,828,633
=============================================================================
</TABLE>
NOTE 10 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the
Fund during each of the years in the four-year period ended December 31,
1999, the eleven months ended December 31, 1995 and the year ended
January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------- JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
-------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71 $ 11.59
- ---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.01 0.08 0.08 0.07 0.09 0.06
- ---------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 8.63 6.57 4.27 2.52 3.65 (0.88)
- ---------------------------------------------------------------------------------------------
Total from investment
operations 8.64 6.65 4.35 2.59 3.74 (0.82)
- ---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.06) (0.09) (0.09) (0.06) (0.01) (0.06)
- ---------------------------------------------------------------------------------------------
Distributions from net
realized gains (1.13) (1.59) (0.68) (0.72) -- --
- ---------------------------------------------------------------------------------------------
Total distributions (1.19) (1.68) (0.77) (0.78) (0.01) (0.06)
- ---------------------------------------------------------------------------------------------
Net asset value, end of
period $ 32.25 $ 24.80 $ 19.83 $ 16.25 $ 14.44 $ 10.71
=============================================================================================
Total return(b) 35.24% 34.12% 26.87% 18.09% 34.89% (7.11)%
=============================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $704,096 $371,915 $258,852 $178,638 $102,600 $45,497
=============================================================================================
Ratio of expenses to
average net assets 0.73%(c) 0.72% 0.73% 0.78% 0.84%(d) 0.95%
=============================================================================================
Ratio of net investment
income to average net
assets 0.04%(c) 0.41% 0.54% 0.79% 0.95%(d) 0.71%
=============================================================================================
Portfolio turnover rate 101% 133% 132% 143% 125% 179%
=============================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $483,567,224.
(d) Annualized.
AIM V.I. GROWTH FUND
FS-97
<PAGE> 174
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
FS-98
<PAGE> 175
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS AND OTHER EQUITY INTERESTS - 93.07%
BANKS (MONEY CENTER) - 2.23%
Chase Manhattan Corp. (The) 700,000 $ 54,381,250
- -----------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.80%
AT&T Corp. - Liberty Media Group-Class A(a) 275,000 15,606,250
- -----------------------------------------------------------------------------
Comcast Corp. - Class A(a) 850,000 42,712,500
- -----------------------------------------------------------------------------
MediaOne Group, Inc.(a) 450,000 34,565,625
- -----------------------------------------------------------------------------
92,884,375
- -----------------------------------------------------------------------------
CHEMICALS (DIVERSIFIED) - 0.29%
Monsanto Co. 200,000 7,125,000
- -----------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 8.06%
Corning, Inc. 150,000 19,340,625
- -----------------------------------------------------------------------------
JDS Uniphase Corp.(a) 200,000 32,262,500
- -----------------------------------------------------------------------------
Lucent Technologies, Inc. 440,000 32,917,500
- -----------------------------------------------------------------------------
Motorola, Inc. 250,000 36,812,500
- -----------------------------------------------------------------------------
QUALCOMM Inc.(a) 84,400 14,875,500
- -----------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 250,000 47,500,000
- -----------------------------------------------------------------------------
Telefonaktiebolaget LM Ericsson - ADR (Sweden) 200,000 13,137,500
- -----------------------------------------------------------------------------
196,846,125
- -----------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 3.75%
Dell Computer Corp.(a) 400,000 20,400,000
- -----------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 920,000 71,242,500
- -----------------------------------------------------------------------------
91,642,500
- -----------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 3.07%
Cisco Systems, Inc.(a) 700,000 74,987,500
- -----------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.57%
EMC Corp.(a) 349,999 38,237,391
- -----------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 17.17%
America Online, Inc.(a) 350,000 26,403,125
- -----------------------------------------------------------------------------
At Home Corp. - Series A(a) 300,000 12,862,500
- -----------------------------------------------------------------------------
Intuit Inc.(a) 225,000 13,485,937
- -----------------------------------------------------------------------------
Microsoft Corp.(a) 1,000,000 116,750,000
- -----------------------------------------------------------------------------
Novell, Inc.(a) 3,150,000 125,803,125
- -----------------------------------------------------------------------------
Oracle Corp.(a) 300,000 33,618,750
- -----------------------------------------------------------------------------
VERITAS Software Corp.(a) 300,000 42,937,500
- -----------------------------------------------------------------------------
Yahoo! Inc.(a) 60,000 25,961,250
- -----------------------------------------------------------------------------
USWeb Corp.(a) 150,000 6,665,625
- -----------------------------------------------------------------------------
Whitman-Hart, Inc.(a) 280,000 15,015,000
- -----------------------------------------------------------------------------
419,502,812
- -----------------------------------------------------------------------------
ELECTRIC COMPANIES - 1.36%
Houston Industries, Inc. - $3.29 Conv. Pfd. 275,000 33,137,500
- -----------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ELECTRICAL EQUIPMENT - 2.69%
General Electric Co. 425,000 $ 65,768,750
- -----------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.36%
Linear Technology Corp. 160,000 11,450,000
- -----------------------------------------------------------------------------
Texas Instruments, Inc. 225,000 21,796,875
- -----------------------------------------------------------------------------
33,246,875
- -----------------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 1.05%
Applied Materials, Inc.(a) 150,000 19,003,125
- -----------------------------------------------------------------------------
Teradyne, Inc.(a) 100,000 6,600,000
- -----------------------------------------------------------------------------
25,603,125
- -----------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 5.40%
American Express Co. 425,000 70,656,250
- -----------------------------------------------------------------------------
Citigroup, Inc. 850,000 47,228,125
- -----------------------------------------------------------------------------
Freddie Mac 300,000 14,118,750
- -----------------------------------------------------------------------------
132,003,125
- -----------------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 7.51%
American Home Products Corp. 575,000 22,676,562
- -----------------------------------------------------------------------------
Bristol-Myers Squibb Co. 575,000 36,907,812
- -----------------------------------------------------------------------------
Johnson & Johnson 450,000 41,906,250
- -----------------------------------------------------------------------------
Warner-Lambert Co. 1,000,000 81,937,500
- -----------------------------------------------------------------------------
183,428,124
- -----------------------------------------------------------------------------
HEALTH CARE (DRUGS-MAJOR PHARMACEUTICALS) - 1.25%
Pharmacia & Upjohn, Inc. 162,700 7,321,500
- -----------------------------------------------------------------------------
Schering-Plough Corp. 550,000 23,203,125
- -----------------------------------------------------------------------------
30,524,625
- -----------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS &
SUPPLIES) - 1.37%
Guidant Corp.(a) 500,000 23,500,000
- -----------------------------------------------------------------------------
Medtronic, Inc. 270,000 9,838,125
- -----------------------------------------------------------------------------
33,338,125
- -----------------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 2.43%
American International Group, Inc. 550,000 59,468,750
- -----------------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 4.90%
Goldman Sachs Group, Inc. (The) 225,000 21,192,188
- -----------------------------------------------------------------------------
Merrill Lynch & Co., Inc. 150,000 12,525,000
- -----------------------------------------------------------------------------
Morgan Stanley, Dean Witter & Co. 509,100 72,674,025
- -----------------------------------------------------------------------------
Schwab (Charles) Corp. (The) 350,000 13,431,250
- -----------------------------------------------------------------------------
119,822,463
- -----------------------------------------------------------------------------
LODGING-HOTELS - 0.69%
Carnival Corp. 350,000 16,734,375
- -----------------------------------------------------------------------------
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-99
<PAGE> 176
<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
FS-100
<PAGE> 177
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $1,640,506,750) $2,439,816,459
- ------------------------------------------------------------------------
Receivables for:
Investments sold 8,981,263
- ------------------------------------------------------------------------
Capital stock sold 1,356,527
- ------------------------------------------------------------------------
Dividends and interest 1,442,965
- ------------------------------------------------------------------------
Investment for deferred compensation plan 32,290
- ------------------------------------------------------------------------
Other assets 2,860
- ------------------------------------------------------------------------
Total assets 2,451,632,364
- ------------------------------------------------------------------------
LIABILITIES:
Payables for:
Investments purchased 4,825,541
- ------------------------------------------------------------------------
Capital stock reacquired 1,633,624
- ------------------------------------------------------------------------
Deferred compensation plan 32,290
- ------------------------------------------------------------------------
Accrued advisory fees 1,177,844
- ------------------------------------------------------------------------
Accrued administrative services fees 644,499
- ------------------------------------------------------------------------
Accrued operating expenses 54,586
- ------------------------------------------------------------------------
Total liabilities 8,368,384
- ------------------------------------------------------------------------
Net assets applicable to shares outstanding $2,443,263,980
========================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ------------------------------------------------------------------------
Outstanding 77,338,464
========================================================================
Net asset value, offering and redemption price per share $ 31.59
========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $16,291 foreign withholding tax) $ 12,399,500
- ------------------------------------------------------------------------------
Interest 4,576,574
- ------------------------------------------------------------------------------
Total investment income 16,976,074
- ------------------------------------------------------------------------------
EXPENSES:
Advisory fees 10,438,977
- ------------------------------------------------------------------------------
Administrative services fees 2,156,876
- ------------------------------------------------------------------------------
Custodian fees 145,809
- ------------------------------------------------------------------------------
Directors' fees 14,383
- ------------------------------------------------------------------------------
Other 442,382
- ------------------------------------------------------------------------------
Total expenses 13,198,427
- ------------------------------------------------------------------------------
Less: Expenses paid indirectly (4,998)
- ------------------------------------------------------------------------------
Net expenses 13,193,429
- ------------------------------------------------------------------------------
Net investment income 3,782,645
- ------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES,
FOREIGN CURRENCIES AND OPTION CONTRACTS:
Net realized gain (loss) from:
Investment securities 75,519,935
- ------------------------------------------------------------------------------
Foreign currencies 915
- ------------------------------------------------------------------------------
Option contracts (3,870,423)
- ------------------------------------------------------------------------------
71,650,427
- ------------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 486,666,488
- ------------------------------------------------------------------------------
Foreign currencies (9,359)
- ------------------------------------------------------------------------------
Option contracts 1,110,542
- ------------------------------------------------------------------------------
487,767,671
- ------------------------------------------------------------------------------
Net gain from investment securities, foreign currencies and
option contracts 559,418,098
- ------------------------------------------------------------------------------
Net increase in net assets resulting from operations $563,200,743
==============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. GROWTH AND INCOME FUND
FS-101
<PAGE> 178
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,782,645 $ 12,149,523
- -------------------------------------------------------------------------------
Net realized gain from investment securities,
foreign currencies and futures and option
contracts 71,650,427 5,086,770
- -------------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities, foreign currencies and
futures and option contracts 487,767,671 224,324,487
- -------------------------------------------------------------------------------
Net increase in net assets resulting from
operations 563,200,743 241,560,780
- -------------------------------------------------------------------------------
Dividends to shareholders from net investment
income (11,988,578) (4,873,870)
- -------------------------------------------------------------------------------
Distributions to shareholders from net
realized gains (8,277,648) (12,029,125)
- -------------------------------------------------------------------------------
Net increase from capital stock transactions 638,270,694 398,288,439
- -------------------------------------------------------------------------------
Net increase in net assets 1,181,205,211 622,946,224
- -------------------------------------------------------------------------------
NET ASSETS:
Beginning of year 1,262,058,769 639,112,545
- -------------------------------------------------------------------------------
End of year $2,443,263,980 $1,262,058,769
===============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $1,574,186,117 $ 935,990,892
- -------------------------------------------------------------------------------
Undistributed net investment income 3,411,046 11,997,368
- -------------------------------------------------------------------------------
Undistributed net realized gain on sales from
investment securities, foreign currencies and
futures and option contracts 66,361,018 2,532,381
- -------------------------------------------------------------------------------
Unrealized appreciation of investment
securities, foreign currencies and futures
and option contracts 799,305,799 311,538,128
- -------------------------------------------------------------------------------
$2,443,263,980 $1,262,058,769
===============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Growth and Income Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to seek
growth of capital with current income as a secondary objective.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular day,
the security is valued at the closing bid price on that day. Each security
reported on the NASDAQ National Market System is valued at the last sales
price on the valuation date or absent a last sales price, at the closing bid
price. Debt obligations (including convertible bonds) are valued on the basis
of prices provided by an independent pricing service. Prices provided by the
pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as yield, type of issue,
coupon rate and maturity date. Securities for which market prices are not
provided by any of the above methods are valued based upon quotes furnished
by independent sources and are valued at the last bid price in the case of
equity securities and in the case of debt obligations, the mean between the
last bid and asked prices. Securities for which market quotations are not
readily available or are questionable are valued at fair value as determined
in good faith by or under the supervision of the Company's officers in a
manner specifically authorized by the Board of Directors of the Company.
Short-term obligations having 60 days or less to maturity are valued at
amortized cost which approximates market value. For purposes of determining
net asset value per share, futures and options contracts generally will be
valued 15 minutes after the close of trading of the New York Stock Exchange
("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
AIM V.I. GROWTH AND INCOME FUND
FS-102
<PAGE> 179
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, paid-in-capital was increased by $795, undistributed
net investment income was decreased by $380,389 and undistributed net
realized gains increased by $379,594 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications above.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations--Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
G. Covered Call Options - The Fund may write call options, on a covered basis;
that is, the Fund will own the underlying security. Options written by the
Fund normally will have expiration dates between three and nine months from
the date written. The exercise price of a call option may be below, equal
to, or above the current market value of the underlying security at the
time the option is written. When the Fund writes a covered call option, an
amount equal to the premium received by the Fund is recorded as an asset
and an equivalent liability. The amount of the liability is subsequently
"marked-to-market" to reflect the current market value of the option
written. The current market value of a written option is the mean between
the last bid and asked prices on that day. If a written call option expires
on the stipulated expiration date, or if the Fund enters into a closing
purchase transaction, the Fund realizes a gain (or a loss if the closing
purchase transaction exceeds the premium received when the option was
written) without regard to any unrealized gain or loss on the underlying
security, and the liability related to such option is extinguished. If a
written option is exercised, the Fund realizes a gain or a loss from the
sale of the underlying security and the proceeds of the sale are increased
by the premium originally received.
A call option gives the purchaser of such option the right to buy, and the
writer (the Fund) the obligation to sell, the underlying security at the
stated exercise price during the option period. The purchaser of a call
option has the right to acquire the security which is the subject of the call
option at any time during the option period. During the option period, in
return for the premium paid by the purchaser of the option, the Fund has
given up the opportunity for capital appreciation above the exercise price
should the market price of the underlying security increase, but has retained
the risk of loss should the price of the underlying security decline. During
the option period, the Fund may be required at any time to deliver the
underlying security against payment of the exercise price. This obligation is
terminated upon the expiration of the option period or at such earlier time
at which the Fund effects a closing purchase transaction by purchasing (at a
price which may be higher than that received when the call option was
written) a call option identical to the one originally written.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $2,156,876 of which AIM
retained $102,711 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $6,283
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $4,998 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$4,998 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
AIM V.I. GROWTH AND INCOME FUND
FS-103
<PAGE> 180
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - CALL OPTION CONTRACTS WRITTEN
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION CONTRACTS
---------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- -----------
<S> <C> <C>
Beginning of year 2,667 $ 617,471
- -----------------------------------------
Written 7,350 7,711,801
- -----------------------------------------
Closed (5,917) (6,761,366)
- -----------------------------------------
Exercised (1,100) (161,695)
- -----------------------------------------
Expired (3,000) (1,406,211)
- -----------------------------------------
End of year -- $ --
=========================================
</TABLE>
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $2,173,804,512 and $1,547,643,195, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $808,508,094
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (17,623,361)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $790,884,733
===========================================================================
Cost of investments for tax purposes is $1,648,931,726.
</TABLE>
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 27,157,175 $712,881,530 19,890,074 $409,625,526
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 704,177 20,266,226 751,578 16,902,995
- ------------------------------------------------------------------------------
Reacquired (3,653,912) (94,877,062) (1,379,171) (28,240,082)
- ------------------------------------------------------------------------------
24,207,440 $638,270,694 19,262,481 $398,288,439
==============================================================================
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
FS-104
<PAGE> 181
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the period May 2, 1994 (date
operations commenced) through January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------ JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
---------- ---------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
- ----------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.06 0.26 0.13 0.16 0.14 0.11
- ----------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 8.05 4.95 3.74 2.36 3.11 (0.02)
- ----------------------------------------------------------------------------------------------------
Total from investment
operations 8.11 5.21 3.87 2.52 3.25 0.09
- ----------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
- ----------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.11) (0.24) (0.02) (0.03) (0.41) --
- ----------------------------------------------------------------------------------------------------
Total distributions (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
- ----------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
====================================================================================================
Total return(b) 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
- ----------------------------------------------------------------------------------------------------
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
====================================================================================================
Ratio of expenses to
average net assets 0.77%(c) 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
====================================================================================================
Ratio of net investment
income to average net
assets 0.22%(c) 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
====================================================================================================
Portfolio turnover rate 93% 140% 135% 148% 145% 96%
====================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,718,996,207.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.72% (annualized) and 1.30% (annualized),
respectively.
AIM V.I. GROWTH AND INCOME FUND
FS-105
<PAGE> 182
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
FS-106
<PAGE> 183
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
CORPORATE BONDS & NOTES - 87.92%
AEROSPACE/DEFENSE - 1.49%
Precision Partners, Inc., Sr. Sub. Notes, 12.00%,
03/15/09(a) $ 500,000 $ 377,500
- -------------------------------------------------------------------------------
COMPUTERS (NETWORKING) - 0.75%
Convergent Communications - Series B, Sr. Unsec. Notes,
13.00%, 04/01/08 250,000 188,750
- -------------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.59%
Equinix Inc., Sr. Notes, 13.00%, 12/01/07(a)(b) 630,000 653,625
- -------------------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 2.23%
ONO Finance PLC (United Kingdom), Sr. Gtd. Sub. Notes,
13.00%, 05/01/09 550,000 563,750
- -------------------------------------------------------------------------------
GAMING, LOTTERY & PARIMUTUEL COMPANIES - 9.83%
Hollywood Casino Corp., 1st Mortgage Notes, 13.00%,
08/01/06(a) 1,000,000 1,075,000
- -------------------------------------------------------------------------------
Venetian Casino Resort LLC, Sec. Gtd. Mortgage Notes,
12.25%, 11/15/04 1,000,000 867,500
- -------------------------------------------------------------------------------
Resort at Summerlin LP - Series B, Sr. Unsec. Sub.
Notes, 13.00%, 12/15/07 768,000 541,440
- -------------------------------------------------------------------------------
2,483,940
- -------------------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 4.29%
DJ Orthopedics, LLC/DJ Orthopedics Capital Corp., Sr.
Unsec. Gtd. Sub. Notes, 12.63%, 06/15/09 1,100,000 1,083,500
- -------------------------------------------------------------------------------
HOUSEHOLD FURNISHING & APPLIANCES - 3.92%
Winsloew Furniture, Inc., Sr. Sub. Notes, 12.75%,
08/15/07(a)(b) 1,100,000 990,000
- -------------------------------------------------------------------------------
HOUSEWARES - 1.40%
Decora Industries, Inc. - Series B, Sr. Sec. Gtd.
Notes, 11.00%, 05/01/05 440,000 354,200
- -------------------------------------------------------------------------------
LEISURE TIME (PRODUCTS) - 2.59%
Marvel Enterprises, Inc., Sr. Unsec. Gtd. Sub. Notes,
12.00%, 06/15/09 700,000 654,500
- -------------------------------------------------------------------------------
LODGING - HOTELS - 0.48%
Stena Line A.B. (Sweden), Sr. Unsec. Yankee Notes,
10.63%, 06/01/08 200,000 121,000
- -------------------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 1.57%
GST Equipment Funding, Sr. Sec. Notes, 13.25%, 05/01/07 400,000 397,000
- -------------------------------------------------------------------------------
METALS MINING - 1.95%
Bulong Operations PTV Ltd., Sr. Sec. Notes, 12.50%,
12/15/08 700,000 493,500
- -------------------------------------------------------------------------------
PERSONAL CARE - 4.45%
American Tissue Inc., Sr. Sec. Notes, 12.50%,
07/15/06(a) 1,100,000 1,124,750
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL MARKET
AMOUNT VALUE
<S> <C> <C>
PHOTOGRAPHY/IMAGING - 1.65%
Polaroid Corp., Sr. Unsec. Notes, 11.50%, 02/15/06 $ 420,000 $ 417,900
- ------------------------------------------------------------------------------
RETAIL (SPECIALTY) - 0.84%
Vista Eyecare, Inc. - Series B, Sr. Unsec. Gtd. Sub.
Notes, 12.75%, 10/15/05 525,000 212,625
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 13.27%
KMC Telecom Holdings, Inc., Sr. Notes, 13.50%,
05/15/09(a) 1,000,000 1,005,000
- ------------------------------------------------------------------------------
Spectrasite Holdings, Inc.,
Sr. Disc. Notes, 12.00%, 07/15/08(c) 400,000 240,000
- ------------------------------------------------------------------------------
Sr. Unsec. Disc. Notes, 11.25%, 04/15/09(c) 70,000 37,800
- ------------------------------------------------------------------------------
Worldwide Fiber Inc. (Canada), Sr. Notes, 12.00%,
08/01/09(a) 1,000,000 1,037,500
- ------------------------------------------------------------------------------
Jazztel PLC (United Kingdom), Sr. Unsec. Notes,
14.00%, 04/01/09 1,000,000 1,032,500
- ------------------------------------------------------------------------------
3,352,800
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 17.03%
DTI Holdings, Inc. - Series B, Sr. Unsec. Disc. Notes,
12.50%, 03/01/08(c) 500,000 179,375
- ------------------------------------------------------------------------------
Destia Communications, Inc., Sr. Unsec. Notes, 13.50%,
07/15/07 650,000 690,625
- ------------------------------------------------------------------------------
GST Network Funding, Inc., Sr. Sec. Disc. Notes,
10.50%, 05/01/08(c) 1,000,000 487,500
- ------------------------------------------------------------------------------
Primus Telecommunications Group, Inc., Sr. Notes,
12.75%, 10/15/09(a) 1,000,000 1,045,000
- ------------------------------------------------------------------------------
Versatel Telecom International N.V. (Netherlands), Sr.
Notes, 13.25%, 05/15/08 100,000 107,000
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 11.88%, 07/15/09 400,000 408,000
- ------------------------------------------------------------------------------
Sr. Unsec. Notes, 13.25%, 05/15/08 200,000 214,000
- ------------------------------------------------------------------------------
Long Distance International, Inc., Sr. Unsec. Notes,
12.25%, 04/15/08 140,000 81,550
- ------------------------------------------------------------------------------
Tele1 Europe B.V. (Netherlands), Sr. Unsec. Notes,
13.00%, 05/15/09(a)(b) 1,000,000 1,055,000
- ------------------------------------------------------------------------------
Viatel, Inc., Sr. Notes, 11.50%, 03/15/09(a) 34,302 34,988
- ------------------------------------------------------------------------------
4,303,038
- ------------------------------------------------------------------------------
TELEPHONE - 10.01%
Logix Communications Enterprises, Sr. Unsec. Notes,
12.25%, 06/15/08 550,000 430,375
- ------------------------------------------------------------------------------
U.S. Xchange LLC, Sr. Unsec. Notes, 15.00%, 07/01/08 460,000 442,750
- ------------------------------------------------------------------------------
FirstWorld Communications Inc., Sr. Unsec. Disc.
Notes, 13.00%, 04/15/08(c) 350,000 211,750
- ------------------------------------------------------------------------------
NEXTLINK Communications, Inc., Sr., Unsec., Disc.,
Notes, 12.25%, 06/01/09(c) 500,000 310,000
- ------------------------------------------------------------------------------
NTL Communications Corp. - Series B, Sr. Unsec. Notes,
12.38%, 10/01/08(a)(c) 750,000 530,625
- ------------------------------------------------------------------------------
PTC International Finance II SA (Luxembourg), Sr. Gtd.
Sub. Notes, 11.25%, 12/01/09 (Acquired 11/16/99; Cost
$591,168)(d) 600,000 603,000
- ------------------------------------------------------------------------------
2,528,500
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. HIGH YIELD FUND
FS-107
<PAGE> 184
<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.
AIM V.I. HIGH YIELD FUND
FS-108
<PAGE> 185
STATEMENT OF ASSETS AND LIABILITIES
December 31 , 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $24,587,365) $ 24,557,687
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 8,404
- ----------------------------------------------------------------------
Interest 723,352
- ----------------------------------------------------------------------
Investment for deferred compensation plan 8,677
- ----------------------------------------------------------------------
Total assets 25,298,120
- ----------------------------------------------------------------------
LIABILITIES:
Payable for deferred compensation plan 8,677
- ----------------------------------------------------------------------
Accrued administrative services fees 14,621
- ----------------------------------------------------------------------
Accrued operating expenses 6,636
- ----------------------------------------------------------------------
Total liabilities 29,934
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $ 25,268,186
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 2,800,045
======================================================================
Net asset value, offering and redemption price per share $ 9.02
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $2,006,435
- ----------------------------------------------------------------------------
Dividends 12,823
- ----------------------------------------------------------------------------
Total investment income 2,019,258
- ----------------------------------------------------------------------------
EXPENSES:
Advisory fees 103,575
- ----------------------------------------------------------------------------
Administrative services fees 61,929
- ----------------------------------------------------------------------------
Custodian fees 19,477
- ----------------------------------------------------------------------------
Directors' fees 8,011
- ----------------------------------------------------------------------------
Printing fees 11,566
- ----------------------------------------------------------------------------
Professional fees 24,496
- ----------------------------------------------------------------------------
Other 5,565
- ----------------------------------------------------------------------------
Total expenses 234,619
- ----------------------------------------------------------------------------
Less: Expenses paid indirectly (4,800)
- ----------------------------------------------------------------------------
Fees waived by advisor (45,183)
- ----------------------------------------------------------------------------
Net expenses 184,636
- ----------------------------------------------------------------------------
Net investment income 1,834,622
- ----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES:
Net realized gain (loss) from investment securities (517,194)
- ----------------------------------------------------------------------------
Change in net unrealized appreciation of investment securities 296,072
- ----------------------------------------------------------------------------
Net gain (loss) from investment securities (221,122)
- ----------------------------------------------------------------------------
Net increase in net assets resulting from operations $1,613,500
============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. HIGH YIELD FUND
FS-109
<PAGE> 186
STATEMENT OF CHANGES IN NET ASSETS
For the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998
<TABLE>
<CAPTION>
1999 1998
----------- ----------
<S> <C> <C>
OPERATIONS:
Net investment income $1,834,622 $ 323,361
- -----------------------------------------------------------------------------
Net realized gain (loss) from investment securities (517,194) (367,230)
- -----------------------------------------------------------------------------
Change in net unrealized appreciation
(depreciation) of investment securities 296,072 (325,750)
- -----------------------------------------------------------------------------
Net increase (decrease) in net assets resulting
from operations 1,613,500 (369,619)
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment
income (1,900,359) (330,305)
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 17,588,744 8,666,225
- -----------------------------------------------------------------------------
Net increase in net assets 17,301,885 7,966,301
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of period 7,966,301 --
- -----------------------------------------------------------------------------
End of period $25,268,186 $7,966,301
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $26,250,824 $8,662,066
- -----------------------------------------------------------------------------
Undistributed net investment income (62,636) (2,785)
- -----------------------------------------------------------------------------
Undistributed net realized gain (loss) from
investment securities (890,324) (367,230)
- -----------------------------------------------------------------------------
Unrealized appreciation (depreciation) of
investment securities (29,678) (325,750)
- -----------------------------------------------------------------------------
$25,268,186 $7,966,301
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. High Yield Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be voted
on exclusively by the shareholders of such portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies. The Fund's investment objective is to achieve a high level of
current income by investing primarily in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than
investment grade are considered "high-risk" securities (commonly referred to
as junk bonds). These bonds may involve special risks in addition to the risks
associated with investment in higher rated debt securities. High yield bonds
may be more susceptible to real or perceived adverse economic conditions than
higher grade bonds. Also, the secondary market in which high yield bonds are
traded may be less liquid than the market for higher grade bonds.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
AIM V.I. HIGH YIELD FUND
FS-110
<PAGE> 187
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
FS-111
<PAGE> 188
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during the year ended December 31, 1999 and the period May 1, 1998 (date
operations commenced) through December 31, 1998.
<TABLE>
<CAPTION>
1999(a) 1998
------- ------
<S> <C> <C>
Net asset value, beginning of period $ 8.84 $10.00
- -------------------------------------------------------------------------------
Income from investment operations:
Net investment income 1.03 0.39
- -------------------------------------------------------------------------------
Net gains (losses) on securities (both realized and
unrealized) (0.10) (1.15)
- -------------------------------------------------------------------------------
Total from investment operations 0.93 (0.76)
- -------------------------------------------------------------------------------
Less dividends from net investment income (0.75) (0.40)
- -------------------------------------------------------------------------------
Net asset value, end of period $ 9.02 $ 8.84
===============================================================================
Total return(b) 10.52% (7.61)%
===============================================================================
RATIOS/SUPPLEMENTAL DATA:
Net assets, end of period (000s omitted) $25,268 $7,966
===============================================================================
Ratio of expenses to average net assets(c) 1.14%(d) 1.13%(e)
===============================================================================
Ratio of net investment income to average net assets(f) 11.07%(d) 9.75%(e)
===============================================================================
Portfolio turnover rate 127% 39%
===============================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses to
average net assets prior to fee waivers and/or expense reimbursements were
1.42% and 2.50% (annualized) for 1999 and 1998, respectively.
(d) Ratios are based on average net assets of $16,571,951.
(e) Annualized.
(f) After fee waivers and/or expense reimbursements. Ratios of net investment
income to average net assets prior to fee waivers and/or expense
reimbursements were 10.80% and 8.36% (annualized) for 1999 and 1998,
respectively.
AIM V.I. HIGH YIELD FUND
FS-112
<PAGE> 189
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
AIM V.I. INTERNATIONAL EQUITY FUND
FS-113
<PAGE> 190
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
SHARES MARKET VALUE
<S> <C> <C>
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 94.30%
AUSTRALIA - 1.12%
AMP Ltd. (Insurance - Life/Health) 120,800 $ 1,335,723
- -------------------------------------------------------------------------------
Brambles Industries Ltd. (Air Freight) 37,700 1,043,340
- -------------------------------------------------------------------------------
Cable & Wireless Optus Ltd. (Telephone)(a) 268,000 896,227
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. (Telephone) 26,200 142,527
- -------------------------------------------------------------------------------
Telstra Corp. Ltd. - Installment Receipts
(Telephone)(a) 466,800 1,646,912
- -------------------------------------------------------------------------------
5,064,729
- -------------------------------------------------------------------------------
BELGIUM - 0.31%
UCB S.A. (Manufacturing - Diversified) 32,000 1,386,486
- -------------------------------------------------------------------------------
BRAZIL - 1.25%
Embratel Participacoes S.A. - ADR (Telecommunications-
Long Distance) 45,100 1,228,975
- -------------------------------------------------------------------------------
Embratel Participacoes S.A. - Pfd.
(Telecommunications - Long Distance) 11,800 303,737
- -------------------------------------------------------------------------------
Petroleo Brasileiro S.A. - Petrobras-Pfd.
(Oil & Gas - Exploration & Production) 9,015 2,295,439
- -------------------------------------------------------------------------------
Tele Centro Sul Participacoes S.A. - ADR (Telephone) 11,970 1,086,277
- -------------------------------------------------------------------------------
Telecommunicacoes de Sao Paulo - Pfd. (Telephone)(a) 3,984 96,601
- -------------------------------------------------------------------------------
Telesp Participacoes S.A. - ADR (Telephone) 27,200 664,700
- -------------------------------------------------------------------------------
5,675,729
- -------------------------------------------------------------------------------
CANADA - 6.71%
BCE Inc. (Telephone) 86,000 7,814,661
- -------------------------------------------------------------------------------
Bombardier Inc. - Class B (Aerospace/Defense) 162,600 3,340,324
- -------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 113,334 11,446,734
- -------------------------------------------------------------------------------
Research in Motion Ltd. (Communications Equipment) 73,400 3,392,074
- -------------------------------------------------------------------------------
Rogers Communications, Inc. - Class B
(Telecommunications-Cellular/Wireless)(a) 76,300 1,866,133
- -------------------------------------------------------------------------------
Shaw Communications Inc. - Class B
(Broadcasting - Television, Radio & Cable) 33,600 1,109,291
- -------------------------------------------------------------------------------
Toronto-Dominion Bank (The) (Banks-Regional) 56,200 1,508,869
- -------------------------------------------------------------------------------
30,478,086
- -------------------------------------------------------------------------------
FINLAND - 3.96%
Nokia Oyj (Communications Equipment) 75,543 13,685,445
- -------------------------------------------------------------------------------
Sonera Oyj (Telecommunications -Cellular/Wireless) 62,950 4,311,378
- -------------------------------------------------------------------------------
17,996,823
- -------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
FRANCE - 12.32%
Accor S.A. (Lodging - Hotels) 56,000 $ 2,703,647
- -------------------------------------------------------------------------------
Altran Technologies S.A. (Services - Commercial &
Consumer) 10,471 6,323,123
- -------------------------------------------------------------------------------
AXA (Insurance - Multi-Line) 33,032 4,601,116
- -------------------------------------------------------------------------------
Banque Nationale de Paris (Banks - Major Regional) 49,800 4,591,103
- -------------------------------------------------------------------------------
Carrefour S.A. (Retail - Food Chains) 54,300 10,006,458
- -------------------------------------------------------------------------------
Pinault-Printemps-Redoute S.A. (Retail - General
Merchandise) 33,200 8,754,505
- -------------------------------------------------------------------------------
PSA Peugeot Citroen (Automobiles) 8,500 1,928,258
- -------------------------------------------------------------------------------
Societe Generale (Banks - Major Regional) 16,800 3,905,831
- -------------------------------------------------------------------------------
Societe Television Francaise 1 (Broadcasting -
Television, Radio & Cable) 13,905 7,277,237
- -------------------------------------------------------------------------------
Total Fina S.A. - ADR (Oil - International Integrated) 3,644 252,347
- -------------------------------------------------------------------------------
Total Fina S.A. - Class B (Oil - International
Integrated) 42,103 5,614,630
- -------------------------------------------------------------------------------
55,958,255
- -------------------------------------------------------------------------------
GERMANY - 4.99%
EM.TV & Merchandising A.G. (Broadcasting -Television,
Radio & Cable) 21,385 1,377,468
- -------------------------------------------------------------------------------
Mannesmann A.G. (Machinery - Diversified) 75,441 18,183,976
- -------------------------------------------------------------------------------
Porsche A.G.-Pfd. (Automobiles) 1,135 3,107,112
- -------------------------------------------------------------------------------
22,668,556
- -------------------------------------------------------------------------------
HONG KONG - 3.39%
China Telecom Ltd. (Telecommunications -
Cellular/Wireless)(a) 1,046,000 6,526,147
- -------------------------------------------------------------------------------
Cosco Pacific Ltd. (Financial - Diversified) 3,138,000 2,603,731
- -------------------------------------------------------------------------------
Dao Heng Bank Group Ltd. (Banks - Regional) 374,000 1,929,298
- -------------------------------------------------------------------------------
Hutchison Whampoa Ltd. (Retail - Food Chains) 299,000 4,346,433
- -------------------------------------------------------------------------------
15,405,609
- -------------------------------------------------------------------------------
INDONESIA - 0.20%
Gulf Indonesia Resources Ltd. (Oil - International
Integrated)(a) 111,400 905,125
- -------------------------------------------------------------------------------
IRELAND - 0.74%
CRH PLC (Construction - Cement & Aggregates) 156,100 3,346,376
- -------------------------------------------------------------------------------
ITALY - 2.47%
Banca Popolare di Brescia (Banks - Regional) 100,800 8,912,397
- -------------------------------------------------------------------------------
Telecom Italia Mobile S.p.A. (Telecommunications -
Cellular/Wireless) 205,000 2,288,114
- -------------------------------------------------------------------------------
11,200,511
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-114
<PAGE> 191
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
JAPAN - 26.88%
Advantest Corp. (Electronics - Instrumentation) 27,200 $ 7,191,187
- ------------------------------------------------------------------------------
Alps Electric Co., Ltd. (Electronics - Component
Distributors) 139,000 2,121,919
- ------------------------------------------------------------------------------
DDI Corp. (Telecommunications) 400 5,483,476
- ------------------------------------------------------------------------------
Fast Retailing Co. Ltd. (Retail - Specialty Apparel) 44 17,923
- ------------------------------------------------------------------------------
Hirose Electric Co. Ltd. (Electronics - Component
Distributors) 23,600 5,294,257
- ------------------------------------------------------------------------------
Hoya Corp. (Manufacturing - Specialized) 32,000 2,522,399
- ------------------------------------------------------------------------------
Ibiden Co., Ltd. (Electronics - Component
Distributors) 72,000 972,925
- ------------------------------------------------------------------------------
Kyocera Corp. (Electronics - Component Distributors) 36,100 9,367,442
- ------------------------------------------------------------------------------
Matsushita Communication Industrial Co., Ltd.
(Telephone) 41,000 10,839,657
- ------------------------------------------------------------------------------
Murata Manufacturing Co., Ltd. (Electronics -
Component Distributors) 42,000 9,870,257
- ------------------------------------------------------------------------------
NEC Corp. (Computers - Hardware) 238,000 5,674,712
- ------------------------------------------------------------------------------
Nippon Telegraph & Telephone Corp. (Telephone) 384 6,580,171
- ------------------------------------------------------------------------------
NTT Data Corp. (Computers - Software & Services) 228 5,246,512
- ------------------------------------------------------------------------------
NTT Mobile Communications Network, Inc.
(Telecommunications - Cellular/Wireless) 273 10,505,655
- ------------------------------------------------------------------------------
Orix Corp. (Financial - Diversified) 4,400 991,804
- ------------------------------------------------------------------------------
Ricoh Co., Ltd. (Office Equipment & Supplies) 200,000 3,771,848
- ------------------------------------------------------------------------------
Rohm Co. Ltd. (Electronics - Component Distributors) 8,600 3,536,842
- ------------------------------------------------------------------------------
Sanix Inc. (Services - Commercial & Consumer) 21,400 2,346,928
- ------------------------------------------------------------------------------
Sharp Corp. (Electrical Equipment) 106,000 2,714,223
- ------------------------------------------------------------------------------
Sony Corp. (Electrical Equipment) 39,800 11,808,470
- ------------------------------------------------------------------------------
Takeda Chemical Industries Ltd. (Health Care -Drugs -
Generic & Other) 73,000 3,609,792
- ------------------------------------------------------------------------------
Tokyo Electron Ltd. (Electronics - Semiconductors) 27,000 3,701,346
- ------------------------------------------------------------------------------
Trend Micro Inc. (Computers - Software & Services)(a) 21,900 5,532,632
- ------------------------------------------------------------------------------
Ushio, Inc. (Electronics - Component Distributors) 121,000 2,334,100
- ------------------------------------------------------------------------------
122,036,477
- ------------------------------------------------------------------------------
MEXICO - 3.22%
Cifra S.A. de C.V. - Series C (Retail - General
Merchandise)(a) 1,014,000 1,930,613
- ------------------------------------------------------------------------------
Coca-Cola Femsa S.A. - ADR (Beverages -
Non-Alcoholic) 70,000 1,229,375
- ------------------------------------------------------------------------------
Fomento Economico Mexicano, S.A. de C.V. - ADR
(Beverages-Alcoholic) 74,709 3,324,550
- ------------------------------------------------------------------------------
Grupo Modelo S.A. de C.V. - Series C
(Beverages - Alcoholic) 523,000 1,435,145
- ------------------------------------------------------------------------------
Grupo Televisa S.A.-GDR (Entertainment)(a) 60,160 4,105,920
- ------------------------------------------------------------------------------
Kimberly-Clark de Mexico, S.A. de C.V. - Class A
(Paper & Forest Products) 226,000 882,533
- ------------------------------------------------------------------------------
Telefonos de Mexico S.A. - ADR (Telephone) 15,068 1,695,150
- ------------------------------------------------------------------------------
14,603,286
- ------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
NETHERLANDS - 3.33%
Aegon N.V. (Insurance Brokers) 22,300 $ 2,152,364
- -------------------------------------------------------------------------------
CMG PLC (Computers - Software & Services) 26,000 1,933,793
- -------------------------------------------------------------------------------
Koninklijke (Royal) Philips Electronics N.V.
(Electrical Equipment) 34,960 4,750,041
- -------------------------------------------------------------------------------
United Pan-Europe Communications N.V. (Broadcasting -
Television, Radio & Cable)(a) 18,500 2,364,654
- -------------------------------------------------------------------------------
Verenigde Nederlandse Uitgeversbedrijven (Publishing) 74,400 3,907,232
- -------------------------------------------------------------------------------
15,108,084
- -------------------------------------------------------------------------------
SINGAPORE - 1.37%
Datacraft Asia Ltd. (Communications Equipment) 134,000 1,112,200
- -------------------------------------------------------------------------------
DBS Group Holdings Ltd. (Banks - Money Center)(a) 143,979 2,360,028
- -------------------------------------------------------------------------------
Keppel Corp. Ltd. (Engineering & Construction) 331,000 866,503
- -------------------------------------------------------------------------------
Singapore Press Holdings Ltd. (Publishing -Newspapers) 87,563 1,897,927
- -------------------------------------------------------------------------------
6,236,658
- -------------------------------------------------------------------------------
SOUTH KOREA - 2.07%
Korea Electric Power Corp. - ADR (Electric Companies) 65,376 1,095,048
- -------------------------------------------------------------------------------
Korea Telecom Corp. - ADR (Telephone) 53,530 4,001,367
- -------------------------------------------------------------------------------
L.G. Chemical Ltd. (Chemicals - Diversified) 66,000 2,086,658
- -------------------------------------------------------------------------------
Pohang Iron & Steel Co. Ltd. - ADR (Iron & Steel) 62,915 2,202,025
- -------------------------------------------------------------------------------
9,385,098
- -------------------------------------------------------------------------------
SPAIN - 2.02%
Banco Popular Espanol S.A. (Banks - Major Regional) 22,900 1,492,339
- -------------------------------------------------------------------------------
Telefonica S.A. (Telephone)(a) 306,743 7,656,293
- -------------------------------------------------------------------------------
9,148,632
- -------------------------------------------------------------------------------
SWEDEN - 2.42%
Hennes & Mauritz A.B. - Class B (Retail - Specialty
Apparel) 166,476 5,575,480
- -------------------------------------------------------------------------------
NetCom A.B. - Class B (Telecommunications -
Cellular/Wireless)(a) 77,200 5,425,056
- -------------------------------------------------------------------------------
11,000,536
- -------------------------------------------------------------------------------
SWITZERLAND - 3.52%
ABB Ltd. (Electrical Equipment)(a) 14,000 1,712,303
- -------------------------------------------------------------------------------
Adecco S.A. (Services - Commercial & Consumer) 3,395 2,643,849
- -------------------------------------------------------------------------------
Ares-Serono Group - Class B (Health Care -
Drugs - Generic & Other)(a) 1,660 3,544,558
- -------------------------------------------------------------------------------
Compagnie Financiere Richemont A.G. (Tobacco) 1,845 4,403,065
- -------------------------------------------------------------------------------
Zurich Allied A.G. (Insurance - Multi-Line) 6,458 3,682,638
- -------------------------------------------------------------------------------
15,986,413
- -------------------------------------------------------------------------------
TAIWAN - 1.07%
Far Eastern Textile Ltd. - GDR (Textiles-Apparel)(a) 100,000 2,415,000
- -------------------------------------------------------------------------------
GT Taiwan Fund (Investment Management)(a)(b) 15,291 237,473
- -------------------------------------------------------------------------------
Taiwan Semiconductor Manufacturing Co. Ltd. - ADR
(Computers-Hardware) 49,000 2,205,000
- -------------------------------------------------------------------------------
4,857,473
- -------------------------------------------------------------------------------
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-115
<PAGE> 192
<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
FS-116
<PAGE> 193
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, at market value (cost $262,481,984) $449,373,233
- ----------------------------------------------------------------------
Foreign currencies, at value (cost $5,268,520) 5,196,151
- ----------------------------------------------------------------------
Receivables for:
Capital stock sold 130,765
- ----------------------------------------------------------------------
Investments sold 71,542
- ----------------------------------------------------------------------
Dividends and interest 667,995
- ----------------------------------------------------------------------
Investment for deferred compensation plan 30,156
- ----------------------------------------------------------------------
Other assets 1,881
- ----------------------------------------------------------------------
Total assets 455,471,723
- ----------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 913,583
- ----------------------------------------------------------------------
Deferred compensation plan 30,156
- ----------------------------------------------------------------------
Accrued advisory fees 264,916
- ----------------------------------------------------------------------
Accrued administrative services fees 97,409
- ----------------------------------------------------------------------
Accrued operating expenses 106,108
- ----------------------------------------------------------------------
Total liabilities 1,412,172
- ----------------------------------------------------------------------
Net assets applicable to shares outstanding $454,059,551
======================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- ----------------------------------------------------------------------
Outstanding 15,503,433
======================================================================
Net asset value, offering and redemption price per share $ 29.29
======================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Dividends (net of $359,411 foreign withholding tax) $ 3,034,915
- -----------------------------------------------------------------------------
Interest 713,358
- -----------------------------------------------------------------------------
Total investment income 3,748,273
- -----------------------------------------------------------------------------
EXPENSES:
Advisory fees 2,066,153
- -----------------------------------------------------------------------------
Administrative services fees 172,703
- -----------------------------------------------------------------------------
Custodian fees 273,972
- -----------------------------------------------------------------------------
Directors' fees 9,419
- -----------------------------------------------------------------------------
Other 174,377
- -----------------------------------------------------------------------------
Total expenses 2,696,624
- -----------------------------------------------------------------------------
Less: Expenses paid indirectly (1,257)
- -----------------------------------------------------------------------------
Net expenses 2,695,367
- -----------------------------------------------------------------------------
Net investment income 1,052,906
- -----------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES
AND FOREIGN CURRENCIES:
Net realized gain (loss) from:
Investment securities 28,518,935
- -----------------------------------------------------------------------------
Foreign currencies (108,248)
- -----------------------------------------------------------------------------
28,410,687
- -----------------------------------------------------------------------------
Change in net unrealized appreciation (depreciation) of:
Investment securities 127,676,389
- -----------------------------------------------------------------------------
Foreign currencies (127,150)
- -----------------------------------------------------------------------------
127,549,239
- -----------------------------------------------------------------------------
Net gain from investment securities and foreign currencies 155,959,926
- -----------------------------------------------------------------------------
Net increase in net assets resulting from operations $157,012,832
=============================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-117
<PAGE> 194
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 1,052,906 $ 1,852,329
- -----------------------------------------------------------------------------
Net realized gain from investment securities and
foreign currencies 28,410,687 13,261,554
- -----------------------------------------------------------------------------
Change in net unrealized appreciation of
investment securities and foreign currencies 127,549,239 15,969,669
- -----------------------------------------------------------------------------
Net increase in net assets resulting from
operations 157,012,832 31,083,552
- -----------------------------------------------------------------------------
Dividends to shareholders from net investment
income (2,918,487) (1,910,166)
- -----------------------------------------------------------------------------
Distributions to shareholders from net realized
gains (12,247,382) --
- -----------------------------------------------------------------------------
Net increase from capital stock transactions 71,898,276 118,341
- -----------------------------------------------------------------------------
Net increase in net assets 213,745,239 29,291,727
- -----------------------------------------------------------------------------
NET ASSETS:
Beginning of year 240,314,312 211,022,585
- -----------------------------------------------------------------------------
End of year $454,059,551 $240,314,312
=============================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $256,736,054 $170,399,034
- -----------------------------------------------------------------------------
Undistributed net investment income (loss) (84,098) 1,934,360
- -----------------------------------------------------------------------------
Undistributed net realized gain from investment
securities and foreign currencies 10,606,640 11,825,802
- -----------------------------------------------------------------------------
Unrealized appreciation of investment securities
and foreign currencies 186,800,955 56,155,116
- -----------------------------------------------------------------------------
$454,059,551 $240,314,312
=============================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. International Equity Fund (the "Fund") is a series portfolio of AIM
Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland
corporation registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end series management investment company
consisting of seventeen separate portfolios. Matters affecting each portfolio
will be voted on exclusively by the shareholders of such portfolio. The
assets, liabilities and operations of each portfolio are accounted for
separately. Information presented in these financial statements pertains only
to the Fund. Currently, shares of the Fund are sold only to insurance company
separate accounts to fund the benefits of variable annuity contracts and
variable life insurance policies. The Fund's investment objective is to seek
to provide long-term growth of capital by investing in a diversified portfolio
of international equity securities, the issuers of which are considered by AIM
to have strong earnings momentum.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - A security listed or traded on an exchange (except
convertible bonds) is valued at its last sales price on the exchange where
the security is principally traded, or lacking any sales on a particular
day, the security is valued at the closing bid price on that day. Each
security reported on the NASDAQ National Market System is valued at the
last sales price on the valuation date or absent a last sales price, at the
closing bid price. Debt obligations (including convertible bonds) are
valued on the basis of prices provided by an independent pricing service.
Prices provided by the pricing service may be determined without exclusive
reliance on quoted prices, and may reflect appropriate factors such as
yield, type of issue, coupon rate and maturity date. Securities for which
market prices are not provided by any of the above methods are valued based
upon quotes furnished by independent sources and are valued at the last bid
price in the case of equity securities and in the case of debt obligations,
the mean between the last bid and asked prices. Securities for which market
quotations are not readily available or are questionable are valued at fair
value as determined in good faith by or under the supervision of the
Company's officers in a manner specifically authorized by the Board of
Directors of the Company. Short-term obligations having 60 days or less to
maturity are valued at amortized cost which approximates market value. For
purposes of determining net asset value per share, futures and options
contracts generally will be valued 15 minutes after the close of trading of
the New York Stock Exchange ("NYSE").
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
AIM V.I. INTERNATIONAL EQUITY FUND
FS-118
<PAGE> 195
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was decreased by
$152,877, undistributed net realized gains decreased by $17,382,467 and
paid-in capital increased by $17,535,344 as a result of differing book/tax
treatment of foreign currency transactions and other reclassifications. Net
assets of the Fund were unaffected by the reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements. The Fund has a capital loss
carryforward of $9,708,288 as of December 31, 1999 which may be carried
forward to offset future taxable gains, if any, which expires in varying
increments, if not previously utilized, in the year 2007.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of
the first $250 million of the Fund's average daily net assets, plus 0.70% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $172,703 of which AIM retained
$64,730 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $3,451
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,257 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,257 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $300,468,441 and $252,489,998, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $187,651,533
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (1,838,689)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $185,812,844
===========================================================================
Cost of investments for tax purposes is $263,560,389.
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
FS-119
<PAGE> 196
NOTE 7 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 6,613,497 $145,638,150 2,410,075 $46,643,002
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 582,183 15,165,869 101,067 1,910,166
- -----------------------------------------------------------------------------
Issued in connection with
acquisitions* 2,243,929 49,699,501 -- --
- -----------------------------------------------------------------------------
Reacquired (6,185,749) (138,605,244) (2,581,125) (48,434,827)
- -----------------------------------------------------------------------------
3,253,860 $ 71,898,276 (69,983) $ 118,341
=============================================================================
</TABLE>
* As of the close of business on October 22, 1999, the Fund acquired all the
net assets of the following funds: GT Global Variable International Fund, GT
Global Variable Europe Fund, GT Global Variable Natural Resources Fund, GT
Global Variable Infrastructure Fund, GT Global Variable New Pacific Fund, GT
Global Variable Latin America Fund and GT Global Variable Emerging Markets
Fund, collectively (the "Variable Funds"), pursuant to a plan of
reorganization approved by the Variable Funds shareholders on August 25,
1999. The acquisitions were accomplished by a tax-free exchange of 2,243,929
shares of the Fund for the respective shares of each of the Variable Funds
outstanding as of the close of business October 22, 1999 (see following
table) and by combining the net assets of the Fund as of that date with
those of the respective Variable Funds outlined in the following table:
<TABLE>
<CAPTION>
SHARES NET ASSETS IMMEDIATELY APPRECIATION/
VARIABLE FUNDS: EXCHANGED BEFORE ACQUISITIONS (DEPRECIATION) INCLUDED
- ------------------------ --------- ---------------------- -----------------------
<S> <C> <C> <C>
GT Global Variable
International Fund 398,165 $ 4,159,686 $ 591,925
- ----------------------------------------------------------------------------------
GT Global Variable
Europe Fund 2,101,240 16,722,795 1,876,631
- ----------------------------------------------------------------------------------
GT Global Variable
Natural Resources Fund 426,574 5,000,655 167,642
- ----------------------------------------------------------------------------------
GT Global Variable
Infrastructure Fund 253,110 3,837,109 609,331
- ----------------------------------------------------------------------------------
GT Global Variable New
Pacific Fund 857,885 7,747,489 1,306,187
- ----------------------------------------------------------------------------------
GT Global Variable Latin
America Fund 731,544 7,915,791 (1,572,891)
- ----------------------------------------------------------------------------------
GT Global Variable
Emerging Markets Fund 544,479 4,315,976 117,775
- ----------------------------------------------------------------------------------
</TABLE>
The net assets of the Fund immediately before the acquisitions were
$285,111,544.
NOTE 8 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995, and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------- JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
-------- -------- -------- -------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03 $ 12.49
- ---------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.08 0.15 0.10 0.07 0.07 0.06
- ---------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 10.59 2.50 1.03 2.67 2.58 (1.49)
- ---------------------------------------------------------------------------------------------
Total from investment
operations 10.67 2.65 1.13 2.74 2.65 (1.43)
- ---------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.19) (0.16) (0.08) (0.04) (0.02) (0.03)
- ---------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.81) -- (0.28) -- -- --
- ---------------------------------------------------------------------------------------------
Total distributions (1.00) (0.16) (0.36) (0.04) (0.02) (0.03)
- ---------------------------------------------------------------------------------------------
Net asset value, end of
period $ 29.29 $ 19.62 $ 17.13 $ 16.36 $ 13.66 $ 11.03
=============================================================================================
Total return(b) 55.04% 15.49% 6.94% 20.05% 24.04% (11.48)%
=============================================================================================
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $454,060 $240,314 $211,023 $165,738 $82,257 $55,019
=============================================================================================
Ratio of expenses to
average net assets 0.97(c) 0.91% 0.93% 0.96% 1.15%(d) 1.27%(e)
=============================================================================================
Ratio of net investment
income to average net
assets 0.38(c) 0.80% 0.68% 0.78% 0.75%(d) 0.60%(e)
=============================================================================================
Portfolio turnover rate 97% 76% 57% 59% 67% 64%
=============================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $277,307,465.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average net assets prior to fee waivers and/or
expense reimbursements were 1.28% and 0.59%, respectively.
AIM V.I. INTERNATIONAL EQUITY FUND
FS-120
<PAGE> 197
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
FS-121
<PAGE> 198
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.
AIM V.I. MONEY MARKET FUND
FS-122
<PAGE> 199
STATEMENT OF ASSETS AND LIABILITIES
December 31, 1999
<TABLE>
<S> <C>
ASSETS:
Investments, excluding repurchase agreements, at value (cost
$53,030,651) $ 53,030,651
- --------------------------------------------------------------------------
Repurchase agreements (cost $41,362,435) 41,362,435
- --------------------------------------------------------------------------
Receivables for:
Capital stock sold 756,435
- --------------------------------------------------------------------------
Interest receivable 111,773
- --------------------------------------------------------------------------
Investment for deferred compensation plan 28,768
- --------------------------------------------------------------------------
Other assets 276
- --------------------------------------------------------------------------
Total assets 95,290,338
- --------------------------------------------------------------------------
LIABILITIES:
Payables for:
Capital stock reacquired 19,925
- --------------------------------------------------------------------------
Deferred compensation plan 28,768
- --------------------------------------------------------------------------
Accrued advisory fees 32,663
- --------------------------------------------------------------------------
Accrued administrative service fees 29,815
- --------------------------------------------------------------------------
Accrued operating expenses 26,998
- --------------------------------------------------------------------------
Total liabilities 138,169
- --------------------------------------------------------------------------
Net assets applicable to shares outstanding $ 95,152,169
==========================================================================
CAPITAL SHARES, $0.001 PAR VALUE PER SHARE:
Authorized 250,000,000
- --------------------------------------------------------------------------
Outstanding 95,152,112
==========================================================================
Net asset value, offering and redemption price per share $ 1.00
==========================================================================
</TABLE>
STATEMENT OF OPERATIONS
For the year ended December 31, 1999
<TABLE>
<S> <C>
INVESTMENT INCOME:
Interest $4,113,561
- ----------------------------------------------------------------
EXPENSES:
Advisory fees 317,031
- ----------------------------------------------------------------
Administrative services fees 70,016
- ----------------------------------------------------------------
Custodian fees 26,011
- ----------------------------------------------------------------
Directors' fees 8,841
- ----------------------------------------------------------------
Other 50,735
- ----------------------------------------------------------------
Total expenses 472,634
- ----------------------------------------------------------------
Net investment income 3,640,927
- ----------------------------------------------------------------
Net increase in net assets resulting from operations $3,640,927
================================================================
</TABLE>
See Notes to Financial Statements.
AIM V.I. MONEY MARKET FUND
FS-123
<PAGE> 200
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 3,640,927 $ 3,115,776
- ---------------------------------------------------------------------------
Net increase in net assets resulting from
operations 3,640,927 3,115,776
- ---------------------------------------------------------------------------
Dividends to shareholders from net investment
income (3,640,927) (3,115,776)
- ---------------------------------------------------------------------------
Net increase from capital stock transactions 31,061,846 5,455,702
- ---------------------------------------------------------------------------
Net increase in net assets 31,061,846 5,455,702
- ---------------------------------------------------------------------------
NET ASSETS:
Beginning of year 64,090,323 58,634,621
- ---------------------------------------------------------------------------
End of year $95,152,169 $64,090,323
===========================================================================
NET ASSETS CONSIST OF:
Capital (par value and additional paid-in) $95,152,112 $64,090,266
- ---------------------------------------------------------------------------
Undistributed net realized gain from investment
securities 57 57
- ---------------------------------------------------------------------------
$95,152,169 $64,090,323
===========================================================================
</TABLE>
NOTES TO FINANCIAL STATEMENTS
December 31, 1999
NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES
AIM V.I. Money Market Fund (the "Fund") is a series portfolio of AIM Variable
Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation
registered under the Investment Company Act of 1940, as amended (the "1940
Act"), as an open-end series management investment company consisting of
seventeen separate portfolios. Matters affecting each portfolio will be voted
on exclusively by the shareholders of such portfolio. The assets, liabilities
and operations of each portfolio are accounted for separately. Information
presented in these financial statements pertains only to the Fund. Currently,
shares of the Fund are sold only to insurance company separate accounts to
fund the benefits of variable annuity contracts and variable life insurance
policies. The Fund's investment objective is to seek to provide as high a
level of current income as is consistent with the preservation of capital and
liquidity.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates. The
following is a summary of the significant accounting policies followed by the
Fund in the preparation of its financial statements.
A. Security Valuations - The Fund's securities are valued on the basis of
amortized cost which approximates market value. This method values a
security at its cost on the date of purchase and thereafter, assumes a
constant amortization to maturity of any discount or premiums.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income, adjusted for amortization of premiums and discounts on
investments, is recorded as earned from settlement date and is recorded on
the accrual basis.
C. Distributions - It is the policy of the Fund to declare and pay dividends
from net investment income daily. Such distributions are paid daily.
Distributions from net realized capital gains, if any, are generally paid
annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.40% on
the first $200 million of the Fund's average daily net assets, plus 0.35% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $70,016 of which AIM retained
$44,311 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for
AIM V.I. MONEY MARKET FUND
FS-124
<PAGE> 201
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
FS-125
<PAGE> 202
NOTE 6 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------- JANUARY 31,
1999 1998 1997 1996 1995 1995
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
- -----------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.05 0.05 0.05 0.05 0.05 0.04
- -----------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.04)
- -----------------------------------------------------------------------------------------
Net asset value, end of
period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
=========================================================================================
Total return 4.66% 5.06% 5.14% 4.97% 5.22% 3.98%
=========================================================================================
RATIOS/SUPPLEMENTAL
DATA:
Net assets, end of
period (000s omitted) $95,152 $64,090 $58,635 $63,529 $65,506 $31,017
=========================================================================================
Ratio of expenses to
average net assets 0.60%(a) 0.58% 0.59% 0.55% 0.53%(b) 0.63%(c)
=========================================================================================
Ratio of net investment
income to average net
assets 4.59%(a) 4.94% 5.01% 4.84% 5.40%(b) 4.14%(c)
=========================================================================================
</TABLE>
(a) Ratios are based on average net assets of $79,257,738.
(b) Annualized.
(c) After fee waivers and/or expense reimbursements. Ratios of expenses and
net investment income to average daily net assets prior to fee waivers
and/or expense reimbursements were 0.70% and 4.07%, respectively.
AIM V.I. MONEY MARKET FUND
FS-126
<PAGE> 203
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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
AIM V.I. TELECOMMUNICATIONS FUND
FS-127
<PAGE> 204
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
DOMESTIC STOCKS - 68.87%
BROADCASTING (TELEVISION, RADIO & CABLE) - 3.01%
Comcast Corp. - Class A 18,600 $ 934,650
- ----------------------------------------------------------------
UnitedGlobalCom Inc. - Class A(a) 33,000 2,330,625
- ----------------------------------------------------------------
3,265,275
- ----------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 15.76%
CIENA Corp.(a) 10,000 575,000
- ----------------------------------------------------------------
Corning, Inc. 15,000 1,934,062
- ----------------------------------------------------------------
General Instrument Corp.(a) 12,000 1,020,000
- ----------------------------------------------------------------
Harmonic, Inc.(a) 20,000 1,898,750
- ----------------------------------------------------------------
JDS Uniphase Corp.(a) 40,000 6,452,500
- ----------------------------------------------------------------
Lucent Technologies Inc. 3,000 224,437
- ----------------------------------------------------------------
Motorola, Inc. 27,900 4,108,275
- ----------------------------------------------------------------
Proxim, Inc.(a) 8,000 880,000
- ----------------------------------------------------------------
17,093,024
- ----------------------------------------------------------------
COMPUTERS (NETWORKING) - 5.02%
Cabletron Systems, Inc.(a) 18,000 468,000
- ----------------------------------------------------------------
Cisco Systems, Inc.(a) 46,400 4,970,600
- ----------------------------------------------------------------
5,438,600
- ----------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 1.93%
EMC Corp.(a) 19,200 2,097,600
- ----------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 21.07%
America Online, Inc.(a) 31,200 2,353,650
- ----------------------------------------------------------------
BEA Systems, Inc.(a) 9,000 629,437
- ----------------------------------------------------------------
eBay, Inc.(a) 25,000 3,129,687
- ----------------------------------------------------------------
FreeMarkets, Inc.(a) 7,900 2,696,369
- ----------------------------------------------------------------
InfoSpace.com, Inc.(a) 6,000 1,284,000
- ----------------------------------------------------------------
Inktomi Corp.(a) 16,000 1,420,000
- ----------------------------------------------------------------
Microsoft Corp.(a) 42,000 4,903,500
- ----------------------------------------------------------------
Oracle Corp.(a) 15,000 1,680,938
- ----------------------------------------------------------------
RealNetworks, Inc.(a) 5,300 637,656
- ----------------------------------------------------------------
Yahoo! Inc.(a) 9,500 4,110,531
- ----------------------------------------------------------------
22,845,768
- ----------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.83%
EchoStar Communications Corp.(a) 9,200 897,000
- ----------------------------------------------------------------
ELECTRONICS (DEFENSE) - 0.71%
General Motors Corp. - Class H(a) 8,000 768,000
- ----------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.69%
Alpha Industries, Inc.(a) 13,000 745,063
- ----------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 0.30%
PMC-Sierra, Inc.(a) 2,000 320,625
- ----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
INVESTMENT MANAGEMENT - 0.42%
Knight/Trimark Group, Inc. - Class A(a) 10,000 $ 460,000
- ------------------------------------------------------------------------------
SERVICES (ADVERTISING/MARKETING) - 0.60%
GoTo.com, Inc.(a) 11,000 646,250
- ------------------------------------------------------------------------------
SERVICES (COMPUTER SYSTEMS) - 1.79%
Brocade Communications Systems, Inc.(a) 11,000 1,947,000
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (CELLULAR/WIRELESS) - 5.69%
Infonet Services Corp.(a) 17,800 467,250
- ------------------------------------------------------------------------------
Level 3 Communications, Inc.(a) 23,000 1,883,125
- ------------------------------------------------------------------------------
Phone.com, Inc.(a) 5,000 579,688
- ------------------------------------------------------------------------------
Powertel, Inc.(a) 3,000 301,125
- ------------------------------------------------------------------------------
Western Wireless Corp. - Class A(a) 44,000 2,937,000
- ------------------------------------------------------------------------------
6,168,188
- ------------------------------------------------------------------------------
TELECOMMUNICATIONS (LONG DISTANCE) - 3.29%
Global TeleSystems Group, Inc.(a) 61,600 2,132,900
- ------------------------------------------------------------------------------
MCI WorldCom, Inc.(a) 27,000 1,432,688
- ------------------------------------------------------------------------------
3,565,588
- ------------------------------------------------------------------------------
TELEPHONE - 7.76%
Bell Atlantic Corp. 23,000 1,415,938
- ------------------------------------------------------------------------------
McLeodUSA, Inc. - Class A(a) 9,000 529,875
- ------------------------------------------------------------------------------
NEXTLINK Communications, Inc. - Class A(a) 7,000 581,438
- ------------------------------------------------------------------------------
NTL Inc.(a) 25,915 3,232,896
- ------------------------------------------------------------------------------
Qwest Communications International, Inc.(a) 28,000 1,204,000
- ------------------------------------------------------------------------------
RCN Corp.(a) 10,000 485,000
- ------------------------------------------------------------------------------
SBC Communications, Inc. 19,900 970,125
- ------------------------------------------------------------------------------
8,419,272
- ------------------------------------------------------------------------------
Total Domestic Stocks (Cost $39,763,183) 74,677,253
- ------------------------------------------------------------------------------
FOREIGN STOCKS & OTHER EQUITY INTERESTS - 24.61%
AUSTRALIA - 0.37%
Telstra Corp. Ltd.-Installment Receipts (Telephone)(a) 115,500 407,494
- ------------------------------------------------------------------------------
CANADA - 3.09%
BCE Inc. (Telephone) 18,934 1,720,498
- ------------------------------------------------------------------------------
Nortel Networks Corp. (Communications Equipment) 16,200 1,636,200
- ------------------------------------------------------------------------------
3,356,698
- ------------------------------------------------------------------------------
FINLAND - 2.93%
Nokia Oyj - ADR (Communications Equipment) 16,700 3,173,000
- ------------------------------------------------------------------------------
GERMANY - 3.18%
Mannesmann A.G. (Machinery - Diversified) 14,300 3,446,940
- ------------------------------------------------------------------------------
HONG KONG - 1.27%
China Telecom Ltd. (Telecommunications -
Cellular/Wireless)(a) 220,000 1,372,612
- ------------------------------------------------------------------------------
</TABLE>
AIM V.I. TELECOMMUNICATIONS FUND
FS-128
<PAGE> 205
<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.
AIM V.I. TELECOMMUNICATIONS FUND
FS-129
<PAGE> 206
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
FS-130
<PAGE> 207
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
------------ -----------
<S> <C> <C>
OPERATIONS:
Net investment income (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").
AIM V.I. TELECOMMUNICATIONS FUND
FS-131
<PAGE> 208
Generally, trading in foreign securities is substantially completed each day
at various times prior to the close of the NYSE. The values of such
securities used in computing the net asset value of the Fund's shares are
determined as of such times. Foreign currency exchange rates are also
generally determined prior to the close of the NYSE. Occasionally, events
affecting the values of such securities and such exchange rates may occur
between the times at which they are determined and the close of the NYSE
which would not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur
during such period, then these securities will be valued at their fair value
as determined in good faith by or under the supervision of the Board of
Directors.
B. Securities Transactions and Investment Income - Securities transactions are
accounted for on a trade date basis. Realized gains or losses on sales are
computed on the basis of specific identification of the securities sold.
Interest income is recorded as earned from settlement date and is recorded
on the accrual basis. Dividend income is recorded on the ex-dividend date.
On December 31, 1999, undistributed net investment income was increased by
$468,914 and undistributed net realized gains decreased by $468,914 as a
result of differing book/tax treatment of foreign currency transactions and
other reclassifications. Net assets of the Fund were unaffected by the
reclassifications.
C. Distributions - Distributions from income and net realized capital gains,
if any, are generally paid annually and recorded on ex-dividend date.
D. Federal Income Taxes - The Fund intends to comply with the requirements of
the Internal Revenue Code necessary to qualify as a regulated investment
company and, as such, will not be subject to federal income taxes on
otherwise taxable income (including net realized capital gains) which is
distributed to shareholders. Therefore, no provision for federal income
taxes is recorded in the financial statements.
E. Foreign Currency Translations - Portfolio securities and other assets and
liabilities denominated in foreign currencies are translated into U.S.
dollar amounts at date of valuation. Purchases and sales of portfolio
securities and income items denominated in foreign currencies are
translated into U.S. dollar amounts on the respective dates of such
transactions. The Fund does not separately account for that portion of the
results of operations resulting from changes in foreign exchange rates on
investments and the fluctuations arising from changes in market prices of
securities held. Such fluctuations are included with the net realized and
unrealized gain or loss from investments.
F. Foreign Currency Contracts - A foreign currency contract is an obligation
to purchase or sell a specific currency for an agreed-upon price at a
future date. The Fund may enter into a foreign currency contract to attempt
to minimize the risk to the Fund from adverse changes in the relationship
between currencies. The Fund may also enter into a foreign currency
contract for the purchase or sale of a security denominated in a foreign
currency in order to "lock in" the U.S. dollar price of that security. The
Fund could be exposed to risk if counterparties to the contracts are unable
to meet the terms of their contracts or if the value of the foreign
currency changes unfavorably.
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of
the Fund's average daily net assets.
Effective July 1, 1999, the Company entered into a master administrative
services agreement with AIM, replacing the prior pricing and accounting
agreement. The Fund, pursuant to the master administrative services agreement
with AIM, has agreed to pay AIM for certain administrative costs incurred in
providing accounting services and other administrative services to the Fund.
Prior to July 1, 1999, AIM was the pricing and accounting agent for the Fund.
The monthly fee for these services paid to AIM was a percentage, not to exceed
0.03% annually, of a Fund's average daily net assets. The annual fee rate was
derived based on the aggregate net assets of the funds which comprised the
following investment companies: AIM Growth Series, AIM Investment Funds, AIM
Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable
Investment Trust. The fee was calculated at the rate of 0.03% of the first $5
billion of assets and 0.02% to the assets in excess of $5 billion. An amount
is allocated to and paid by each such fund based on its relative average daily
net assets. For the year ended December 31, 1999, AIM was paid $34,698 of
which AIM retained $34,698 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $156 for
services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the
Company's directors. A member of that firm is a director of the Company.
NOTE 3 - EXPENSE REDUCTIONS
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $18 under an expense offset arrangement and AIM directed
certain portfolio trades to brokers who then paid $632 of the Fund's expenses.
The effect of the above arrangement resulted in a reduction of the Fund's
total expenses of $650 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. The funds which
are party to the line of credit are charged a commitment fee of 0.09% on the
unused balance of the committed line. The commitment fee is allocated among
the funds based on their respective average net assets for the period. Prior
to May 28, 1999, the Fund, along with certain other funds advised and/or
administered by AIM, had a line of credit with BankBoston and State Street
Bank & Trust Company. The arrangements with the banks allowed the Fund and
certain other funds to borrow, on a first come, first served basis, an
aggregate maximum amount of $250,000,000.
During the year ended December 31, 1999, the average outstanding daily
balance of bank loans for the Fund was $79,497 with a weighted average
interest rate of 5.57%. Interest expense for the Fund for the year ended
December 31, 1999 was $4,428.
AIM V.I. TELECOMMUNICATIONS FUND
FS-132
<PAGE> 209
NOTE 6 - PORTFOLIO SECURITIES LOANED
At December 31, 1999, there were no securities on loans to brokers. For the
year ended December 31, 1999, the Fund received fees of $52,600 for securities
lending.
For international securities, cash collateral is received by the fund against
loaned securities in an amount at least equal to 105% of the market value of
the loaned securities at the inception of each loan. The collateral must be
maintained at not less than 103% of the market value of the loaned securities
during the period of the loan. For domestic securities, cash collateral is
received by the Fund against loaned securities in the amount at least equal to
102% of the market value of the loaned securities at the inception of each
loan. This collateral must be maintained at not less than 100% of the market
value of the loaned securities during the period of the loan. The cash
collateral is invested in a securities lending trust which consists of a
portfolio of high quality short duration securities whose average effective
duration is restricted to 120 days or less.
NOTE 7 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $88,854,506 and $107,703,816, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $53,172,990
- --------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (497,109)
- --------------------------------------------------------------------------
Net unrealized appreciation of investment securities $52,675,881
==========================================================================
</TABLE>
Cost of investments for tax purposes is $55,822,372.
AIM V.I. TELECOMMUNICATIONS FUND
FS-133
<PAGE> 210
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ -----------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- -----------
<S> <C> <C> <C> <C>
Sold 6,650,710 148,837,352 2,494,268 49,416,214
- -----------------------------------------------------------------------------
Issued as reinvestment of
dividends 763,720 15,618,065 293,286 5,760,403
- -----------------------------------------------------------------------------
Reacquired (7,487,234) (167,330,089) (3,130,421) (61,528,494)
- -----------------------------------------------------------------------------
(72,804) $ (2,874,672) (342,867) $(6,351,877)
=============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the five-year period ended December 31, 1999.
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 20.66 $ 18.40 $ 18.14 $ 16.87 $ 13.98
- -------------------------------------------------------------------------------
Income from investment
operations:
Net investment income
(loss) (0.14) (0.01) (0.02) (0.05) 0.02
- -------------------------------------------------------------------------------
Net gains on securities
(both realized and
unrealized) 18.46 3.99 2.59 3.31 3.26
- -------------------------------------------------------------------------------
Total from investment
operations 18.32 3.98 2.57 3.26 3.28
- -------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income -- -- -- (0.02) (0.03)
- -------------------------------------------------------------------------------
Distributions from net
realized capital gains (6.02) (1.72) (2.31) (1.97) (0.36)
- -------------------------------------------------------------------------------
Total distributions (6.02) (1.72) (2.31) (1.99) (0.39)
- -------------------------------------------------------------------------------
Net asset value, end of
period $ 32.96 $ 20.66 $ 18.40 $ 18.14 $ 16.87
===============================================================================
Total return 106.52% 22.11% 14.56% 19.34% 23.66%
===============================================================================
Ratios/supplemental data:
Net assets, end of period
(000s omitted) $108,428 $69,459 $68,186 $63,258 $50,778
===============================================================================
Ratio of expenses to
average net assets
including interest
expense:
with waivers 1.27%(a) 1.17% 1.11% 1.12% 1.20%
===============================================================================
without waivers 1.27%(a) 1.18% 1.16% 1.17% 1.26%
===============================================================================
Ratio of expenses to
average net assets
excluding interest
expense:
with waivers 1.26%(a) 1.16% 1.11% 1.12% 1.20%
===============================================================================
without waivers 1.26%(a) 1.17% 1.16% 1.17% 1.26%
===============================================================================
Ratio of net investment
income to average net
assets:
with waivers (0.62)%(a) (0.04)% (0.10)% (0.26)% 0.16%
===============================================================================
without waivers (0.62)%(a) (0.05)% (0.15)% (0.31)% 0.10%
===============================================================================
Ratio of interest expense
to average net assets 0.01%(a) 0.01% -- -- --
===============================================================================
Portfolio turnover rate 124% 73% 91% 77% 70%
===============================================================================
</TABLE>
(a) Ratios are based on average net assets of $75,606,845.
AIM V.I. TELECOMMUNICATIONS FUND
FS-134
<PAGE> 211
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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
FS-135
<PAGE> 212
SCHEDULE OF INVESTMENTS
December 31, 1999
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
COMMON STOCKS & OTHER
EQUITY INTERESTS - 89.17%
BANKS (MONEY CENTER) - 1.21%
Chase Manhattan Corp. (The) 370,000 $ 28,744,375
- -------------------------------------------------------------------------
BROADCASTING (TELEVISION, RADIO & CABLE) - 8.78%
Comcast Corp. - Class A 2,264,000 113,766,000
- -------------------------------------------------------------------------
Cox Communications, Inc. - Class A(a) 1,538,500 79,232,750
- -------------------------------------------------------------------------
MediaOne Group, Inc. 212,000 16,284,250
- -------------------------------------------------------------------------
209,283,000
- -------------------------------------------------------------------------
COMMUNICATIONS EQUIPMENT - 9.99%
Comverse Technology, Inc.(a) 62,000 8,974,500
- -------------------------------------------------------------------------
Lucent Technologies, Inc. 150,000 11,221,875
- -------------------------------------------------------------------------
Motorola, Inc. 272,000 40,052,000
- -------------------------------------------------------------------------
Nokia Oyj - ADR (Finland) 936,000 177,840,000
- -------------------------------------------------------------------------
238,088,375
- -------------------------------------------------------------------------
COMPUTERS (HARDWARE) - 8.99%
Apple Computer, Inc.(a) 675,000 69,398,437
- -------------------------------------------------------------------------
Gateway, Inc.(a) 967,000 69,684,437
- -------------------------------------------------------------------------
International Business Machines Corp. 362,400 39,139,200
- -------------------------------------------------------------------------
Sun Microsystems, Inc.(a) 465,000 36,008,437
- -------------------------------------------------------------------------
214,230,511
- -------------------------------------------------------------------------
COMPUTERS (PERIPHERALS) - 2.42%
EMC Corp.(a) 84,000 9,177,000
- -------------------------------------------------------------------------
Lexmark International Group, Inc. - Class A(a) 536,000 48,508,000
- -------------------------------------------------------------------------
57,685,000
- -------------------------------------------------------------------------
COMPUTERS (SOFTWARE & SERVICES) - 6.11%
At Home Corp. - Class A(a) 1,021,500 43,796,812
- -------------------------------------------------------------------------
BMC Software, Inc.(a) 184,000 14,708,500
- -------------------------------------------------------------------------
Citrix Systems, Inc.(a) 55,100 6,777,300
- -------------------------------------------------------------------------
Microsoft Corp.(a) 360,000 42,030,000
- -------------------------------------------------------------------------
Unisys Corp.(a) 1,200,500 38,340,969
- -------------------------------------------------------------------------
145,653,581
- -------------------------------------------------------------------------
CONSUMER FINANCE - 0.21%
Providian Financial Corp. 54,000 4,917,375
- -------------------------------------------------------------------------
ELECTRICAL EQUIPMENT - 0.45%
Solectron Corp.(a) 114,000 10,844,250
- -------------------------------------------------------------------------
ELECTRONICS (INSTRUMENTATION) - 0.07%
Waters Corp.(a) 31,800 1,685,400
- -------------------------------------------------------------------------
ELECTRONICS (SEMICONDUCTORS) - 1.44%
Analog devices, Inc.(a) 135,000 12,555,000
- -------------------------------------------------------------------------
Texas Instruments, Inc. 225,000 21,796,875
- -------------------------------------------------------------------------
34,351,875
- -------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
MARKET
SHARES VALUE
<S> <C> <C>
ENTERTAINMENT - 3.10%
Time Warner, Inc. 1,020,000 $73,886,250
- --------------------------------------------------------------------
EQUIPMENT (SEMICONDUCTOR) - 2.85%
Applied Materials, Inc.(a) 423,000 53,588,812
- --------------------------------------------------------------------
Teradyne, Inc.(a) 217,600 14,361,600
- --------------------------------------------------------------------
67,950,412
- --------------------------------------------------------------------
FINANCIAL (DIVERSIFIED) - 3.58%
American Express Co. 139,500 23,191,875
- --------------------------------------------------------------------
Associates First Capital Corp. - Class A 885,000 24,282,187
- --------------------------------------------------------------------
Citigroup, Inc. 553,000 30,726,062
- --------------------------------------------------------------------
Freddie Mac 152,000 7,153,500
- --------------------------------------------------------------------
85,353,624
- --------------------------------------------------------------------
HEALTH CARE (DIVERSIFIED) - 1.54%
Bristol-Myers Squibb Co. 487,000 31,259,313
- --------------------------------------------------------------------
Warner-Lambert Co. 66,000 5,407,875
- --------------------------------------------------------------------
36,667,188
- --------------------------------------------------------------------
HEALTH CARE (DRUGS - MAJOR PHARMACEUTICALS) - 1.80%
Pharmacia & Upjohn, Inc. 954,500 42,952,500
- --------------------------------------------------------------------
HEALTH CARE (MEDICAL PRODUCTS & SUPPLIES) - 2.51%
Guidant Corp. 1,272,000 59,784,000
- --------------------------------------------------------------------
HOUSEHOLD PRODUCTS (NON-DURABLES) - 1.33%
Colgate-Palmolive Co. 324,500 21,092,500
- --------------------------------------------------------------------
Kimberly-Clark Corp. 162,000 10,570,500
- --------------------------------------------------------------------
31,663,000
- --------------------------------------------------------------------
INSURANCE (MULTI-LINE) - 3.63%
American International Group, Inc. 689,500 74,552,188
- --------------------------------------------------------------------
Hartford Financial Services Group, Inc. (The) 255,000 12,080.625
- --------------------------------------------------------------------
86,632,813
- --------------------------------------------------------------------
INVESTMENT BANKING/BROKERAGE - 2.41%
Morgan Stanley, Dean Witter, Discover & Co. 403,200 57,556,800
- --------------------------------------------------------------------
LODGING - HOTELS - 1.40%
Carnival Corp. 697,000 33,325,313
- --------------------------------------------------------------------
MANUFACTURING (DIVERSIFIED) - 2.67%
Tyco International Ltd. 1,636,500 63,618,938
- --------------------------------------------------------------------
PAPER & FOREST PRODUCTS - 0.79%
Weyerhaeuser Co. 262,700 18,865,144
- --------------------------------------------------------------------
RESTAURANTS - 0.38%
McDonald's Corp. 222,000 8,949,375
- --------------------------------------------------------------------
</TABLE>
AIM V.I. VALUE FUND
FS-136
<PAGE> 213
<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
FS-137
<PAGE> 214
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>
AIM V.I. VALUE FUND
FS-138
<PAGE> 215
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
-------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income $ 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
FS-139
<PAGE> 216
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.
AIM V.I. VALUE FUND
FS-140
<PAGE> 217
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES
The Company has entered into a master investment advisory agreement with A I M
Advisors, Inc. ("AIM"). Under the terms of the master investment advisory
agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of
the first $250 million of the Fund's average daily net assets, plus 0.60% of
the Fund's average daily net assets in excess of $250 million.
The Fund, pursuant to a master administrative services agreement with AIM,
has agreed to pay AIM for certain administrative costs incurred in providing
accounting services and other administrative services to the Fund. For the
year ended December 31, 1999, the Fund paid AIM $2,155,772 of which AIM
retained $107,813 for such services.
The Company has entered into a master distribution agreement with A I M
Distributors, Inc. ("AIM Distributors") to serve as the distributor for the
Fund. Certain officers and directors of the Company are officers of AIM and
AIM Distributors.
During the year ended December 31, 1999, the Fund paid legal fees of $6,262
for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to
the Company's directors. A member of that firm is a director of the Company.
NOTE 3 - INDIRECT EXPENSES
During the year ended December 31, 1999, the Fund received reductions in
custodian fees of $1,407 under an expense offset arrangement. The effect of
the above arrangement resulted in a reduction of the Fund's total expenses of
$1,407 during the year ended December 31, 1999.
NOTE 4 - DIRECTORS' FEES
Directors' fees represent remuneration paid to directors who are not an
"interested person" of AIM. The Company invests directors' fees, if so elected
by a director, in mutual fund shares in accordance with a deferred
compensation plan.
NOTE 5 - BANK BORROWINGS
The Fund is a participant in a committed line of credit facility with a
syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to
the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for
borrowings. The Fund and other funds advised by AIM which are parties to the
line of credit may borrow on a first come, first served basis. During the year
ended December 31, 1999, the Fund did not borrow under the line of credit
agreement. The funds which are party to the line of credit are charged a
commitment fee of 0.09% on the unused balance of the committed line. Prior to
May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is
allocated among the funds based on their respective average net assets for the
period.
NOTE 6 - INVESTMENT SECURITIES
The aggregate amount of investment securities (other than short-term
securities) purchased and sold by the Fund during the year ended December 31,
1999 was $1,517,968,122 and $956,466,504, respectively.
The amount of unrealized appreciation (depreciation) of investment
securities, for tax purposes, as of December 31, 1999 is as follows:
<TABLE>
<S> <C>
Aggregate unrealized appreciation of investment securities $713,240,314
- ---------------------------------------------------------------------------
Aggregate unrealized (depreciation) of investment securities (33,618,676)
- ---------------------------------------------------------------------------
Net unrealized appreciation of investment securities $679,621,638
===========================================================================
</TABLE>
Cost of investments for tax purposes is $1,697,583,656.
NOTE 7 - CALL OPTION CONTRACTS
Transactions in call options written during the year ended December 31, 1999
are summarized as follows:
<TABLE>
<CAPTION>
CALL OPTION
CONTRACTS
--------------------
NUMBER OF PREMIUMS
CONTRACTS RECEIVED
--------- ----------
<S> <C> <C>
Beginning of period 200 83,771
- ------------------------------------------
Written 7,578 $4,253,471
- ------------------------------------------
Closed (1,251) (683,197)
- ------------------------------------------
Exercised (3,321) (1,874,685)
- ------------------------------------------
Expired (3,206) (1,779,360)
==========================================
End of period -- --
==========================================
</TABLE>
AIM V.I. VALUE FUND
FS-141
<PAGE> 218
NOTE 8 - CAPITAL STOCK
Changes in capital stock outstanding during the years ended December 31, 1999
and 1998 were as follows:
<TABLE>
<CAPTION>
1999 1998
------------------------ ------------------------
SHARES AMOUNT SHARES AMOUNT
---------- ------------ ---------- ------------
<S> <C> <C> <C> <C>
Sold 30,095,501 $884,324,432 13,690,852 $321,377,374
- ------------------------------------------------------------------------------
Issued as reinvestment of
dividends 1,227,239 38,842,126 2,225,788 55,355,370
- ------------------------------------------------------------------------------
Reacquired (6,712,560) (198,140,598) (2,542,811) (57,608,788)
- ------------------------------------------------------------------------------
24,610,180 $725,025,960 13,373,829 $319,123,956
==============================================================================
</TABLE>
NOTE 9 - FINANCIAL HIGHLIGHTS
Shown below are the financial highlights for a share outstanding of the Fund
during each of the years in the four-year period ended December 31, 1999, the
eleven months ended December 31, 1995 and the year ended January 31, 1995.
<TABLE>
<CAPTION>
DECEMBER 31,
------------------------------------------------------- JANUARY 31,
1999(a) 1998 1997 1996 1995 1995
---------- ---------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Net asset value,
beginning of period $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83 $ 12.17
- -------------------------------------------------------------------------------------------------
Income from investment
operations:
Net investment income 0.06 0.09 0.08 0.30 0.11 0.10
- -------------------------------------------------------------------------------------------------
Net gains (losses) on
securities (both
realized and
unrealized) 7.76 6.59 4.05 2.09 4.18 (0.35)
- -------------------------------------------------------------------------------------------------
Total from investment
operations 7.82 6.68 4.13 2.39 4.29 (0.25)
- -------------------------------------------------------------------------------------------------
Less distributions:
Dividends from net
investment income (0.09) (0.13) (0.19) (0.10) (0.01) (0.09)
- -------------------------------------------------------------------------------------------------
Distributions from net
realized gains (0.48) (1.13) (0.59) (0.92) -- --
- -------------------------------------------------------------------------------------------------
Total distributions (0.57) (1.26) (0.78) (1.02) (0.01) (0.09)
- -------------------------------------------------------------------------------------------------
Net asset value, end of
period $ 33.50 $ 26.25 $ 20.83 $ 17.48 $ 16.11 $ 11.83
- -------------------------------------------------------------------------------------------------
Total return(b) 29.90% 32.41% 23.69% 15.02% 36.25% (2.03)%
- -------------------------------------------------------------------------------------------------
Ratios/supplemental
data:
Net assets, end of
period (000s omitted) $2,383,367 $1,221,384 $690,841 $369,735 $257,212 $109,257
- -------------------------------------------------------------------------------------------------
Ratio of expenses to
average net assets 0.76%(c) 0.66% 0.70% 0.73% 0.75%(d) 0.82%
- -------------------------------------------------------------------------------------------------
Ratio of net investment
income to average net
assets 0.20%(c) 0.68% 1.05% 2.00% 1.11%(d) 1.17%
- -------------------------------------------------------------------------------------------------
Portfolio turnover rate 62% 100% 127% 129% 145% 143%
=================================================================================================
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,709,245,315.
(d) Annualized.
AIM V.I. VALUE FUND
FS-142
<PAGE> 219
AIM VARIABLE INSURANCE FUNDS, INC.
AIM V.I. AGGRESSIVE GROWTH FUND
AIM V.I. BALANCED FUND
AIM V.I. BLUE CHIP FUND
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CAPITAL DEVELOPMENT FUND
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
AIM V.I. DIVERSIFIED INCOME FUND
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. HIGH YIELD FUND
AIM V.I. INTERNATIONAL EQUITY FUND
AIM V.I. MONEY MARKET FUND
AIM V.I. TELECOMMUNICATIONS FUND
AIM V.I. VALUE FUND
Supplement dated March 13, 2000
to the Prospectus dated February 16, 2000
as supplemented February 25, 2000
The following replaces in its entirety the section entitled "FUND MANAGEMENT -
THE ADVISOR" on page 22 of the Prospectus:
"THE ADVISORS
A I M Advisors, Inc. (the advisor) serves as each fund's investment
advisor. The advisor is located at 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173. The advisor supervises all aspects of each
fund's operations and provides investment advisory services to the
funds, including obtaining and evaluating economic, statistical and
financial information to formulate and implement investment programs
for the funds. H.S. Dent Advisors, Inc. (Dent Advisors) serves as the
subadvisor for AIM V.I. Dent Demographic Trends Fund, and is located
at 6515 Gwin Road, Oakland, California 94611. Dent Advisors is
responsible for providing the advisor with macroeconomic, thematic,
demographic, lifestyle trends and sector research, custom reports and
investment and market capitalization recommendations with respect to
the fund. INVESCO Asset Management Limited (INVESCO) serves as the
subadvisor for AIM V.I. Global Growth and Income Fund, and is located
at 11 Devonshire Square, London, England EC2M4YR. INVESCO is
responsible for providing the advisor with economic and market
research, securities analysis and investment recommendations with
respect to the fund. The advisor and INVESCO are affiliated.
At a meeting held on March 7, 2000, the Board of Directors,
including a majority of the independent directors, approved the
termination of the subadvisory agreement between the Advisor and
INVESCO, effective March 20, 2000. In approving such termination, the
Board considered the nature and quality of services rendered and to be
rendered by the Advisor and the Advisor's qualifications regarding its
provision of the services previously provided by INVESCO.
The advisor has acted as an investment advisor since its
organization in 1976. Today, the advisor, together with its
subsidiaries, advises or manages over 120 investment portfolios,
including the funds, encompassing a broad range of investment
objectives."
