<PAGE> 1
As filed with the Securities and Exchange Commission on June 16, 2000.
Securities Act Registration No. 333-_______
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
[ ]Pre-Effective Amendment No. __ [ ]Post Effective Amendment No. __
(Check appropriate box or boxes)
AIM Variable Insurance Funds
(Exact Name of Registrant as Specified in Charter)
11 Greenway Plaza, Suite 100
Houston, Texas 77046
(Address of Principal Executive Offices)
Registrant's Telephone Number: (713) 214-1456
Name and Address of Agent for Service:
NANCY L. MARTIN, ESQUIRE
AIM Variable Insurance Funds
11 Greenway Plaza
Suite 100
Houston, Texas 77046
Approximate Date of Proposed Public Offering: As soon as practicable after the
Registration Statement becomes effective under the Securities Act of 1933.
It is proposed that this filing will become effective on July 16, 2000 pursuant
to Rule 488.
The title of the securities being registered is shares of beneficial interest.
No filing fee is due in reliance on Section 24(f) of the Securities Act of 1933.
<PAGE> 2
AIM V.I. GLOBAL GROWTH AND INCOME FUND
A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
July 20, 2000
Dear Shareholder:
Enclosed is a combined proxy statement and prospectus seeking your approval of
the proposed combination of AIM V.I. GLOBAL GROWTH AND INCOME FUND ("Global
Growth and Income Fund" or "Acquired Fund") with AIM V.I. GROWTH AND INCOME FUND
("Growth and Income Fund" or "Acquiring Fund").
The Acquired Fund and the Acquiring Fund (each, a "Fund," and collectively, the
"Funds") are each an investment portfolio of AIM Variable Insurance Funds
("AVIF").
As discussed in the accompanying document, the Acquiring Fund has:
o substantially identical investment objectives,
o substantially similar investment policies,
o the same investment adviser (A I M Advisors, Inc.),
o significantly larger net assets,
o a lower operating expense ratio, and
o better historical performance than the Acquired Fund.
The accompanying document describes the proposed transaction and compares the
investment objectives and policies, net assets, operating expenses, performance
histories and risks of the Acquired Fund and the Acquiring Fund.
Shareholders of the Acquired Fund are being asked to approve an Agreement and
Plan of Reorganization by and among AIM Variable Insurance Funds, on behalf of
the Acquired Fund and the Acquiring Fund, and AIM that will govern the
reorganization of the Acquired Fund into the Acquiring Fund.
AFTER CAREFUL CONSIDERATION, THE BOARD OF TRUSTEES OF AIM VARIABLE INSURANCE
FUNDS, ON BEHALF OF THE ACQUIRED FUND, HAS UNANIMOUSLY APPROVED THE PROPOSAL AND
RECOMMEND THAT YOU READ THE ENCLOSED MATERIALS CAREFULLY AND THEN VOTE FOR THE
PROPOSAL.
Your vote is important. Please take a moment now to sign and return your proxy
cards in the enclosed postage paid return envelope.
Sincerely,
Robert H. Graham
President
<PAGE> 3
AIM V.I. GLOBAL GROWTH AND INCOME FUND
A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON
SEPTEMBER 1, 2000
To the Shareholders:
Notice is hereby given that a Special Meeting of Shareholders (the "Special
Meeting") of AIM V.I. Global Growth and Income Fund will be held at 11 Greenway
Plaza, Suite 100, Houston, Texas, on Friday, September 1, 2000, at 3:00 p.m.
local time, for the following purposes:
(1) To approve an Agreement and Plan of Reorganization (the "Agreement")
by and among AIM Variable Insurance Funds ("AVIF"), on behalf of its
AIM V.I. Global Growth and Income Fund ("Acquired Fund") and its AIM
V.I. Growth and Income Fund ("Acquiring Fund"), and A I M Advisors,
Inc., and the consummation of the transaction that the Agreement
contemplates. The Agreement contemplates the acquisition of all of the
assets and the assumption of all of the liabilities of the Acquired
Fund by the Acquiring Fund in exchange for shares of the Acquiring
Fund, which shares the Acquiring Fund will directly issue to the
shareholders of the Acquired Fund. Each shareholder of the Acquired
Fund will receive that number of the Acquiring Fund's shares
representing interests with an aggregate net asset value equal to the
aggregate net asset value of his or her shares of the Acquired Fund.
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment thereof.
Shareholders of record at the close of business on June 23, 2000, are
entitled to notice of, and to vote at, the Special Meeting. Please refer to the
accompanying Combined Proxy Statement and Prospectus for more information.
WHETHER OR NOT YOU ATTEND THE SPECIAL MEETING, WE URGE YOU TO PROMPTLY COMPLETE,
SIGN AND RETURN THE ENCLOSED PROXY CARD, SO THAT A QUORUM WILL BE PRESENT AND A
MAXIMUM NUMBER OF SHARES MAY BE VOTED. VARIABLE ANNUITY OR VARIABLE LIFE
INSURANCE CONTRACTOWNERS WHO ARE ENTITLED TO INSTRUCT THE VOTING OF SHARES
ATTRIBUTABLE TO THEIR CONTRACTS MAY DO SO BY RETURNING THE ACCOMPANYING VOTING
INSTRUCTION FORM IN THE ENCLOSED ENVELOPE.
<PAGE> 4
By Order of the Board,
Carol F. Relihan, Secretary
Houston, Texas
<PAGE> 5
PART A
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GROWTH AND INCOME FUND
EACH A PORTFOLIO OF
AIM VARIABLE INSURANCE FUNDS
11 GREENWAY PLAZA, SUITE 100
HOUSTON, TEXAS 77046-1173
TOLL FREE: (800) 410-4246
COMBINED PROXY STATEMENT AND PROSPECTUS
DATED: JULY 20, 2000
This document is being furnished in connection with a special meeting of
Shareholders of AIM V.I. Global Growth and Income Fund ("Acquired Fund"), to be
held on September 1, 2000 (the "Special Meeting").
At the Special Meeting, the shareholders of the Acquired Fund will be asked to
consider and approve an Agreement and Plan of Reorganization (the "Agreement")
by and among AIM Variable Insurance Funds ("AVIF"), a Delaware business trust,
acting on behalf of the Acquired Fund and on behalf of AIM V.I. Growth and
Income Fund ("Acquiring Fund"), and A I M Advisors, Inc. ("AIM"). The Agreement
provides for the reorganization of the Acquired Fund into the Acquiring Fund
(the "Reorganization"). THE BOARD OF TRUSTEES OF THE ACQUIRED FUND HAS
UNANIMOUSLY APPROVED THE AGREEMENT AND REORGANIZATION AS BEING IN THE BEST
INTERESTS OF THE ACQUIRED FUND.
The Agreement provides that:
o all of the assets of the Acquired Fund will be transferred to the
Acquiring Fund,
o the Acquiring Fund will assume all of the liabilities of the Acquired
Fund, and
o the Acquiring Fund will issue its shares to the shareholders of the
Acquired Fund.
The value of each Acquired Fund shareholder's account with the Acquiring Fund
immediately after the Reorganization will be the same as the value of such
shareholder's account with the Acquired Fund immediately prior to the
Reorganization. The Reorganization has been structured as a tax-free
transaction.
The Acquiring Fund is an investment portfolio of AVIF, an open-end, series
management investment company. The investment objective of the Acquiring Fund is
substantially identical to that of the Acquired Fund. AIM serves as the
investment adviser to the Acquired Fund and the Acquiring Fund.
<PAGE> 6
This Combined Proxy Statement and Prospectus ("Proxy Statement/Prospectus") sets
forth the information that a shareholder of the Acquired Fund should know before
voting on the Agreement. Please read it and retain it for future reference.
AVIF also has filed with the Securities and Exchange Commission (the "SEC") a
Statement of Additional Information, dated July 20, 2000, relating to the
Agreement. The Statement of Additional Information is incorporated by reference
into this Proxy Statement/Prospectus.
The Prospectus of the Acquired Fund, dated May 1, 2000 (the "Acquired Fund
Prospectus"), together with the related Statement of Additional Information,
also dated May 1, 2000, are on file with the SEC and are incorporated into this
Proxy Statement/Prospectus by reference. The Prospectus of the Acquiring Fund,
dated May 1, 2000 (the "Acquiring Fund Prospectus") is attached as Appendix II
to this Proxy Statement/Prospectus. The related Statement of Additional
Information, also dated May 1, 2000, is on file with the SEC. The Acquiring Fund
Prospectus and the related Statement of Additional Information are incorporated
into this Proxy Statement/Prospectus by reference. A copy of portions of the
annual report of the Acquiring Fund for the year ended December 31, 1999, is
attached as Appendix III of this Proxy Statement/Prospectus. You can get a free
copy of any of these documents by writing to A I M Distributors, Inc., P.O. Box
4739, Houston, Texas 77210-4739 or by calling (800) 410-4246.
The SEC maintains a Web site at http://www.sec.gov that contains the prospectus
and statements of additional information described above, material incorporated
by reference, and other information about the Acquired and Acquiring Funds.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THE
SECURITIES DESCRIBED IN THIS PROXY STATEMENT/PROSPECTUS, AND HAS NOT PASSED ON
THE ACCURACY OR THE ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANYONE WHO
TELLS YOU OTHERWISE IS COMMITTING A FEDERAL CRIME.
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
INTRODUCTION..................................................................................... 1
REASONS FOR THE REORGANIZATION................................................................... 3
Background and Reasons for the Reorganization............................................... 3
Board Considerations........................................................................ 3
SYNOPSIS......................................................................................... 7
The Reorganization.......................................................................... 7
Comparison of the Acquiring Fund and the Acquired Fund...................................... 7
PRINCIPAL RISK FACTORS........................................................................... 11
INFORMATION ABOUT THE ACQUIRING FUND AND THE ACQUIRED
FUNDS....................................................................................... 13
ADDITIONAL INFORMATION ABOUT THE AGREEMENT....................................................... 14
Terms of the Reorganization................................................................. 14
The Reorganization.......................................................................... 14
Other Terms................................................................................. 14
Federal Tax Consequences.................................................................... 15
Accounting Treatment........................................................................ 18
RIGHTS OF SHAREHOLDERS........................................................................... 19
OWNERSHIP OF THE ACQUIRING FUND AND THE ACQUIRED FUND
SHARES...................................................................................... 20
5% Holders.................................................................................. 20
Ownership of Officers and Trustees.......................................................... 21
CAPITALIZATION................................................................................... 22
LEGAL MATTERS.................................................................................... 23
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE
COMMISSION.................................................................................. 24
APPENDICES
Agreement and Plan of Reorganization.................................................. Appendix I
Prospectus of the Acquiring Fund...................................................... Appendix II
AIM V.I. Growth and Income Fund Discussion and Analysis............................... Appendix III
</TABLE>
<PAGE> 8
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM Funds, AIM Funds and Design, AIM Investor, AIM
LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La
Familia AIM de Fondos and Design, Invierta con DISCIPLINA and Invest with
DISCIPLINE are registered service marks and AIM Bank Connection and AIM Internet
Connect are service marks of A I M Management Group Inc.
<PAGE> 9
INTRODUCTION
--------------------------------------------------------------------------------
This Proxy Statement/Prospectus relates to the solicitation of proxies by the
Board of Trustees of the Acquired Fund from the shareholders of the Acquired
Fund for use at the Special Meeting of Shareholders to be held at 11 Greenway
Plaza, Suite 100, Houston, TX 77046-1173 on September 1, 2000, at 3:00 p.m.,
Central time (such meeting and any adjournments thereof are referred to as the
"Special Meeting").
All properly executed and unrevoked proxies received in time for the Special
Meeting will be voted in accordance with the instructions contained therein. If
no instructions are given, shares represented by proxies will be voted FOR the
proposal to approve the Agreement and in accordance with management's
recommendation on other matters. The presence in person or by proxy of one-third
of the outstanding shares of beneficial interest in the Acquired Fund at the
Special Meeting will constitute a quorum ("Quorum") with respect to the shares.
Approval of the Agreement requires the affirmative vote of a majority of the
shares cast by shareholders of the Acquired Fund. Abstentions will be counted as
shares present at the Special Meeting for quorum purposes, but will not be
considered votes cast at the Special Meeting. Any person giving a proxy has the
power to revoke it at any time prior to its exercise by executing a superseding
proxy or by submitting a notice of revocation to the Secretary of AVIF. In
addition, although mere attendance at the Special Meeting will not revoke a
proxy, a shareholder present at the Special Meeting may withdraw his proxy and
vote in person. Shareholders may also transact any other business not currently
contemplated that may properly come before the Special Meeting in the discretion
of the proxies or their substitutes.
In accordance with current law, life insurance company shareholders of the
Acquired Fund, in effect, pass along their voting rights to owners of variable
annuity and variable life insurance contracts issued by the companies.
Essentially, the life insurance companies seek instructions as to how contract
owners wish the companies to vote the Acquired Fund shares (1) technically owned
by the companies but (2) beneficially owned by the contract owners. The life
insurance companies communicate directly with contract owners about the
procedures that the companies follow in seeking instructions and voting shares
under the particular variable annuity and variable life insurance contracts. The
Acquired Fund understands that the life insurance companies will vote shares for
which instructions are not received from contract owners in proportion to shares
for which instructions are received from shareholders.
Shareholders of record as of the close of business on June 23, 2000 (the "Record
Date") are entitled to vote at the Special Meeting. Each share is entitled to
one vote for each full share held, and a fractional vote for a fractional share
held. On the Record Date, there were ______shares outstanding for the Acquired
Fund.
The Acquired Fund expects to solicit proxies principally by mail, but also may
solicit proxies by telephone, facsimile, telegraph or personal interview. The
officers of the Acquired Fund will not receive any additional or special
compensation for any such solicitation. The cost of shareholder
1
<PAGE> 10
solicitation is anticipated to be approximately $17,000. The Agreement and Plan
of Reorganization provides that the Acquired Fund will bear its costs and
expenses incurred in connection with its Reorganization.
The Acquired Fund intends to mail this Proxy Statement/Prospectus and the
accompanying proxy on or about July 20, 2000.
2
<PAGE> 11
REASONS FOR THE REORGANIZATION
--------------------------------------------------------------------------------
BACKGROUND AND REASONS FOR THE REORGANIZATION
The Acquired Fund (formerly named the GT Global Variable Growth & Income Fund)
is an investment portfolio of AVIF. AVIF is a Delaware business trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"). AVIF
consists of 17 separate portfolios, including the Acquired and Acquiring Funds.
Sales of shares of the Acquired Fund have been declining over the past two
years. Because more shares are being redeemed than purchased, the Fund's
relatively small asset base has eroded appreciably.
In view of this situation, AIM, the investment adviser to each Fund, evaluated
the Acquired Fund and the Acquiring Fund and recommended the Reorganization,
because the Acquiring Fund has substantially identical investment objectives,
substantially similar investment policies, better historical performance, and a
lower operating expense ratio than the Acquired Fund. The Acquiring Fund is also
significantly larger than the Acquired Fund and sales of the Acquiring Fund's
shares for the past two years have far exceeded, and continue to exceed,
redemptions. AIM believes that combining the Acquired Fund with the Acquiring
Fund, which has a large increasing base of assets, will enable Acquired Fund
shareholders to participate in economies of scale.
BOARD CONSIDERATIONS
The Board of Trustees of AVIF, on behalf of the Acquired Fund, has determined
that the Reorganization of the Acquired Fund is in the best interests of the
Acquired Fund, and the Board of Trustees recommends approval of the Agreement by
the shareholders of the Acquired Fund at the Special Meeting. The following is a
summary of the information that was presented to, and considered by, the Board
of Trustees in making its determination.
At a meeting of the Board of Trustees held on June 14, 2000, AIM proposed that
the Board of Trustees approve the Reorganization of the Acquired Fund into the
Acquiring Fund. The Board of Trustees received from AIM written materials that
described the structure and tax consequences of the Reorganization and that
contained information concerning the Acquired Fund and the Acquiring Fund,
including a comparison of the investment objectives and policies of the Acquired
Fund and the Acquiring Fund, a comparison of the performance, expenses, and net
assets of the Funds, financial information, and information on the portfolio
managers of the Acquiring Fund.
In considering the Reorganization, the Board of Trustees noted that the Acquired
Fund and Acquiring Fund have, for the most part, substantially identical
investment objectives and
3
<PAGE> 12
substantially similar investment policies. The Board of Trustees also noted that
the expense ratios of the Acquired Fund for each of the past five years and at
April 30, 2000, have been higher than those of the Acquiring Fund, as shown
below:
RATIO OF EXPENSES TO AVERAGE NET ASSETS(a)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
AT
FUND 4/30/00 1999 1998 1997 1996 1995
---- ------- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund
(Acquired Fund)(b) 1.65% 1.33% 1.18% 1.13% 1.20% 1.23%
AIM V.I. Growth and Income Fund
(Acquiring Fund)(c) 0.82% 0.77% 0.65% 0.69% 0.78% 0.78%(d)
</TABLE>
(a) Ratios for 1999 are based on average net assets of $43,643,834 for the
Acquired Fund and $1,718,996,207 for the Acquiring Fund.
(b) Ratios for the Acquired Fund are shown net of expense reimbursements. Absent
such expense reimbursements, the expense ratios for 1999, 1997, 1996, and 1995
would have been 1.36%, 1.27%, 1.30%, and 1.44%, respectively. In addition, the
Acquired Fund bears interest expenses that are not shown above.
(c) Ratios for the Acquiring Fund for 1999 and 1998 were computed using average
shares outstanding.
(d) Annualized.
NET ASSETS
In addition, the Board of Trustees considered the fact that the net assets of
the Acquired Fund are significantly lower than the net assets of the Acquiring
Fund, as shown below.
<TABLE>
<CAPTION>
NET ASSETS AT NET ASSETS AT
APRIL 28, 2000 DECEMBER 31, 1999
Fund $(000's) $(000's)
---- -------------- -----------------
<S> <C> <C>
AIM V.I. Global Growth and Income (Acquired Fund) $ 27,273 $ 30,756
AIM V.I. Growth and Income Fund (Acquiring Fund) $2,667,325 $2,443,264
</TABLE>
The Board of Trustees also considered the performance of the Acquired Fund in
relation to the performance of the Acquiring Fund, both on the basis of (1)
total returns and (2) industry ranking. Comparative average annual total
returns for the one, three, five year, and since inception periods ended
December 31, 1999 and March 31, 2000, and comparative year to date average
annual total returns (through April 30, 2000), are set out below. Past
performance cannot guarantee future results. Average annual total return figures
do not reflect life insurance company charges. If average annual total return
figures reflected life insurance company charges, the figures shown would be
lower.
4
<PAGE> 13
AVERAGE ANNUAL TOTAL RETURNS (THROUGH DECEMBER 31, 1999)
<TABLE>
<CAPTION>
SINCE INCEPTION OF
YOUNGER OF
ONE THREE FIVE SINCE ACQUIRED OR
FUND YEAR YEARS YEARS INCEPTION ACQUIRING FUND
---- ---- ----- ----- --------- ------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income (0.13)% 11.55% 13.28% 11.63% 11.55%
(Acquired Fund)
AIM V.I. Growth and Income Fund 34.25% 29.17% 28.18% 24.49% 24.49%
(Acquiring Fund) 05/02/94 05/02/94
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (THROUGH APRIL 30, 2000)
<TABLE>
<CAPTION>
SINCE INCEPTION OF
YOUNGER OF
ONE THREE FIVE SINCE ACQUIRED OR
FUND YEAR YEARS YEARS INCEPTION ACQUIRING FUND
---- ---- ----- ----- --------- ------------------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income (1.52)% 10.47% 12.28% 10.90% 10.68%
(Acquired Fund) 02/10/93 05/02/94
AIM V.I. Growth and Income Fund 23.69% 27.92% 25.59% 23.24% 23.24%
(Acquiring Fund) 05/02/94 05/02/94
</TABLE>
AVERAGE ANNUAL TOTAL RETURNS (YEAR TO DATE THROUGH APRIL 30, 2000)
<TABLE>
<CAPTION>
FUND YTD (APRIL 30, 2000)
---- --------------------
<S> <C>
AIM V.I. Global Growth and Income (1.11)%
(Acquired Fund)
AIM V.I. Growth and Income Fund 1.14%
(Acquiring Fund)
</TABLE>
5
<PAGE> 14
INDUSTRY RANKINGS
o Lipper Rank (Percentile)(1)
<TABLE>
<CAPTION>
CATEGORY YTD 1 YEAR 3 YEAR 5 YEAR
-------- --- ------ ------ ------
<S> <C> <C> <C> <C> <C>
AIM V.I. Global Growth and Income Fund................... Global 55% 99% 96% 87%
AIM V.I. Growth and Income Fund.......................... Growth & 34% 9% 8% 7%
Income
</TABLE>
(1) Under the Lipper ranking system, the lower the percentile rank the better
the performance.
The Board of Trustees further noted that the Acquired Fund will have been
provided with an opinion of counsel that the Reorganization will be tax-free as
to the Acquired Fund and its shareholders and that there will be no adverse tax
consequences for owners of variable annuity and variable life insurance
contracts.
AIM provided the Board of Trustees with an analysis of the Reorganization,
including, comparisons of each Fund's investment objectives and policies,
principal risks, and management fee rates for the year ended December 31, 1999.
A summary of AIM's comparisons and other expenses is set out below.
6
<PAGE> 15
SYNOPSIS
--------------------------------------------------------------------------------
This synopsis is qualified by reference to the more complete information
contained elsewhere in this Proxy Statement/Prospectus, the Prospectus for the
Acquiring Fund, the Prospectus for the Acquired Fund, and the Agreement.
THE REORGANIZATION
The Reorganization will result in the combination of the Acquired Fund with the
Acquiring Fund.
If shareholders of the Acquired Fund approve the Agreement and other closing
conditions are satisfied, all of the assets of the Acquired Fund will be
transferred to the Acquiring Fund, the Acquiring Fund will assume all of the
liabilities of the Acquired Fund, and the Acquiring Fund will issue its shares
to the Acquired Fund's shareholders. The shares of the Acquiring Fund issued in
a Reorganization will have an aggregate net asset value equal to the value of
the Acquired Fund's net assets transferred to the Acquiring Fund. The value of
each shareholder's account with the Acquiring Fund immediately after a
Reorganization will be the same as the value of such shareholder's account with
the Acquired Fund immediately prior to the Reorganization. A copy of the
Agreement is attached as Appendix I to this Proxy Statement/Prospectus. See
"Additional Information About the Agreement" below.
The Acquired Fund has received an opinion of Freedman, Levy, Kroll & Simonds, to
the effect that the Reorganization will constitute tax-free reorganization for
Federal income tax purposes. Thus, shareholders will not have to pay Federal
income taxes as a result of the Reorganization, and owners of variable annuity
and variable life insurance contracts will not bear any adverse tax
consequences. See "Additional Information About the Agreement -- Federal Tax
Consequences" below.
COMPARISON OF THE ACQUIRING FUND AND THE ACQUIRED FUND
INVESTMENT OBJECTIVES
The Acquiring Fund and the Acquired Fund have substantially identical investment
objectives. The Acquiring Fund seeks growth of capital with a secondary
objective of current income. The Acquired Fund seeks long-term growth of capital
together with current income.
The investment objective(s) of both Funds are non-fundamental policies and may
be changed by the Board of Trustees may be changed by the Board of Trustees
without shareholder approval.
7
<PAGE> 16
INVESTMENT POLICIES
The investment policies for the Acquiring Fund and the Acquired Fund are not
identical, but are similar in many respects. The Acquiring Fund invests 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 Acquired Fund invests at least 65% of its total
assets in a combination of blue-chip equity securities and high-quality
government bonds of U.S. and foreign issuers.
Each of the Funds invests in foreign securities. However, the Acquiring Fund may
invest up to 25% of its total assets in foreign securities, while the Acquired
Fund generally invests 65% of its assets in U.S. and foreign securities
(although, it is not anticipated that foreign securities will constitute more
than 90% of the value of the total assets of the Acquired Fund).
The Acquired Fund may invest up to 35% of its total assets in other equity
securities and government and corporate debt securities that are investment
grade. The Acquired Fund may purchase debt obligations issued or guaranteed by
the U.S. or foreign governments, including foreign states, provinces or
municipalities, or their agencies, authorities or instrumentalities and debt
obligations of supranational organizations. The Acquired Fund may invest up to
100% of its total assets in either equity or debt securities in response to
general economic changes and market conditions around the world.
The Acquired Fund normally invests in securities of issuers in at least three
countries, including the United States, but may not invest more than 40% of its
assets in securities of issuers in any one country, other than the U.S. The
Acquired Fund may invest in the securities of issuers located in developing
countries. The Acquired Fund may invest in securities denominated in more than
one currency.
The investment policies, strategies and practices of each Fund are also
non-fundamental. The Board of Trustees of the Trust reserves the right to change
any of these non-fundamental investment policies, strategies or practices
without shareholder approval.
The foregoing discussion is a summary of the principal differences and
similarities between the investment policies of the Funds. For a more complete
discussion of each Fund's policies, see "Investment Objectives and Strategies"
in each Fund's Prospectus and "Investment Strategies and Risks" and "Certain
Investment Strategies and Techniques" in each Fund's Statement of Additional
Information.
The investment restrictions adopted by both Funds as fundamental are identical
and are summarized under the caption "Investment Restrictions" in their
respective Prospectuses and Statements of Additional Information. A fundamental
investment restriction cannot be changed without the vote of the majority of the
outstanding voting securities of a fund as defined in the 1940 Act.
8
<PAGE> 17
PERFORMANCE
A comparison of the performance of the Acquiring Fund and Acquired Fund is
provided under "Reasons for the Reorganization - Board Considerations," above.
FEE TABLE
This table compares the fees and expenses of the Acquired Fund and Acquiring
Fund as of April 30, 2000.
The Acquired Fund and the Acquiring Fund do not charge any of the following
fees:
<TABLE>
<S> <C>
Sales Charge Imposed on Purchases None
Deferred Sales Charge None
Sales Charge Imposed on Reinvested Dividends None
Redemption Fee None
Exchange Fee None
Maximum Account Fee None
Distribution or Service (12b-1) Fees None
</TABLE>
<TABLE>
<CAPTION>
AIM V.I. GLOBAL GROWTH AIM V.I. GROWTH AND
AND INCOME FUND INCOME FUND
(ACQUIRED FUND) (ACQUIRING FUND)
<S> <C> <C>
Management Fees 1.00% 0.60%
Other Expenses 0.65% 0.22%
----- -----
Total Annual Fund
Operating Expenses 1.65% 0.82%
===== =====
</TABLE>
EXPENSE EXAMPLE
The following example is intended to help you compare the cost of investing in
the Acquired Fund with the cost of investing in the Acquiring Fund.
The example assumes that you invest $10,000 in each Fund for the time periods
indicated and then redeem all of your shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's gross operating expenses remain the same. The example does not reflect
the fees and expenses associated with variable annuity and variable life
insurance contracts for which the Funds may serve as investment vehicles.
Although your actual returns may be higher or lower, based on these assumptions
your cost would be:
9
<PAGE> 18
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
AIM V.I. GLOBAL GROWTH AND INCOME FUND 168 520 897 1,955
(ACQUIRED FUND)
AIM V.I. GROWTH AND INCOME FUND 84 262 455 1,014
(ACQUIRING FUND)
</TABLE>
DISTRIBUTION OF FUND SHARES
The Acquired Fund and the Acquiring Fund each sells its shares exclusively to
separate accounts of life insurance companies to fund variable annuity contracts
and variable life insurance contracts issued by the companies. Under the
contracts, a separate account buys or redeems shares of a Fund based on (1) a
contract owner's instruction to invest or receive back monies under a contract
(such as making a premium payment or surrendering a contract) and (2) the
operation of a contract (such as deduction of contract fees and charges).
Contracts may permit contract owners to transfer monies among investment
portfolios of a single mutual fund or of two or more mutual funds. Separate
accounts generally buy additional shares with dividend and capital gains
distributions declared by the Acquired Fund and the Acquiring Fund.
The life insurance companies, on behalf of their separate accounts, are the
shareholders of Acquired Fund and the Acquiring Fund. The owners of the variable
annuity contracts and the variable life insurance contracts are, through the
separate accounts, the beneficial owners of the shares of the Acquired Fund and
the Acquiring Fund.
INVESTMENT ADVISORY SERVICES
AIM serves as investment adviser to the Acquired Fund and the Acquiring Fund.
There are no sub-advisers to either the Acquired Fund or the Acquiring Fund.
10
<PAGE> 19
PRINCIPAL RISK FACTORS
--------------------------------------------------------------------------------
The principal risks of investing in the Acquiring Fund are set out below.
There is a risk that you could lose all or a portion of your investment in the
Fund and that the income you may receive from your investment may vary. The
value of your investment in the Fund will go up and down with the prices of the
securities in which the Fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the Fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the Fund.
The prices of foreign securities in which the Acquiring Fund invests may be
further affected by other factors, including:
o Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and
the currencies in which those investments are traded.
o Political and economic conditions--The value of the fund's foreign
investments may be adversely affected by political and social instability
in their home countries and by changes in economic or taxation policies in
those countries.
o Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available
information about foreign companies than about U.S. companies.
o Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
In addition, if the seller of a repurchase agreement in which the Fund invests
defaults on its obligation or declares bankruptcy, the Fund may experience
delays in selling the securities
11
<PAGE> 20
underlying the repurchase agreement. As a result, the Fund may incur losses
arising from decline in the value of those securities, reduced levels of income
and expenses of enforcing its rights.
COMPARISON OF RISKS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
The Acquiring Fund presents many of the same principal risks of investing as
does the Acquired Fund. There are, however, certain differences between the
principal risks of investing in the Acquiring and Acquired Fund.
Although the Acquired Fund may invest in convertible securities, the Acquiring
Fund generally will invest in convertible securities to a greater degree, and,
therefore, will have more exposure to the risks associated with such
investments, which are described in the preceding section.
The Acquired Fund generally invests to a greater extent in debt securities than
the Acquiring Fund and, therefore, has greater exposure to the risks of
investing in debt securities than the Acquiring Fund. Debt securities are
particularly vulnerable to credit risk and interest rate fluctuations. Interest
rate increases may cause the price of a debt security to decrease. The longer a
debt security's duration, the more sensitive it is to this risk.
The Acquired Fund has greater exposure to the risks of investing in securities
of foreign companies than does the Acquiring Fund. The Acquiring Fund may invest
up to 25% of its total assets in foreign securities, while the Acquired Fund
seeks to meet its objectives by investing at least 65% of its total assets in a
combination of blue chip equity securities and high-quality government bonds of
U.S. and foreign issuers. The Acquired Fund normally invests in securities of
issuers in at least three countries, including the U.S.; however, the Acquired
Fund may not invest more than 40% of its assets in securities of issuers in any
one country, other than the U.S.
PLEASE REFER TO THE PROSPECTUS FOR THE ACQUIRED FUND AND THE ACCOMPANYING
PROSPECTUS FOR THE ACQUIRING FUND FOR MORE DETAILS.
12
<PAGE> 21
INFORMATION ABOUT THE ACQUIRED FUND AND THE ACQUIRING FUND
--------------------------------------------------------------------------------
The Synopsis included in this Proxy Statement/Prospectus briefly compares each
Acquired Fund to the Acquiring Fund into which it would be reorganized,
highlighting certain key features of the Funds and certain additional
information about the differences between the Funds.
The Acquiring Fund's Prospectus, included in Appendix II, provides additional
information about the Acquiring Fund. A portion of the most recent Annual Report
for the Acquiring Fund, included in Appendix III, also provides information
about the Acquiring Fund.
Additional information about the Acquired Fund is incorporated into this Proxy
Statement/Prospectus by reference to the Acquired Fund's Prospectus. If you want
more information about the Acquired Fund, you can request a free copy of the
Acquired Fund's Prospectus by calling 1-800-410-4246.
13
<PAGE> 22
ADDITIONAL INFORMATION ABOUT THE AGREEMENT
--------------------------------------------------------------------------------
TERMS OF THE REORGANIZATION
The terms and conditions under which the Reorganization may be consummated are
set forth in the Agreement. Significant provisions of the Agreement are
summarized below; however, this summary is qualified in its entirety by
reference to the Agreement, a copy of which is attached as Appendix I to this
Proxy Statement/Prospectus.
THE REORGANIZATION
The Acquiring Fund will acquire all of the assets of the Acquired Fund with
which it will combine in exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund.
Consummation of each Reorganization (the "Closing") is expected to occur on or
about September 18, 2000 (the "Closing Date"), at 8:00 a.m. Central time (the
"Effective Time") on the basis of values calculated as of the close of regular
trading on the NYSE on the preceding business day.
At the Effective Time, the Acquired Fund shall deliver all of its assets to the
Custodian for the account of the corresponding Acquiring Fund in exchange for
(1) the assumption by the Acquiring Fund of all of the liabilities of any kind
of the Acquired Fund, and (2) delivery by the Acquiring Fund directly to the
Acquired Fund shareholders of a number of Acquiring Fund shares (including, if
applicable, fractional shares rounded to the nearest thousandth) having an
aggregate net asset value equal to the net value of the assets of the Acquired
Fund so transferred, assigned and delivered.
OTHER TERMS
The Agreement may be amended without shareholder approval by mutual agreement of
AVIF, on behalf of the Acquired Fund and the Acquiring Fund, and AIM. If any
amendment is made to the Agreement that effects a material change to the
Agreement and the Reorganization, such change will be submitted to the affected
shareholders for their approval.
The Acquired Fund and the Acquiring Fund each has made representations and
warranties in the Agreement that are customary in matters such as the
Reorganization. The obligations of the Acquired Fund and the Acquiring Fund
pursuant to the Agreement are subject to various conditions, including the
following:
(a) the assets of the Acquired Fund to be acquired by the Acquiring Fund
shall constitute at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by the Acquired Fund
immediately prior to the Reorganization, including for this purpose any amounts
used by the Acquired Fund to pay its Reorganization expenses and all redemptions
and distributions made by the Acquired Fund immediately before
14
<PAGE> 23
the Reorganization (other than the redemptions pursuant to a demand of a
shareholder in the ordinary course of the Acquired Fund's business as a series
of an open-end management investment company under the 1940 Act and regular,
normal dividends not in excess of the requirements of Section 852 of the Code);
(b) AVIF, on behalf of the Acquired Fund and the Acquiring Fund, shall have
filed with the SEC its Registration Statement on Form N-14 under the Securities
Act of 1933 (the "1933 Act") pertaining to the Reorganization; such Registration
Statement shall have become effective; and no stop-order suspending the
effectiveness of the Registration Statement shall have been issued, and no
proceeding for that purpose shall have been initiated or threatened by the SEC
(and not withdrawn or terminated);
(c) the shareholders of the Acquired Fund shall have approved the
Agreement; and
(d) AVIF, on behalf of the Acquired Fund and the Acquiring Fund, shall have
received an opinion from Freedman, Levy, Kroll & Simonds that the Reorganization
will not result in the recognition of gain or loss for United States Federal
income tax purposes for the Acquired Fund, the Acquiring Fund, the
shareholders of the Acquired Fund or any contract owner.
Each of the Acquired Fund and the Acquiring Fund has agreed to bear its own
expenses in connection with the Reorganization.
The Board of Trustees of AVIF, on behalf of the Acquiring Fund, may waive
without shareholder approval any failure by the Acquired Fund to satisfy (1) any
of the conditions to the Acquiring Fund's obligations under Section 6.1 of the
Agreement, and (2) any of the mutual conditions under Section 6.2 of the
Agreement that the Acquired Fund also waives. The Agreement may be terminated
entirely or abandoned by the Acquired Fund or the Acquiring Fund at any time by
mutual agreement of the parties to the Agreement, or by any party in the event
that the Acquired Fund's shareholders do not approve the Agreement or in the
event the Closing does not occur on or before the Closing Date.
FEDERAL TAX CONSEQUENCES
The following is a general summary of the material Federal income tax
consequences of the Reorganization and is based upon the current provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), the existing
Treasury regulations thereunder, current administrative rulings of the Internal
Revenue Service ("IRS") and judicial decisions, all of which are subject to
change.
The principal Federal income tax consequences that are expected to result from
the Reorganization, under currently applicable law, are as follows:
(1) The transfer of the assets of the Acquired Fund to the Acquiring Fund
in exchange for shares of voting stock of the Acquiring Fund ("voting stock")
distributed directly to the shareholders of the Acquired Fund, as provided in
the Agreement, will constitute a
15
<PAGE> 24
"reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquired Fund and the Acquiring Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
(2) In accordance with Section 361(a) and Section 361(c)(1) of the Code, no
gain or loss will be recognized by the Acquired Fund on the transfer of its
assets to the Acquiring Fund solely in exchange for the voting stock of the
Acquiring Fund and the Acquiring Fund's assumption of the Acquired Fund's
liabilities, or on the distribution of the voting stock to the Acquired Fund's
shareholders.
(3) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by the Acquiring Fund on the receipt of assets of the Acquired Fund
in exchange for the voting stock of the Acquiring Fund and the Acquiring Fund's
assumption of the Acquired Fund's liabilities.
(4) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by shareholders of the Acquired Fund on the receipt of the voting
stock of the Acquiring Fund in constructive exchange for their Acquired Fund
shares.
(5) In accordance with Section 362(b) of the Code, the basis to the
Acquiring Fund of the assets of the Acquired Fund transferred to it will be the
same as the basis of those assets in the hands of the Acquired Fund immediately
before the Reorganization.
(6) In accordance with Section 358(a) of the Code, the Acquired Fund
shareholders' basis for the voting stock of the Acquiring Fund received by the
Acquired Fund shareholder will be the same as the Acquired Fund shareholders'
basis for Acquired Fund shares constructively exchanged therefor.
(7) In accordance with Section 1223(1) of the Code, the Acquired Fund
shareholders' holding period for the voting stock of the Acquiring Fund will
include the Acquired Fund shareholders' holding period for the Acquired Fund
shares constructively exchanged therefor, provided that the Acquired Fund
shareholder held the Acquired Fund shares as a capital asset.
(8) In accordance with Section 1223(2) of the Code, the holding period for
assets of the Acquired Fund transferred to the Acquiring Fund in the
Reorganization will include the holding period for those assets in the hands of
the Acquired Fund.
(9) The Acquired Fund and the Acquiring Fund will each be a RIC under
Subchapter M and will each comply with the investment diversification
requirements of Section 817(h) of the Code. Accordingly, the Reorganization will
not produce adverse Federal income tax consequences by reason of income or gain
for any Contract Owner.
As a condition to Closing, Freedman, Levy, Kroll & Simonds will render a
favorable opinion to AVIF, on behalf of the Acquired Fund, as to the foregoing
Federal income tax consequences of the Reorganization, which opinion will be
conditioned upon the accuracy, as of the Closing Date, of certain
representations of AVIF, Acquired Fund upon which Freedman, Levy, Kroll &
16
<PAGE> 25
Simonds will rely in rendering its opinion, which representations include, but
are not limited to, the following (taking into account for purposes thereof any
events that are part of the plan of reorganization):
(a) The fair market value of the voting stock of the Acquiring Fund
received by each shareholder of the Acquired Fund will be approximately equal to
the fair market value of the shares of the Acquired Fund that such shareholder
held before the Reorganization.
(b) There is no plan or intention by the shareholders of the Acquired Fund
to redeem a number of shares of the voting stock of the Acquiring Fund received
in the Reorganization that would reduce the Acquired Fund shareholders'
ownership of the shares to a number of shares having a value, as of the Closing
Date, of less than 50% of the value of all of the formerly outstanding shares of
the Acquired Fund as of the Closing Date.
(c) Following the Reorganization, the Acquiring Fund will continue the
historic business of the Acquired Fund or use a significant portion of the
Acquired Fund's historic business assets in its business.
(d) At the direction of the Acquired Fund, the Acquiring Fund will issue
directly to the Acquired Fund's shareholders pro rata the voting stock that the
Acquired Fund constructively receives in the Reorganization, and the Acquired
Fund will distribute its other properties (if any) to its shareholders, on or as
promptly as practicable after the Closing Date.
(e) The Acquiring Fund has no plan or intention to reacquire any of its
voting stock issued in the Reorganization, except to the extent that the
Acquiring Fund is required by the 1940 Act to redeem any of its shares of voting
stock presented for redemption.
(f) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund acquired in the
Reorganization, except for dispositions made in the ordinary course of its
business or dispositions necessary to maintain its status as a RIC under the
Code.
(g) The Acquiring Fund, the Acquired Fund, and each shareholder of the
Acquired Fund will pay its respective expenses, if any, incurred in connection
with the Reorganization.
(h) The Acquiring Fund will acquire at least 90 percent of the fair market
value of the net assets, and at least 70 percent of the fair market value of the
gross assets, held by the Acquired Fund immediately before the Reorganization,
including for this purpose any amounts used by the Acquired Fund to pay its
Reorganization expenses and all redemptions and distributions made by the
Acquired Fund immediately before the Reorganization (other than redemptions
pursuant to a demand of a shareholder in the ordinary course of the Acquired
Fund's business as a series of an open-end management investment company under
the 1940 Act and regular, normal dividends not in excess of the requirements of
Section 852 of the Code).
(i) The Acquiring Fund and the Acquired Fund have each elected to be taxed
as a RIC under Section 851 of the Code and will each have qualified for the
special Federal tax treatment
17
<PAGE> 26
afforded RICs under the Code for all taxable periods. These taxable periods
include the taxable year of the Acquiring Fund that includes the Closing Date
and the last short taxable period of the Acquired Fund ending on the Closing
Date.
(j) The liabilities of the Acquired Fund assumed by the Acquiring Fund and
the liabilities to which the transferred assets of the Acquired Fund are subject
were incurred by the Acquired Fund in the ordinary course of its business.
(k) There is no intercompany indebtedness existing between the Acquiring
Fund and the Acquired Fund that was issued, acquired, or will be settled at a
discount.
(l) The Acquiring Fund does not own, directly or indirectly, nor has it
owned during the past five years, directly or indirectly, any shares of the
Acquired Fund from which it is receiving assets in the Reorganization.
(m) The fair market value of the assets of the Acquired Fund transferred to
the Acquiring Fund will equal or exceed the sum of the liabilities assumed by
the Acquiring Fund, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(n) The Acquired Fund is not under the jurisdiction of a court in a United
States Code Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(o) Immediately before the Reorganization, not more than 25 percent of the
value of the total assets of the Acquiring Fund or the Acquired Fund will be
invested in the stock or securities of any one issuer, and not more than 50
percent of the value of the total assets of the Acquiring Fund or the Acquired
Fund will be invested in the stock or securities of five or fewer issuers.
(p) The Acquiring Fund and the Acquired Fund will each have satisfied the
investment diversification requirements of Section 817(h) of the Code for all
taxable quarters since its inception, including the last short taxable period of
the Acquired Fund ending on the Closing Date and taxable quarter of the
Acquiring Fund that includes the Closing Date.
THE FOREGOING DESCRIPTION OF THE FEDERAL INCOME TAX CONSEQUENCES OF THE
REORGANIZATION IS MADE WITHOUT REGARD TO THE PARTICULAR FACTS AND CIRCUMSTANCES
OF ANY SHAREHOLDER OF THE ACQUIRED FUND. THE ACQUIRED FUND'S SHAREHOLDERS ARE
URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES TO THEM
OF THE REORGANIZATION, INCLUDING THE APPLICABILITY AND EFFECT OF STATE, LOCAL,
FOREIGN AND OTHER TAX LAWS.
ACCOUNTING TREATMENT
The Reorganization will be accounted for on a tax-free combined basis.
Accordingly, the book cost basis to the Acquiring Fund of the assets of the
Acquired Fund will be the same as the book cost basis of such assets to the
Acquired Fund.
18
<PAGE> 27
RIGHTS OF SHAREHOLDERS
--------------------------------------------------------------------------------
The Acquired Fund and the Acquiring Fund are each an investment portfolio of
AVIF, a Delaware business trust. Accordingly, the shareholders of the Acquired
and the Acquiring Funds are entitled to the same rights accorded to them under
the laws of Delaware applicable to business trusts.
19
<PAGE> 28
OWNERSHIP OF THE ACQUIRED FUND AND THE ACQUIRING FUND SHARES
--------------------------------------------------------------------------------
5% OWNERS
Listed below is the name, address and percent ownership of each person who as of
June 12, 2000, to the knowledge of AVIF, owned of record 5% or more of the
outstanding shares of the Acquired Fund. To the knowledge of AVIF, as of June
12, 2000, no contract owner beneficially owned 5% or more of the outstanding
shares of the Acquired Fund.
<TABLE>
<CAPTION>
PERCENT OWNED
OF RECORD
-------------
<S> <C>
General American Life 95.66%
Insurance Company
One Tower Lane, Ste. 3000
Oakbrook, IL 60181
</TABLE>
* A shareholder who beneficially owns more than 25% of the voting securities of
the Acquired Fund may be presumed to "control" the Fund. The Acquired Fund
understands that insurance company separate accounts owning shares of the Fund
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 Acquired Fund in
its own right, it may elect to do so, subject to the then current interpretation
of the 1940 Act and the rules thereunder.
Listed below is the name, address and percent ownership of each person who as of
June 12, 2000, to the knowledge of AVIF, owned of record 5% or more of the
outstanding shares of the Acquiring Fund. To the knowledge of AVIF, as of June
12, 2000, no contract owner beneficially owned 5% or more of the outstanding
shares of any Acquiring Fund.
<TABLE>
<CAPTION>
PERCENT OWNED
OF RECORD
-------------
<S> <C>
IDS Life Insurance Company 59.93%
IDS Tower 10
Minneapolis, MN 55440
Glenbrook Life and Annuity Company 9.49%
3100 Sanders Road
Northbrook, IL 60062
</TABLE>
20
<PAGE> 29
<TABLE>
<CAPTION>
PERCENT OWNED
OF RECORD
-------------
<S> <C>
Prudential Life Insurance Company 8.18%
751 Broad Street
Newark, NJ 07102
Connecticut General Life Insurance Company 6.73%
3500 Sanders Road
Northbrook, IL 60062
</TABLE>
* A shareholder who beneficially owns more than 25% of the voting
securities of the Acquiring Fund may be presumed to "control" the Fund. The
Acquiring Fund understands that insurance company separate accounts owning
shares of the Fund 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
Fund in its own right, it may elect to do so, subject to the then current
interpretation of the 1940 Act and the rules thereunder.
AIM, a Delaware corporation, is a wholly owned subsidiary of A I M Management
Group Inc. The address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas
77048-1173.
OWNERSHIP OF OFFICERS AND TRUSTEES
To the best of the knowledge of AVIF, the beneficial ownership of shares of the
Acquired and Acquiring Funds by officers and trustees of AVIF as a group
constituted less than 1% of the outstanding shares of each such Fund as of June
12, 2000.
21
<PAGE> 30
CAPITALIZATION
--------------------------------------------------------------------------------
The following table sets forth as of December 31, 1999: (i) the capitalization
of the Acquiring Fund's shares, (ii) the capitalization of the Acquired Fund's
shares, (iii) pro forma capitalization of the Acquiring Fund shares as adjusted
to give effect to the transaction contemplated by the Agreement.
<TABLE>
<CAPTION>
PRO FORMA
AIM V.I. GLOBAL GROWTH AIM V.I. GROWTH AIM V.I. GROWTH AND
AND INCOME FUND AND INCOME FUND INCOME FUND
---------------------- --------------- -------------------
<S> <C> <C> <C>
Net Assets $ 30,756,126 $ 2,443,263,980 $ 2,474,020,106
Shares Outstanding 2,273,784 77,338,464 78,312,326
Net Asset Value Per Share $ 13.53 $ 31.59 $ 31.59
</TABLE>
22
<PAGE> 31
LEGAL MATTERS
--------------------------------------------------------------------------------
Certain legal matters concerning AVIF and its participation in the
Reorganization, the issuance of shares of the Acquiring Fund in connection with
the Reorganization, and the Federal income tax consequences of the
Reorganization will be passed upon by Freedman, Levy, Kroll & Simonds, 1050
Connecticut Avenue, N.W., Washington, D.C. 20036-5366.
23
<PAGE> 32
INFORMATION FILED WITH THE SECURITIES AND EXCHANGE COMMISSION
--------------------------------------------------------------------------------
This Proxy Statement/Prospectus and the related Statement of Additional
Information do not contain all the information set forth in the registration
statements and the exhibits relating thereto and annual reports that AVIF has
filed with the SEC pursuant to the requirements of the 1933 Act and the 1940
Act, to which reference is hereby made. The SEC file number for the registration
statement of AVIF containing the Prospectus and Statement of Additional
Information relating to the Acquired Fund and the Acquiring Fund is Registration
No. 33-57340.
AVIF and each of its investment portfolios, including the Acquired Fund and the
Acquiring Fund, are subject to the informational requirements of the 1940 Act
and in accordance therewith file reports and other information with the SEC.
Reports, proxy statements, registration statements and other information filed
by those companies (including the Form N-14 Registration Statement of AVIF
relating to the Acquiring Fund of which this Proxy Statement/Prospectus is a
part and which is hereby incorporated by reference) may be inspected without
charge and copied at the prescribed rates at the public reference facilities
maintained by the SEC at Room 1014, Judiciary Plaza, 450 Fifth Street, NW,
Washington, DC 20549, and at the following regional offices of the SEC: 7 World
Trade Center, Suite 1300, New York, New York 10048; 1401 Brickell Avenue, Suite
200, Miami, Florida 33131, 500 West Madison Street, 14th Floor, Chicago,
Illinois 60661, 1801 California Street, Suite 4800, Denver, Colorado 80202, and
5670 Wilshire Blvd., 11th Floor, Los Angeles, California 90036. The SEC
maintains a Web site at http://www.sec.gov that contains information regarding
AVIF and other registrants that file electronically with the SEC.
24
<PAGE> 33
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION, dated as of June 15, 2000 (this
"Agreement"), by and among AIM Variable Insurance Funds, a Delaware business
trust ("AVIF"), acting on behalf of AIM V.I. Global Growth and Income Fund
("Acquired Fund"), AVIF, acting on behalf of AIM V.I. Growth and Income Fund
("Acquiring Fund"), and A I M Advisors, Inc. ("AIM"), a Delaware corporation.
WITNESSETH
WHEREAS, AVIF is an investment company registered with the SEC under the
Investment Company Act that offers separate series of its shares representing
interests in separate investment portfolios for sale to separate accounts of
life insurance companies to support investments under variable annuities and
variable life insurance contracts issued by such companies; and
WHEREAS, AIM provides investment advisory services to AVIF; and
WHEREAS, the Acquired Fund desires to provide for its reorganization through the
transfer of all of its assets to the Acquiring Fund with which it will combine
in exchange for the issuance by AVIF of shares of such Acquiring Fund in the
manner set forth in this Agreement and the assumption by the Acquiring Fund of
all of the liabilities of the Acquired Fund; and
WHEREAS, this Agreement is intended to be and is adopted by the parties hereto
as a Plan of Reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the foregoing premises and the agreements
and undertakings contained in this Agreement, AVIF and AIM agree as follows:
ARTICLE 1 DEFINITIONS
SECTION 1.1 DEFINITIONS.
For all purposes in this Agreement, the following terms shall have the
respective meanings set forth in this Section 1.1 (such definitions to be
equally applicable to both the singular and plural forms of the terms herein
defined):
"Acquired Fund" means AIM V.I. Global Growth and Income Fund, a separate
series of AVIF.
"Acquired Fund Financial Statements" shall have the meaning set forth in
Section 3.3 of this Agreement.
1
<PAGE> 34
"Acquired Fund Shareholders" means the holders of record as of the
Effective Time of the issued and outstanding shares of beneficial interest in
the Acquired Fund.
"Acquired Fund Shareholders Meeting" means a meeting of the shareholders of
the Acquired Fund convened in accordance with applicable law and the Agreement
and Declaration of Trust of AVIF to consider and vote upon the approval of this
Agreement and the Reorganization of the Acquired Fund contemplated by this
Agreement.
"Acquired Fund Shares" means the issued and outstanding shares of
beneficial interest in the Acquired Fund.
"Acquiring Fund" means AIM V.I. Growth and Income Fund, a separate series
of AVIF.
"Acquiring Fund Financial Statements" shall have the meaning set forth in
Section 4.3 of this Agreement.
"Acquiring Fund Shares" means shares of beneficial interest of the
Acquiring Fund issued pursuant to Section 2.6 of this Agreement.
"Advisers Act" means the Investment Advisers Act of 1940, as amended, and
all rules and regulations of the SEC adopted pursuant thereto.
"Affiliated Person" means an affiliated person as defined in Section
2(a)(3) of the Investment Company Act.
"Agreement" means this Agreement and Plan of Reorganization, together with
all schedules and exhibits attached hereto and all amendments hereto and
thereof.
"AVIF" means AIM Variable Insurance Funds, a Delaware business trust.
"AVIF Registration Statement" means the registration statement on Form
N-1A, as amended, of AVIF (File Nos. 33-57340 and 811-7452).
"Benefit Plan" means any material "employee benefit plan" (as defined in
Section 3(3) of ERISA) and any material bonus, deferred compensation, incentive
compensation, stock ownership, stock purchase, stock option, phantom stock,
vacation, retirement, profit sharing, welfare plans or other plan, arrangement
or understanding maintained or contributed to by AVIF on behalf of the Acquired
Fund, or otherwise providing benefits to any current or former employee, officer
or trustee of AVIF.
"Closing" means the transfer of the assets of the Acquired Fund to the
Acquiring Fund with which it will combine, the assumption of all of the Acquired
Fund's liabilities by the Acquiring Fund and the issuance of the Acquiring Fund
Shares directly to the Acquired Fund Shareholders as described in Section 2.1 of
this Agreement.
2
<PAGE> 35
"Closing Date" means September 5, 2000, or such other dates as the parties
may mutually determine.
"Code" means the Internal Revenue Code of 1986, as amended, and all rules
and regulations adopted pursuant thereto.
"Custodian" means State Street Bank and Trust Company acting in its
capacity as custodian for the assets of the Acquiring Fund and the Acquired
Fund.
"Effective Time" means 8:00 a.m. Central Time on the Closing Date, or such
other times as the parties may mutually determine.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended, and all rules or regulations adopted pursuant thereto.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
all rules and regulations adopted pursuant thereto.
"Governmental Authority" means any foreign, United States or state
government, government agency, department, board, commission (including the SEC)
or instrumentality, and any court, tribunal or arbitrator of competent
jurisdiction, and any governmental or non-governmental self-regulatory
organization, agency or authority (including without limitation the National
Association of Securities Dealers, Inc., the Commodity Futures Trading
Commission, the National Futures Association, the Investment Management
Regulatory Organization Limited and the Office of Fair Trading).
"Investment Company Act" means the Investment Company Act of 1940, as
amended, and all rules and regulations adopted pursuant thereto.
"Lien" means any pledge, lien, security interest, charge, claim or
encumbrance of any kind.
"Material Adverse Effect" means an effect that would cause a change in the
condition (financial or otherwise), properties, assets or prospects of an entity
having an adverse monetary effect in an amount equal to or greater than $50,000.
"NYSE" means the New York Stock Exchange, Inc.
"Person" means an individual or a corporation, partnership, joint venture,
association, trust, unincorporated organization or other entity.
"Reorganization" means the acquisition of the assets of the Acquired Fund
by the Acquiring Fund with which it will combine in consideration of the
assumption by the Acquiring Fund of all of the liabilities of the Acquired Fund
and the issuance by AVIF of Acquiring Fund Shares directly to Acquired Fund
Shareholders as described in this Agreement, and the termination of the Acquired
Fund's status as a designated series of shares of AVIF.
3
<PAGE> 36
"Required Shareholder Vote" shall have the meaning set forth in Section
3.17 of this Agreement.
"Return" means any return, report or form or any attachment thereto
required to be filed with any taxing authority.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, and all
rules and regulations adopted pursuant thereto.
"Tax" means any tax or similar governmental charge, impost or levy
(including income taxes (including alternative minimum tax and estimated tax),
franchise taxes, transfer taxes or fees, sales taxes, use taxes, gross receipts
taxes, value added taxes, employment taxes, excise taxes, ad valorem taxes,
property taxes, withholding taxes, payroll taxes, minimum taxes, or windfall
profit taxes), together with any related penalties, fines, additions to tax or
interest, imposed by the United States or any state, county, local or foreign
government or subdivision or agency thereof.
ARTICLE 2 TRANSFER OF ASSETS
SECTION 2.1 REORGANIZATION.
At the Effective Time, all of the assets of the Acquired Fund shall be delivered
to the Custodian for the account of the Acquiring Fund in exchange for the
assumption by the Acquiring Fund of all of the liabilities of any kind of the
Acquired Fund and delivery by AVIF directly to the holders of record as of the
Effective Time of the issued and outstanding shares of the Acquired Fund
(including, if applicable, fractional shares rounded to the nearest thousandth)
of a number of Acquiring Fund shares (including, if applicable, fractional
shares rounded to the nearest thousandth), having an aggregate net asset value
equal to the net value of the assets of the Acquired Fund so transferred,
assigned and delivered, all determined and adjusted as provided in Section 2.2
below. Upon delivery of such assets, the Acquiring Fund will receive good and
marketable title to such assets free and clear of all Liens.
SECTION 2.2 COMPUTATION OF NET ASSET VALUE.
(a) The net asset value of the Acquiring Fund Shares, and the net value of
the assets of the Acquired Fund, shall be determined as of the close of regular
trading on the NYSE on the business day immediately preceding the Closing Date.
(b) The net asset value of the Acquiring Fund Shares shall be computed in
accordance with the policies and procedures of the Acquiring Fund as described
in the AVIF Registration Statement.
4
<PAGE> 37
(c) The net value of the assets of the Acquired Fund to be transferred to
the Acquiring Fund pursuant to this Agreement shall be computed in accordance
with the policies and procedures of the Acquired Fund as described in the AVIF
Registration Statement.
(d) All computations of value regarding the net assets of the Acquired Fund
and the net asset value of the Acquiring Fund Shares to be issued pursuant to
this Agreement shall be made by AVIF. AVIF agrees to use commercially reasonable
efforts to resolve any material pricing differences between the prices of
portfolio securities determined in accordance with their respective pricing
policies and procedures.
SECTION 2.3 VALUATION.
The assets of the Acquired Fund and the net asset value per share of the
Acquiring Fund Shares shall be valued as of the close of regular trading on the
NYSE on the business day immediately preceding the Closing Date. The share
transfer books of the Acquired Fund will be permanently closed as of the close
of business on the business day immediately preceding the Closing Date and only
requests for the redemption of shares of the Acquired Fund received in proper
form prior to the close of regular trading on the NYSE on that date shall be
accepted by the Acquired Fund. Redemption requests thereafter received by the
Acquired Fund shall be deemed to be redemption requests for Acquiring Fund
Shares as applicable (assuming that the transactions contemplated by this
Agreement have been consummated), to be distributed to the Acquired Fund
Shareholders under this Agreement.
SECTION 2.4 DELIVERY.
(a) Assets held by the Acquired Fund shall be delivered by AVIF to the
Custodian on the Closing Date. No later than three (3) business days preceding
the Closing Date, AVIF shall instruct the Custodian to transfer such assets to
the account of the Acquiring Fund. The assets so delivered shall be duly
endorsed in proper form for transfer in such condition as to constitute a good
delivery thereof, in accordance with the custom of brokers, and shall be
accompanied by all necessary state stock transfer stamps, if any, or a check for
the appropriate purchase price thereof. Cash held by the Acquired Fund shall be
delivered on the Closing Date and shall be in the form of currency or wire
transfer in Federal funds, payable to the order of the account of the Acquiring
Fund at the Custodian.
(b) If, on the Closing Date, the Acquired Fund is unable to make delivery
in the manner contemplated by Section 2.4(a) of securities held by the Acquired
Fund for the reason that any of such securities purchased prior to the Closing
Date have not yet been delivered to the Acquired Fund or its broker, then AVIF,
on behalf of the Acquiring Fund, shall waive the delivery requirements of
Section 2.4(a) with respect to said undelivered securities if the Acquired Fund
has delivered to the Custodian by or on the Closing Date, and with respect to
said undelivered securities, executed copies of an agreement of assignment and
escrow agreement and due bills executed on behalf of said broker or brokers,
together with such other documents as may be required by AVIF or the Custodian,
including brokers' confirmation slips.
5
<PAGE> 38
SECTION 2.5 TERMINATION OF SERIES.
As soon as reasonably practicable after the Closing Date, the status of the
Acquired Fund as a designated series of shares of AVIF shall be terminated;
provided, however, that the termination of the status of the Acquired Fund as a
series of shares of AVIF shall not be required if the Reorganization of the
Acquired Fund shall not have been consummated.
SECTION 2.6 ISSUANCE OF ACQUIRING FUND SHARES.
At the Effective Time, the Acquired Fund Shareholders of record as of the close
of business on the business day immediately preceding the Closing Date holding
the Acquired Fund Shares shall be issued that number of full and fractional
shares of the Acquiring Fund having a net asset value (computed in accordance
with Section 2.2 hereof) equal to the net asset value of the Acquired Fund
Shares (computed in accordance with Section 2.2 hereof) held by the Acquired
Fund Shareholders as of the close of business on the business day immediately
preceding the Closing Date. All issued and outstanding shares of beneficial
interest in the Acquired Fund shall thereupon be canceled on the books of AVIF.
AVIF shall provide instructions to the transfer agent of AVIF with respect to
the Acquiring Fund Shares to be issued to Acquired Fund Shareholders. AVIF shall
have no obligation to inquire as to the validity, propriety or correctness of
any such instruction, but shall assume that such instruction is valid, proper
and correct. AVIF shall record on its books the ownership of Acquiring Fund
Shares by Acquired Fund Shareholders and shall forward a confirmation of such
ownership to the Acquired Fund Shareholders. No redemption or repurchase of such
shares credited to former Acquired Fund Shareholders in respect of the Acquired
Fund shares represented by unsurrendered shares certificates shall be permitted
until such certificates have been surrendered to AVIF for cancellation, or if
such certificates are lost or misplaced, until lost certificate affidavits have
been executed and delivered to AVIF.
SECTION 2.7 INVESTMENT SECURITIES.
On or prior to the Closing Date, the Acquired Fund shall deliver a list setting
forth the securities the Acquired Fund then owns together with the respective
Federal income tax bases thereof. The Acquired Fund shall provide on or before
the Closing Date, detailed tax basis accounting records for each security to be
transferred to the Acquiring Fund pursuant to this Agreement. Such records shall
be prepared in accordance with the requirements for specific identification tax
lot accounting and clearly reflect the bases used for determination of gain and
loss realized on the sale of any security transferred to the Acquiring Fund
hereunder. Such records shall be made available by the Acquired Fund prior to
the Closing Date for inspection by the Treasurer (or his designee) or the
auditors of the Acquiring Fund upon reasonable request.
SECTION 2.8 LIABILITIES.
The Acquired Fund shall use reasonable best efforts to discharge all of its
known liabilities, so far as may be possible, prior to the Closing Date.
6
<PAGE> 39
ARTICLE 3 REPRESENTATIONS AND WARRANTIES OF AVIF ON BEHALF
OF THE ACQUIRED FUND
AVIF, on behalf of the Acquired Fund, represents and warrants that:
SECTION 3.1 ORGANIZATION; AUTHORITY.
AVIF is duly organized, validly existing and in good standing under the Delaware
Business Trust Act, with all requisite trust power and authority to enter into
this Agreement and perform its obligations hereunder.
SECTION 3.2 REGISTRATION AND REGULATION OF AVIF.
AVIF is duly registered with the SEC as an investment company under the
Investment Company Act and all Acquired Fund Shares which have been or are being
offered for sale have been duly registered under the Securities Act and have
been duly registered, qualified or are exempt from registration or qualification
under the securities laws of each state or other jurisdiction in which such
shares have been or are being offered for sale, and no action has been taken by
AVIF to revoke or rescind any such registration or qualification. The Acquired
Fund is in compliance in all material respects with all applicable laws, rules
and regulations, including, without limitation, the Investment Company Act, the
Securities Act, the Exchange Act and all applicable state securities laws. The
Acquired Fund is in compliance in all material respects with the investment
policies and restrictions applicable to it set forth in the AVIF Registration
Statement currently in effect. The value of the net assets of the Acquired Fund
is determined using portfolio valuation methods that comply in all material
respects with the requirements of the Investment Company Act and the policies of
the Acquired Fund and all purchases and redemptions of Acquired Fund Shares have
been effected at the net asset value per share calculated in such manner.
SECTION 3.3 FINANCIAL STATEMENTS.
The books of account and related records of the Acquired Fund fairly reflect in
reasonable detail its assets, liabilities and transactions in accordance with
generally accepted accounting principles applied on a consistent basis. The
audited financial statements for the fiscal year ended December 31, 1999 of the
Acquired Fund previously delivered to AVIF (the "Acquired Fund Financial
Statements") present fairly in all material respects the financial position of
the Acquired Fund as of the dates indicated and the results of operations and
changes in net assets for the periods then ended in accordance with generally
accepted accounting principles applied on a consistent basis for the periods
then ended.
SECTION 3.4 NO MATERIAL ADVERSE CHANGES; CONTINGENT LIABILITIES.
Since December 31, 1999, no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
the Acquired Fund or the status of the Acquired Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance
7
<PAGE> 40
of any investments made by the Acquired Fund or occurring in the ordinary course
of business of the Acquired Fund or AVIF. There are no contingent liabilities of
the Acquired Fund not disclosed in the Acquired Fund Financial Statements which
are required to be disclosed in accordance with generally accepted accounting
principles.
SECTION 3.5 ACQUIRED FUND SHARES; LIABILITIES; BUSINESS OPERATIONS.
(a) The Acquired Fund Shares have been duly authorized and validly issued
and are fully paid and non-assessable.
(b) There is no plan or intention by the shareholders of the Acquired Fund
to redeem or otherwise dispose of a number of the Acquiring Fund Shares received
by them in connection with the Reorganization that would reduce the Acquired
Fund Shareholder's ownership of voting stock of the Acquiring Fund to a number
of shares having a value, as of the Closing Date, of less than fifty percent
(50%) of the value of all of the formerly outstanding shares of the Acquired
Fund as of the same date. For purposes of this representation, Acquired Fund
Shares exchanged for cash or other property or exchanged for cash in lieu of
fractional shares of the Acquiring Fund will be treated as outstanding Acquired
Fund Shares on the date of the Reorganization. Moreover, Acquired Fund Shares
and Acquiring Fund Shares held by Acquired Fund Shareholders and otherwise sold,
redeemed or disposed of prior or subsequent to the Reorganization will be
considered in making this representation, except for Acquired Fund Shares or
Acquiring Fund Shares which have been, or will be, redeemed by the Acquired Fund
or the Acquiring Fund in the ordinary course of its business as a series of an
open-end, management investment company under the Investment Company Act.
(c) At the time of its Reorganization, the Acquired Fund shall not have
outstanding any warrants, options, convertible securities or any other type of
right pursuant to which any Person could acquire Acquired Fund Shares, except
for the right of investors to acquire the Acquired Fund Shares at net asset
value in the normal course of its business as a series of an open-end management
investment company operating under the Investment Company Act.
(d) From the date it commenced operations and ending on the Closing Date,
the Acquired Fund will have conducted its historic business within the meaning
of Section 1.368-1(d)(2) of the Income Tax Regulations under the Code. In
anticipation of its Reorganization, the Acquired Fund will not dispose of assets
that, in the aggregate, will result in less than fifty percent (50%) of its
historic business assets (within the meaning of Section 1.368-1(d) of those
regulations) being transferred to the Acquiring Fund.
(e) AVIF does not have, and has not had during the six (6) months prior to
the date of this Agreement, any employees, and shall not hire any employees from
and after the date of this Agreement through the Closing Date.
8
<PAGE> 41
SECTION 3.6 ACCOUNTANTS.
Tait, Weller & Baker, which has reported upon the Acquired Fund Financial
Statements for the period ended December 31, 1999, are independent public
accountants as required by the Securities Act and the Exchange Act.
SECTION 3.7 BINDING OBLIGATION.
This Agreement has been duly authorized, executed and delivered by AVIF on
behalf of the Acquired Fund and, assuming this Agreement has been duly executed
and delivered by AVIF and approved by Acquired Fund Shareholders, constitutes
the legal, valid and binding obligation of AVIF in accordance with its terms
from and with respect to the revenues and assets of the Acquired Fund, except as
the enforceability hereof may be limited by bankruptcy, insolvency,
reorganization or similar laws relating to or affecting creditors' rights
generally, or by general equity principles (whether applied in a court of law or
a court of equity and including limitations on the availability of specific
performance or other equitable remedies).
SECTION 3.8 NO BREACHES OR DEFAULTS.
The execution and delivery of this Agreement by AVIF on behalf of the Acquired
Fund and performance by AVIF of its obligations hereunder has been duly
authorized by all necessary trust action on the part of AVIF, other than the
Acquired Fund Shareholders approval, and (i) do not, and on the Closing Date
will not, result in any violation of the Agreement and Declaration of Trust or
by-laws of AVIF and (ii) do not, and on the Closing Date will not, result in a
breach of any of the terms or provisions of, or constitute (with or without the
giving of notice or the lapse of time or both) a default under, or give rise to
a right of termination, cancellation or acceleration of any obligation or to the
loss of a material benefit under, or result in the creation or imposition of any
Lien upon any property or assets of the Acquired Fund (except for such breaches
or defaults or Liens that would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect) under (A) any indenture,
mortgage or loan agreement or any other material agreement or instrument to
which AVIF is a party or by which it may be bound and which relates to the
assets of the Acquired Fund or to which any property of the Acquired Fund may be
subject; (B) any Permit (as defined below); or (C) any existing applicable law,
rule, regulation, judgment, order or decree of any Governmental Authority having
jurisdiction over AVIF or any property of the Acquired Fund. AVIF is not under
the jurisdiction of a court in a proceeding under Title 11 of the United States
Code or similar case within the meaning of Section 368(a)(3)(A) of the Code.
SECTION 3.9 AUTHORIZATIONS OR CONSENTS.
Other than those which shall have been obtained or made on or prior to the
Closing Date and those that must be made after the Closing Date to comply with
Section 2.5 of this Agreement, no authorization or approval or other action by,
and no notice to or filing with, any Governmental Authority will be required to
be obtained or made by AVIF, on behalf of the Acquired Fund, in connection with
the due execution and delivery by AVIF of this Agreement and the consummation by
AVIF of the transactions contemplated hereby.
9
<PAGE> 42
SECTION 3.10 PERMITS.
AVIF has in full force and effect all approvals, consents, authorizations,
certificates, filings, franchises, licenses, notices, permits and rights of
Governmental Authorities (collectively, "Permits") necessary for it to conduct
its business as presently conducted as it relates to the Acquired Fund, and
there has occurred no default under any Permit, except for the absence of
Permits and for defaults under Permits the absence or default of which would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect. To the knowledge of AVIF there are no proceedings relating to
the suspension, revocation or modification of any Permit, except for such that
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect.
SECTION 3.11 NO ACTIONS, SUITS OR PROCEEDINGS.
(a) There is no pending action, litigation or proceeding, nor, to the
knowledge of AVIF, has any litigation been overtly threatened in writing or, if
probable of assertion, orally, against AVIF, or the Acquired Fund, before any
Governmental Authority which questions the validity or legality of this
Agreement or of the actions contemplated hereby or which seeks to prevent the
consummation of the transactions contemplated hereby, including the
Reorganization.
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AVIF, threatened in
writing or, if probable of assertion, orally, against AVIF affecting any
property, asset, interest or right of the Acquired Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquired Fund. There are not in existence on the date hereof
any plea agreements, judgments, injunctions, consents, decrees, exceptions or
orders that were entered by, filed with or issued by Governmental Authority
relating to AVIF's conduct of the business of the Acquired Fund affecting in any
significant respect the conduct of such business. AVIF is not, and has not been
to the knowledge of AVIF, the target of any investigation by the SEC or any
state securities administrator with respect to its conduct of the business of
the Acquired Fund.
SECTION 3.12 CONTRACTS.
Neither AVIF nor the Acquired Fund is in default under any contract, agreement,
commitment, arrangement, lease, insurance policy or other instrument to which it
is a party and which involves or affects the assets of the Acquired Fund, by
which the assets, business, or operations of the Acquired Fund may be bound or
affected, or under which it or the assets, business or operations of the
Acquired Fund receives benefits, and which default could reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect, and, to the
knowledge of AVIF there has not occurred any event that, with the lapse of time
or the giving of notice or both, would constitute such a default.
10
<PAGE> 43
SECTION 3.13 PROPERTIES AND ASSETS.
The Acquired Fund has good and marketable title to all properties and assets
reflected in the Acquired Fund Financial Statements as owned by it, free and
clear of all Liens, except as described in the Acquired Fund Financial
Statements.
SECTION 3.14 TAXES.
(a) The Acquired Fund has elected to be a regulated investment company
under Subchapter M of the Code. The Acquired Fund has qualified as such for each
taxable year since inception and that has ended prior to the Closing Date and
will have satisfied the requirements of Part I of Subchapter M of the Code to
maintain such qualification for the period beginning on the first day of its
current taxable year and ending on the Closing Date. The Acquired Fund has no
earnings and profits accumulated in any taxable year in which the provisions of
Subchapter M of the Code did not apply to it. In order to (i) insure continued
qualification of the Acquired Fund as a "regulated investment company" for tax
purposes and (ii) eliminate any tax liability of the Acquired Fund arising by
reason of undistributed investment company taxable income or net capital gain,
AVIF will declare on or prior to the Closing Date to the shareholders of the
Acquired Fund a dividend or dividends that, together with all previous such
dividends, shall have the effect of distributing (A) all of the Acquired Fund's
investment company taxable income (determined without regard to any deductions
for dividends paid) for the taxable year ended December 31, 1999 and for the
short taxable year beginning on January 1, 2000 and ending on the Closing Date
and (B) all of the Acquired Fund's net capital gain reorganized in its taxable
year ended December 31, 1999 and in such short taxable year (after reduction for
any capital loss carryover).
(b) The Acquired Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the Acquired Fund Financial Statements for all Taxes in respect of all
periods ended on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Acquired Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Returns of the
Acquired Fund are currently being or have been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
(c) There is no intercompany indebtedness existing between the Acquiring
Fund and the Acquired Fund that was issued, acquired, or will be settled at a
discount.
11
<PAGE> 44
(d) The fair market value of the assets of the Acquired Fund transferred to
the Acquiring Fund will equal or exceed the sum of the liabilities assumed by
the Acquiring Fund, plus the amount of liabilities, if any, to which the
transferred assets are subject.
(e) The Acquired Fund is not under the jurisdiction of a court in a United
States Code Title 11 or similar case within the meaning of Section 368(a)(3)(A)
of the Code.
(f) Immediately before the Reorganization, not more than 25 percent of the
value of the total assets of the Acquired Fund will be invested in the stock or
securities of any one issuer, and not more than 50 percent of the value of the
Acquired Fund will be invested in the stock or securities of five or fewer
issuers.
SECTION 3.15 BENEFIT AND EMPLOYMENT OBLIGATIONS.
On or prior to the Closing Date, the Acquired Fund will have no obligation to
provide any post-retirement or post-employment benefit to any Person, including
but not limited to under any Benefit Plan, and have no obligation to provide
unfunded deferred compensation or other unfunded or self-funded benefits to any
Person.
SECTION 3.16 BROKERS.
No broker, finder or similar intermediary has acted for or on behalf of AVIF in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection therewith based on any
agreement, arrangement or understanding with AVIF or any action taken by it.
SECTION 3.17 VOTING REQUIREMENTS.
The vote of a majority of the shares of the Acquired Fund cast at a meeting at
which a quorum is present (the "Required Shareholder Vote") is the only vote of
the holders of any class or series of shares of beneficial interest in the
Acquired Fund necessary to approve this Agreement and the Reorganization of the
Acquired Fund contemplated by this Agreement.
SECTION 3.18 STATE TAKEOVER STATUTES.
No state takeover statute or similar statute or regulation applies or purports
to apply to the Reorganization, this Agreement or any of the transactions
contemplated by this Agreement.
SECTION 3.19 BOOKS AND RECORDS.
The books and records of AVIF relating to the Acquired Fund, reflecting, among
other things, the purchase and sale of Acquired Fund Shares, the number of
issued and outstanding shares owned by the Acquired Fund Shareholders and the
state or other jurisdiction in which such shares were offered and sold, are
complete and accurate in all material respects.
12
<PAGE> 45
SECTION 3.20 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
The current prospectus and statement of additional information for the Acquired
Fund as of the date on which it was issued did not contain, and as supplemented
by any supplement thereto dated prior to or on the Closing Date do not contain,
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
SECTION 3.21 NO DISTRIBUTION.
The Acquiring Fund Shares are not being acquired for the purpose of any
distribution thereof, other than in accordance with the terms of this Agreement.
SECTION 3.22 LIABILITIES OF THE ACQUIRED FUND.
The liabilities of the Acquired Fund that are to be assumed by the Acquiring
Fund in connection with the Reorganization, or which the assets of the Acquired
Fund to be transferred in the Reorganization are subject, were incurred by the
Acquired Fund in the ordinary course of its business. The fair market value of
the assets of the Acquired Fund to be transferred to the Acquiring Fund in the
Reorganization will equal or exceed the sum of the liabilities to be assumed by
the Acquiring Fund plus the amount of liabilities, if any, to which such
transferred assets will be subject.
SECTION 3.23 VALUE OF SHARES.
The fair market value of the Acquiring Fund Shares received by Acquired Fund
Shareholders in the Reorganization will be approximately equal to the fair
market value of the Acquired Fund Shares constructively surrendered in exchange
therefor.
SECTION 3.24 SHAREHOLDER EXPENSES.
The Acquired Fund Shareholders will pay their own expenses, if any, incurred in
connection with the Reorganization.
SECTION 3.25 INTERCOMPANY INDEBTEDNESS.
There is no intercompany indebtedness between the Acquired Fund and the
Acquiring Fund that was issued or acquired, or will be settled, at a discount.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF AVIF
AVIF, on behalf of the Acquiring Fund, represents and warrants as follows:
13
<PAGE> 46
SECTION 4.1 ORGANIZATION; AUTHORITY.
AVIF is duly organized, validly existing and in good standing under the Delaware
Business Trust Act with all requisite trust power and authority to enter into
this Agreement and perform its obligations hereunder.
SECTION 4.2 REGISTRATION AND REGULATION OF AVIF.
AVIF is duly registered with the SEC as an investment company under the
Investment Company Act. The Acquiring Fund is in compliance in all material
respects with all applicable laws, rules and regulations, including, without
limitation, the Investment Company Act, the Securities Act, the Exchange Act and
all applicable state securities laws. The Acquiring Fund is in compliance in all
material respects with the applicable investment policies and restrictions set
forth in the AVIF Registration Statement. The value of the net assets of the
Acquiring Fund is determined using portfolio valuation methods that comply in
all material respects with the requirements of the Investment Company Act and
the policies of the Acquiring Fund and all purchases and redemptions of
Acquiring Fund Shares have been effected at the net asset value per share
calculated in such manner.
SECTION 4.3 FINANCIAL STATEMENTS.
The books of account and related records of the Acquiring Fund fairly reflect in
reasonable detail its assets, liabilities and transactions in accordance with
generally accepted accounting principles applied on a consistent basis. The
audited financial statements for the fiscal year ended December 31, 1999 of the
Acquiring Fund (the "Acquiring Fund Financial Statements") present fairly in all
material respects the financial position of the Acquiring Fund as at the dates
indicated and the results of operations and changes in net assets for the
periods then ended in accordance with generally accepted accounting principles
applied on a consistent basis for the periods then ended.
SECTION 4.4 NO MATERIAL ADVERSE CHANGES; CONTINGENT LIABILITIES.
Since December 31, 1999, no material adverse change has occurred in the
financial condition, results of operations, business, assets or liabilities of
the Acquiring Fund or the status of the Acquiring Fund as a regulated investment
company under the Code, other than changes resulting from any change in general
conditions in the financial or securities markets or the performance of any
investments made by the Acquiring Fund or occurring in the ordinary course of
business of the Acquiring Fund or AVIF. There are no contingent liabilities of
the Acquiring Fund not disclosed in the Acquiring Fund Financial Statements
which are required to be disclosed in accordance with generally accepted
accounting principles.
SECTION 4.5 REGISTRATION OF ACQUIRING FUND SHARES.
(a) The shares of beneficial interest of AVIF are divided into 17
portfolios, including the Acquiring Fund. Under its Agreement and Declaration of
Trust, AVIF is authorized to issue an unlimited number of shares of the
Acquiring Fund.
14
<PAGE> 47
(b) The Acquiring Fund Shares to be issued pursuant to Section 2.6 shall on
the Closing Date be duly registered under the Securities Act by a Registration
Statement on Form N-14 of AVIF then in effect.
(c) The Acquiring Fund Shares to be issued pursuant to Section 2.6 are duly
authorized and on the Closing Date will be validly issued and fully paid and
non-assessable and will conform to the description thereof contained in the
Registration Statement on Form N-14 then in effect. At the time of its
Reorganization, the Acquiring Fund shall not have outstanding any warrants,
options, convertible securities or any other type of right pursuant to which any
Person could acquire Acquiring Fund Shares, except for the right of investors to
acquire Acquiring Fund Shares at net asset value in the normal course of its
business as a series of an open-end management investment company operating
under the Investment Company Act.
(d) The combined proxy statement/prospectus (the "Combined Proxy
Statement/Prospectus") which forms a part of AVIF's Registration Statement on
Form N-14 shall be furnished to the Acquired Fund Shareholders entitled to vote
at the Acquired Fund Shareholders Meeting. The Combined Proxy
Statement/Prospectus and related Statement of Additional Information of the
Acquiring Fund, when they become effective, shall conform to the applicable
requirements of the Securities Act and the Investment Company Act and shall not
include any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the statements therein,
in light of the circumstances under which they were made, not materially
misleading.
(e) The shares of the Acquiring Fund which have been or are being offered
for sale (other than Acquiring Fund Shares to be issued in connection with the
Reorganization) have been duly registered under the Securities Act by the AVIF
Registration Statement and have been duly registered, qualified or are exempt
from registration or qualification under the securities laws of each state or
other jurisdiction in which such shares have been or are being offered for sale,
and no action has been taken by AVIF to revoke or rescind any such registration
or qualification.
SECTION 4.6 ACCOUNTANTS.
Tait, Weller & Baker, which has reported upon the Acquiring Fund Financial
Statements for the period ended December 31, 1999, are independent public
accountants as required by the Securities Act and the Exchange Act.
SECTION 4.7 BINDING OBLIGATION.
This Agreement has been duly authorized, executed and delivered by AVIF on
behalf of the Acquiring Fund and, assuming this Agreement has been duly executed
and delivered by AVIF, constitutes the legal, valid and binding obligation of
AVIF, in accordance with its terms from and with respect to the revenues and
assets of the Acquiring Fund, except as the enforceability hereof may be limited
by bankruptcy, insolvency, reorganization or similar laws relating to or
affecting creditors' rights generally, or by general equity principles (whether
applied in a court or law or a court of equity and including limitations on the
availability of specific performance or other equitable remedies).
15
<PAGE> 48
SECTION 4.8 NO BREACHES OR DEFAULTS.
The execution and delivery of this Agreement by AVIF on behalf of the Acquiring
Fund and performance by AVIF of its obligations hereunder have been duly
authorized by all necessary trust action on the part of AVIF and (i) do not, and
on the Closing Date will not, result in any violation of the Agreement and
Declaration of Trust or by-laws of AVIF and (ii) do not, and on the Closing Date
will not, result in a breach of any of the terms or provisions of, or constitute
(with or without the giving of notice or the lapse of time or both) a default
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to the loss of a material benefit under, or result in the
creation or imposition of any Lien upon any property or assets of the Acquiring
Fund (except for such breaches or defaults or Liens that would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect)
under (A) any indenture, mortgage or loan agreement or any other material
agreement or instrument to which AVIF is a party or by which it may be bound and
which relates to the assets of the Acquiring Fund or to which any properties of
the Acquiring Fund may be subject; (B) any Permit; or (C) any existing
applicable law, rule, regulation, judgment, order or decree of any Governmental
Authority having jurisdiction over AVIF or any property of the Acquiring Fund.
AVIF is not under the jurisdiction of a court in a proceeding under Title 11 of
the United States Code or similar case within the meaning of Section
368(a)(3)(A) of the Code.
SECTION 4.9 AUTHORIZATIONS OR CONSENTS.
Other than those which shall have been obtained or made on or prior to the
Closing Date, no authorization or approval or other action by, and no notice to,
or filing with, any Governmental Authority will be required to be obtained or
made by AVIF in connection with the due execution and delivery by AVIF of this
Agreement and the consummation by AVIF of the transactions contemplated hereby.
SECTION 4.10 PERMITS.
AVIF has in full force and effect all Permits necessary for it to conduct its
business as presently conducted as it relates to the Acquiring Fund, and there
has occurred no default under any Permit, except for the absence of Permits and
for defaults under Permits the absence or default of which would not reasonably
be expected to have, individually or in the aggregate, a Material Adverse
Effect. To the knowledge of AVIF there are no proceedings relating to the
suspension, revocation or modification of any Permit, except for such that would
not reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect.
SECTION 4.11 NO ACTIONS, SUITS OR PROCEEDINGS.
(a) There is no pending action, suit or proceeding, nor, to the knowledge
of AVIF, has any litigation been overtly threatened in writing or, if probable
of assertion, orally, against AVIF or the Acquiring Fund before any Governmental
Authority which questions the validity or legality of this Agreement or of the
transactions contemplated hereby, or which seeks to prevent the consummation of
the transactions contemplated hereby, including the Reorganization.
16
<PAGE> 49
(b) There are no judicial, administrative or arbitration actions, suits, or
proceedings instituted or pending or, to the knowledge of AVIF, threatened in
writing or, if probable of assertion, orally, against AVIF affecting any
property, asset, interest or right of the Acquiring Fund, that could reasonably
be expected to have, individually or in the aggregate, a Material Adverse Effect
with respect to the Acquiring Fund. There are not in existence on the date
hereof any plea agreements, judgments, injunctions, consents, decrees,
exceptions or orders that were entered by, filed with or issued by Governmental
Authority relating to AVIF's conduct of the business of the Acquiring Fund
affecting in any significant respect the conduct of such business. AVIF is not,
and has not been, to the knowledge of AVIF, the target of any investigation by
the SEC or any state securities administrator with respect to its conduct of the
business of the Acquiring Fund.
SECTION 4.12 TAXES.
(a) The Acquiring Fund has elected to be treated as a regulated investment
company under Subchapter M of the Code. The Acquiring Fund has qualified as such
for each taxable year since inception that has ended prior to the Closing Date
and will satisfy the requirements of Part I of Subchapter M of the Code to
maintain such qualification for its current taxable year. The Acquiring Fund has
no earnings or profits accumulated in any taxable year in which the provisions
of Subchapter M of the Code did not apply to it.
(b) The Acquiring Fund has timely filed all Returns required to be filed by
it and all Taxes with respect thereto have been paid, except where the failure
so to file or so to pay, would not reasonably be expected, individually or in
the aggregate, to have a Material Adverse Effect. Adequate provision has been
made in the Acquiring Fund Financial Statements for all Taxes in respect of all
periods ending on or before the date of such financial statements, except where
the failure to make such provisions would not reasonably be expected,
individually or in the aggregate, to have a Material Adverse Effect. No
deficiencies for any Taxes have been proposed, assessed or asserted in writing
by any taxing authority against the Acquiring Fund, and no deficiency has been
proposed, assessed or asserted, in writing, where such deficiency would
reasonably be expected, individually or in the aggregate, to have a Material
Adverse Effect. No waivers of the time to assess any such Taxes are outstanding
nor are any written requests for such waivers pending and no Return of the
Acquiring Fund is currently being or has been audited with respect to income
taxes or other Taxes by any Federal, state, local or foreign Tax authority.
SECTION 4.13 BROKERS.
No broker, finder or similar intermediary has acted for or on behalf of AVIF in
connection with this Agreement or the transactions contemplated hereby, and no
broker, finder, agent or similar intermediary is entitled to any broker's,
finder's or similar fee or other commission in connection
17
<PAGE> 50
therewith based on any agreement, arrangement or understanding with AVIF or any
action taken by it.
SECTION 4.14 REPRESENTATIONS CONCERNING THE REORGANIZATION.
(a) The Acquiring Fund does not own directly or indirectly, nor has it
owned at any time during the five-year period ending on the Closing Date, any
shares of the Acquired Fund.
(b) AVIF has no plan or intention to reacquire any of the Acquiring Fund
Shares issued in the Reorganization, except to the extent that the Acquiring
Fund is required by the Investment Company Act, to redeem any of its shares
presented for redemption at net asset value in the ordinary course of its
business as an open-end, management investment company.
(c) The Acquiring Fund has no plan or intention to sell or otherwise
dispose of any of the assets of the Acquired Fund acquired in the
Reorganization, other than in the ordinary course of its business and to the
extent necessary to maintain its status as a "regulated investment company"
under the Code.
(d) Following the Reorganization, the Acquiring Fund will continue the
"historic business" (within the meaning of Section 1.368-1(d) of the Income Tax
Regulations under the Code) of the Acquired Fund from which the Acquiring Fund
acquired assets in the Reorganization or use a significant portion of the
Acquired Fund's historic business assets in a business.
(e) Immediately before the Reorganization, not more than 25 percent of the
value of the total assets of the Acquiring Fund will be invested in the stock or
securities of any one issuer, and not more than 50 percent of the value of the
total assets of the Acquiring Fund will be invested in the stock or securities
of five or fewer issuers.
SECTION 4.15 PROSPECTUS AND STATEMENT OF ADDITIONAL INFORMATION.
The current prospectus and statement of additional information for the Acquiring
Fund as of the date on which it was issued did not contain, and as supplemented
by any supplement thereto dated prior to or on the Closing Date do not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein not
misleading.
SECTION 4.16 VALUE OF SHARES.
The fair market value of the Acquiring Fund Shares received by Acquired Fund
Shareholders in the Reorganization will be approximately equal to the fair
market value of the Acquired Fund Shares constructively surrendered in exchange
therefor.
SECTION 4.17 INTERCOMPANY INDEBTEDNESS; CONSIDERATION.
There is no intercompany indebtedness between the Acquired Fund and the
Acquiring Fund that was issued or acquired, or will be settled, at a discount.
No consideration other than the
18
<PAGE> 51
Acquiring Fund Shares (and the Acquiring Fund's assumption of the Acquired
Fund's liabilities, including for this purpose all liabilities to which the
assets of the Acquired Fund are subject) will be issued in exchange for the
assets of the Acquired Fund acquired by the Acquiring Fund in connection with
the Reorganization. The fair market value of the assets of the Acquired Fund
transferred to the Acquiring Fund in the Reorganization will equal or exceed the
sum of the liabilities assumed by the Acquiring Fund, plus the amount of
liabilities, if any, to which such transferred assets are subject.
ARTICLE 5 COVENANTS
SECTION 5.1 CONDUCT OF BUSINESS.
(a) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), AVIF shall conduct the business of the Acquired Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business and customer
relations necessary to conduct the business of the Acquired Fund in the ordinary
course in all material respects.
(b) From the date of this Agreement up to and including the Closing Date
(or, if earlier, the date upon which this Agreement is terminated pursuant to
Article 7), AVIF shall conduct the business of the Acquiring Fund only in the
ordinary course and substantially in accordance with past practices, and shall
use its reasonable best efforts to preserve intact its business organization and
material assets and maintain the rights, franchises and business relations
necessary to conduct the business operations of the Acquiring Fund in the
ordinary course in all material respects.
SECTION 5.2 EXPENSES.
The Acquired Fund and the Acquiring Fund shall each bear the expenses it incurs
in connection with this Agreement and the Reorganization and other transactions
contemplated hereby.
SECTION 5.3 FURTHER ASSURANCES.
Each of the parties hereto shall execute such documents and other papers and
perform such further acts as may be reasonably required to carry out the
provisions hereof and the transactions contemplated hereby. Each such party
shall, on or prior to the Closing Date, use its reasonable best efforts to
fulfill or obtain the fulfillment of the conditions precedent to the
consummation of the Reorganization, including the execution and delivery of any
documents, certificates, instruments or other papers that are reasonably
required for the consummation of the Reorganization.
19
<PAGE> 52
SECTION 5.4 NOTICE OF EVENTS.
AVIF shall give prompt notice to the Acquired Fund and the Acquiring Fund of (a)
the occurrence or nonoccurrence of any event which to the knowledge of AVIF the
occurrence or non-occurrence of which would be likely to result in any of the
conditions specified in (i) in the case of the Acquired Fund, Sections 6.1 and
6.2 or (ii) in the case of the Acquiring Fund, Sections 6.2 and 6.3, not being
satisfied so as to permit the consummation of the Reorganization and (b) any
material failure on its part to comply with or satisfy any covenant, condition
or agreement to be complied with or satisfied by it hereunder; provided,
however, that the delivery of any notice pursuant to this Section 5.5 shall not
limit or otherwise affect the remedies available hereunder to any party.
SECTION 5.6 ACCESS TO INFORMATION.
(a) The Acquired Fund will, during regular business hours and on reasonable
prior notice, allow the Acquiring Fund and its authorized representatives
reasonable access to the books and records of the Acquired Fund pertaining to
the assets of the Acquired Fund and to officers of the Acquired Fund
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AVIF.
(b) The Acquiring Fund will, during regular business hours and on
reasonable prior notice, allow the Acquired Fund and its authorized
representatives reasonable access to the books and records of the Acquiring Fund
pertaining to the assets of the Acquiring Fund and to officers of AVIF
knowledgeable thereof; provided, however, that any such access shall not
significantly interfere with the business or operations of AVIF.
SECTION 5.7 CONSENTS, APPROVALS AND FILINGS.
AVIF shall make all necessary filings, as soon as reasonably practicable,
including, without limitation, those required under the Securities Act, the
Exchange Act, the Investment Company Act and the Advisers Act, in order to
facilitate prompt consummation of the Reorganization and the other transactions
contemplated by this Agreement. In addition, AVIF shall use its reasonable best
efforts (i) to comply as promptly as reasonably practicable with all
requirements of Governmental Authorities applicable to the Reorganization and
the other transactions contemplated herein and (ii) to obtain as promptly as
reasonably practicable all necessary permits, orders or other consents of
Governmental Authorities and consents of all third parties necessary for the
consummation of the Reorganization and the other transactions contemplated
herein. AVIF shall use reasonable efforts to provide such information and
communications to Governmental Authorities as such Governmental Authorities may
request.
SECTION 5.8 SUBMISSION OF AGREEMENT TO SHAREHOLDERS.
AVIF shall take all action necessary in accordance with applicable law and its
Agreement and Declaration of Trust and by-laws to convene the Acquired Fund
Shareholders Meeting. AVIF shall, through its Board of Trustees, recommend to
the Acquired Fund Shareholders approval of this Agreement and the transactions
contemplated by this Agreement. AVIF shall use its
20
<PAGE> 53
reasonable best efforts to hold the Acquired Fund Shareholders Meeting as soon
as practicable after the date hereof.
ARTICLE 6 CONDITIONS PRECEDENT TO THE REORGANIZATION
SECTION 6.1 CONDITIONS PRECEDENT OF AVIF (ON BEHALF OF THE ACQUIRING FUND.)
The obligation of AVIF (on behalf of the Acquiring Fund) to consummate the
Reorganization is subject to the satisfaction, at or prior to the Closing Date,
of all of the following conditions, any one or more of which may be waived in
writing by AVIF (on behalf of the Acquiring Fund).
(a) The representations and warranties of AVIF on behalf of the Acquired
Fund participating in the Reorganization set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
(b) AVIF shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquired Fund participating in the
Reorganization set forth herein on its part to be performed or satisfied at or
prior to the Closing Date.
(c) AVIF (on behalf of the Acquiring Fund) shall have received the signed
opinion of Freedman, Levy, Kroll & Simonds, as to the matters set forth in
Schedule 6.1(c).
(d) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
SECTION 6.2 MUTUAL CONDITIONS.
The obligations of AVIF (on behalf of the Acquired Fund) and AVIF (on behalf of
the Acquiring Fund) to consummate the Reorganization are subject to the
satisfaction, at or prior to the Closing Date, of all of the following further
conditions, any one or more may be waived in writing by AVIF, but only if and to
the extent that such waiver is made on behalf of both the Acquired Fund and the
Acquiring Fund.
(a) All filings required to be made prior to the Closing Date with, and all
consents, approvals, permits and authorizations required to be obtained on or
prior to the Closing Date from Governmental Authorities in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein by AVIF shall have been made or obtained, as
the case may be; provided, however, that such consents, approvals, permits and
authorizations may be subject to conditions that would not reasonably be
expected, individually or in the aggregate, to have a Material Adverse Effect.
(b) This Agreement, the Reorganization of the Acquired Fund and related
matters shall have been approved and adopted at the Acquired Fund Shareholders
Meeting by the shareholders of the Acquired Fund on the record date by the
Required Shareholder Vote.
21
<PAGE> 54
(c) The assets of the Acquired Fund to be acquired by the Acquiring Fund
shall constitute at least 90% of the fair market value of the net assets and at
least 70% of the fair market value of the gross assets held by the Acquired Fund
immediately prior to the Reorganization. For purposes of this Section 6.2(c),
assets used by the Acquired Fund to pay the expenses it incurs in connection
with this Agreement and the Reorganization and to effect all shareholder
redemptions and distributions (other than regular, normal dividends and regular,
normal redemptions pursuant to the Investment Company Act, and not in excess of
the requirements of Section 852 of the Code, occurring in the ordinary course of
the Acquired Fund's business as a series of an open-end management investment
company) after the date of this Agreement shall be included as assets of the
Acquired Fund held immediately prior to the Reorganization.
(d) No temporary restraining order, preliminary or permanent injunction or
other order issued by any Governmental Authority preventing the consummation of
the Reorganization on the Closing Date shall be in effect; provided, however,
that the party or parties invoking this condition shall use reasonable efforts
to have any such order or injunction vacated.
(e) The Registration Statement on Form N-14 filed by AVIF with respect to
the Acquiring Fund Shares to be issued to Acquired Fund Shareholders in
connection with the Reorganization shall have become effective under the
Securities Act and no stop order suspending the effectiveness thereof shall have
been issued and, to the best knowledge of the parties hereto, no investigation
or proceeding for that purpose shall have been instituted or be pending,
threatened or contemplated under the Securities Act.
(f) AVIF shall have received on or before the Closing Date an opinion of
Freedman, Levy, Kroll & Simonds in form and substance reasonably acceptable to
AVIF as to the matters set forth on Schedule 6.2(f).
(g) The dividend or dividends described in the last sentence of Section
3.14(a) shall have been declared.
(h) The Acquiring Fund and the Acquired Fund will have satisfied the
investment diversification requirements of Section 817(h) of the Code for all
taxable quarters since its inception, including the last short taxable period of
the Acquired Fund ending on the Closing Date and taxable quarter of the
Acquiring Fund that includes the Closing Date.
SECTION 6.3 CONDITIONS PRECEDENT OF AVIF (ON BEHALF OF THE ACQUIRED FUND).
The obligation of AVIF (on behalf of the Acquired Fund) to consummate the
Reorganization is subject to the satisfaction, at or prior to the Closing Date,
of all of the following conditions, any one or more of which may be waived in
writing by AVIF (on behalf of the Acquired Fund).
(a) The representations and warranties of AVIF on behalf of the Acquiring
Fund participating in the Reorganization set forth in this Agreement shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing Date with the same effect as though all such representations
and warranties had been made as of the Closing Date.
22
<PAGE> 55
(b) AVIF shall have complied with and satisfied in all material respects
all agreements and conditions relating to the Acquiring Fund participating in
the Reorganization set forth herein on its part to be performed or satisfied at
or prior to the Closing Date.
(c) AVIF (on behalf of the Acquired Fund) shall have received the signed
opinion of Freedman, Levy, Kroll & Simonds, as to the matters set forth in
Schedule 6.3(c).
ARTICLE 7 TERMINATION OF AGREEMENT
SECTION 7.1 TERMINATION.
(a) This Agreement may be terminated in whole or with respect to the
Reorganization described herein on or prior to the Closing Date at the election
of AVIF if:
(i) the applicable Closing Date shall not be on or before the date set
out under "Closing Date" in Section 1.1, or such later date as the parties
hereto may agree upon, unless the failure to consummate the Reorganization
is the result of a willful and material breach of this Agreement by a
party;
(ii) upon a vote at the Acquired Fund Shareholders Meeting or any
adjournment thereof, the Required Shareholder Vote shall not have been
obtained as contemplated by Section 5.8; or
(iii) any Governmental Authority shall have issued an order, decree or
ruling or taken any other action permanently enjoining, restraining or
otherwise prohibiting the Reorganization and such order, decree, ruling or
other action shall have become final and nonappealable.
(b) The termination of this Agreement shall be effectuated by the delivery
by AVIF to the Acquired Fund, the Acquiring Fund, and AIM a written notice of
such termination.
SECTION 7.2 SURVIVAL AFTER TERMINATION.
If this Agreement is terminated in accordance with Section 7.1 hereof and the
Reorganization of the Acquired Fund is not consummated, this Agreement shall
become void and of no further force and effect with respect to such
Reorganization and the Acquired Fund, except for the provisions of Section 5.3.
ARTICLE 8 MISCELLANEOUS
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The representations, warranties and covenants in this Agreement or in any
certificate or instrument delivered pursuant to this Agreement shall survive the
consummation of the transactions contemplated hereunder for a period of one (1)
year following the Closing Date.
23
<PAGE> 56
SECTION 8.2 GOVERNING LAW.
This Agreement shall be construed and interpreted according to the laws of the
State of Delaware applicable to contracts made and to be performed wholly within
such state.
SECTION 8.3 BINDING EFFECT, PERSONS BENEFITING, NO ASSIGNMENT.
This Agreement shall inure to the benefit of and be binding upon the parties
hereto and the respective successors and assigns of the parties and such
Persons. Nothing in this Agreement is intended or shall be construed to confer
upon any entity or Person other than the parties hereto and their respective
successors and permitted assigns any right, remedy or claim under or by reason
of this Agreement or any part hereof. Without the prior written consent of the
parties hereto, this Agreement may not be assigned by any of the parties hereto.
SECTION 8.4 OBLIGATIONS OF AVIF (WITH RESPECT TO THE ACQUIRING FUND AND THE
ACQUIRED FUND).
(a) AVIF (on behalf of the Acquired Fund) hereby acknowledges and
agrees that the Acquiring Fund is a separate investment portfolio of AVIF, that
AVIF is executing this Agreement on behalf of the Acquiring Fund, and that any
amounts payable by AVIF (on behalf of the Acquiring Fund) under or in connection
with this Agreement shall be payable solely from the revenues and assets of the
Acquiring Fund. AVIF (on behalf of the Acquired Fund) further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of
AVIF (on behalf of the Acquired Fund) in his or her capacity as an officer of
AVIF intending to bind AVIF as provided herein, and that no officer, director or
shareholder of AVIF shall be personally liable for the liabilities or
obligations of AVIF incurred hereunder.
(b) AVIF (on behalf of the Acquiring Fund) hereby acknowledges and agrees
that the Acquired Fund is a separate investment portfolio of AVIF, that AVIF is
executing this Agreement on behalf of the Acquired Fund and that any amounts
payable by AVIF (on behalf of the Acquired Fund) under or in connection with
this Agreement shall be payable solely from the revenues and assets of the
Acquired Fund. AVIF (on behalf of the Acquiring Fund) further acknowledges and
agrees that this Agreement has been executed by a duly authorized officer of
AVIF (with respect to the Acquired Fund) in his or her capacity as an officer of
AVIF intending to bind AVIF as provided herein, and that no officer, trustee or
shareholder of AVIF shall be personally liable for the liabilities of AVIF
incurred hereunder.
SECTION 8.5 AMENDMENTS.
This Agreement may not be amended, altered or modified except by a written
instrument executed by AVIF, acting on behalf of the Acquired Fund on behalf of
the Acquiring Fund.
24
<PAGE> 57
SECTION 8.6 ENFORCEMENT.
The parties agree irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any court of the United States or any state having jurisdiction, in
addition to any other remedy to which they are entitled at law or in equity.
SECTION 8.7 INTERPRETATION.
When a reference is made in this Agreement to a Section or Schedule, such
reference shall be to a Section of, or a Schedule to, this Agreement unless
otherwise indicated. The table of contents and headings contained in this
Agreement are for reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to be
followed by the words "without limitation." Each representation and warranty
contained in Article 3 or 4 that relates to a general category of a subject
matter shall be deemed superseded by a specific representation and warranty
relating to a subcategory thereof to the extent of such specific representation
or warranty.
SECTION 8.8 COUNTERPARTS.
This Agreement may be executed in counterparts, each of which shall be deemed an
original and each of which shall constitute one and the same instrument.
SECTION 8.9 ENTIRE AGREEMENT; SCHEDULES.
This Agreement, including the Schedules, certificates and lists referred to
herein, and any documents executed by the parties simultaneously herewith or
pursuant thereto, constitute the entire understanding and agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and understandings, written or oral, between the parties
with respect to such subject matter.
SECTION 8.10 NOTICES.
All notices, requests, demands and other communications hereunder shall be in
writing and shall be deemed to have been duly given when delivered by hand or by
overnight courier, two days after being sent by registered mail, return receipt
requested, or when sent by telecopier (with receipt confirmed), provided, in the
case of a telecopied notice, a copy is also sent by registered mail, return
receipt requested, or by courier, addressed as follows (or to such other address
as a party may designate by notice to the other):
25
<PAGE> 58
(a) If to AVIF:
AIM Variable Insurance Funds, 11 Greenway Plaza, Suite 100 Houston, Texas
77046-1173 Attn: Nancy L. Martin, Esq. Fax: (713) 993-9185.
with a copy to:
Freedman, Levy, Kroll & Simonds, 1050 Connecticut Avenue, N.W., Suite 825,
Washington, D.C. 20036 Attn: Gary O. Cohen, Esq. Fax: (202) 457-5151.
(b) If to AIM:
A I M Advisors, Inc., 11 Greenway Plaza, Suite 100 Houston, Texas
77046-1173 Attn: Nancy L. Martin, Esq. Fax: (713) 993-9185.
SECTION 8.11 REPRESENTATIONS BY AIM.
In its capacity as investment adviser to AVIF (with respect to the Acquired
Fund), AIM represents to AVIF that to the best of its knowledge the
representations and warranties of AVIF (with respect to the Acquired Fund)
contained in this Agreement are true and correct as of the date of this
Agreement. In its capacity as investment adviser to AVIF (with respect to the
Acquiring Fund), AIM represents to AVIF that to the best of its knowledge the
representations and warranties of AVIF (with respect to the Acquiring Fund)
contained in this Agreement are true and correct as of the date of this
Agreement. For purposes of this Section 8.11, the best knowledge standard shall
be deemed to mean that the officers of AIM who have substantive responsibility
for the provision of investment advisory services to AVIF (with respect to the
Acquired Fund and the Acquiring Fund) do not have actual knowledge to the
contrary after due inquiry.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
AIM VARIABLE INSURANCE FUNDS
acting on behalf of AIM V.I. Global
Growth and Income Fund
ATTEST
By: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
AIM VARIABLE INSURANCE FUNDS
acting on behalf of AIM V.I. Growth
and Income Fund
ATTEST
By: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
A I M Advisors, Inc.
ATTEST
By: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM
--------------------------- ----------------------------
Name: Nancy L. Martin Name: Robert H. Graham
Title: Assistant Secretary Title: President
26
<PAGE> 59
SCHEDULE 6.1(c)
OPINION OF COUNSEL TO AVIF (on behalf of the Acquired Fund)
1. AVIF is duly organized and validly existing as a business trust under the
Delaware Business Trust Act.
2. AVIF is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AVIF have been
duly authorized and approved by all requisite trust action on the part of AVIF.
The Agreement has been duly executed and delivered by AVIF and constitutes the
valid and binding obligation of AVIF.
4. The Acquired Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AVIF is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is the
current primary contact for AVIF or who has devoted substantive attention on
behalf of AVIF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquired Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
27
<PAGE> 60
SCHEDULE 6.2(f)
TAX OPINION
(1) The transfer of the assets of the Acquired Fund to the Acquiring Fund
in exchange for voting stock of the Acquiring Fund distributed directly to the
shareholders of the Acquired Fund, as provided in the Agreement, will constitute
a "reorganization" within the meaning of Section 368(a)(1) of the Code, and the
Acquired Fund and the Acquiring Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code.
(2) In accordance with Section 361(a) and Section 361(c)(1) of the Code, no
gain or loss will be recognized by the Acquired Fund on the transfer of its
assets to the Acquiring Fund solely in exchange for voting stock of the
Acquiring Fund and the Acquiring Fund's assumption of the Acquired Fund's
liabilities, or on the distribution of the voting stock to the Acquired Fund's
shareholders.
(3) In accordance with Section 1032 of the Code, no gain or loss will be
recognized by the Acquiring Fund on the receipt of assets of the Acquired Fund
in exchange for Acquiring Fund voting stock and the Acquiring Fund's assumption
of the Acquired Fund's liabilities.
(4) In accordance with Section 354(a)(1) of the Code, no gain or loss will
be recognized by shareholders of the Acquired Fund on the receipt of voting
stock of the Acquiring Fund in constructive exchange for their Acquired Fund
shares.
(5) In accordance with Section 362(b) of the Code, the basis to the
Acquiring Fund of the assets of Acquired Fund transferred to it will be the same
as the basis of those assets in the hands of the Acquired Fund immediately
before the Reorganization.
(6) In accordance with Section 358(a) of the Code, the Acquired Fund
shareholders' basis for voting stock of the Acquiring Fund received by the
Acquired Fund shareholder will be the same as the Acquired Fund shareholders'
basis for Acquired Fund shares constructively exchanged therefor.
(7) In accordance with Section 1223(1) of the Code, the Acquired Fund
shareholders' holding period for voting stock of the Acquiring Fund will include
the Acquired Fund shareholders' holding period for the Acquired Fund shares
constructively exchanged therefor, provided that the Acquired Fund shareholder
held the Acquired Fund shares as a capital asset.
(8) In accordance with Section 1223(2) of the Code, the holding period for
assets of the Acquired Fund transferred to the Acquiring Fund in the
Reorganization will include the holding period for those assets in the hands of
the Acquired Fund.
(9) The Acquired Fund and the Acquiring Fund will each be a RIC under
Subchapter M and will each comply with the investment diversification
requirements of Section 817(h) of the Code. Accordingly, the Reorganization will
not produce adverse Federal income tax consequences by reason of income or gain
for any Contract Owner.
28
<PAGE> 61
SCHEDULE 6.3(c)
OPINION OF COUNSEL TO AVIF (on behalf of the Acquiring Fund)
1. AVIF is duly organized and validly existing as a business trust under the
Delaware Business Trust Act.
2. AVIF is an open-end, management investment company registered under the
Investment Company Act of 1940.
3. The execution, delivery and performance of the Agreement by AVIF have been
duly authorized and approved by all requisite trust action on the part of AVIF.
The Agreement has been duly executed and delivered by AVIF and constitutes the
valid and binding obligation of AVIF.
4. The Acquiring Fund Shares outstanding on the date hereof have been duly
authorized and validly issued, are fully paid and are non-assessable.
5. To the best of our knowledge, AVIF is not required to submit any notice,
report or other filing with or obtain any authorization, consent or approval
from any governmental authority or self regulatory organization prior to the
consummation of the transactions contemplated by the Agreement.
We confirm to you that to our knowledge after inquiry of each lawyer who is the
current primary contact for AVIF or who has devoted substantive attention on
behalf of AVIF during the preceding twelve months and who is still currently
employed by or is currently a member of this firm, no litigation or governmental
proceeding is pending or threatened in writing against the Acquiring Fund (i)
with respect to the Agreement or (ii) which involves in excess of $500,000 in
damages.
29
<PAGE> 62
APPENDIX II
AIM V.I. GROWTH
AND INCOME FUND
--------------------------------------------------------------------------------
Shares of the fund are currently offered only to insurance company
separate accounts. AIM V.I. Growth and Income Fund seeks to provide growth
of capital with a secondary objective of current income.
PROSPECTUS AIM--Registered Trademark--
MAY 1, 2000
This prospectus contains important
information. Please read it before
investing and keep it for future
reference.
As with all other mutual fund securities,
the Securities and Exchange Commission
has not approved or disapproved these
securities or determined whether the
information in this prospectus is
adequate or accurate. Anyone who tells
you otherwise is committing a crime.
An investment in the fund:
- is not FDIC insured;
- may lose value; and
- is not guaranteed by a bank.
[AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 63
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT OBJECTIVES AND STRATEGIES 1
- - - - - - - - - - - - - - - - - - - - - - - -
PRINCIPAL RISKS OF INVESTING IN THE FUND 1
- - - - - - - - - - - - - - - - - - - - - - - -
PERFORMANCE INFORMATION 2
- - - - - - - - - - - - - - - - - - - - - - - -
Annual Total Returns 2
Performance Table 2
FUND MANAGEMENT 3
- - - - - - - - - - - - - - - - - - - - - - - -
The Advisor 3
Advisor Compensation 3
Portfolio Managers 3
OTHER INFORMATION 3
- - - - - - - - - - - - - - - - - - - - - - - -
Purchase and Redemption of Shares 3
Pricing of Shares 3
Taxes 3
Dividends and Distributions 3
FINANCIAL HIGHLIGHTS 4
- - - - - - - - - - - - - - - - - - - - - - - -
OBTAINING ADDITIONAL INFORMATION Back Cover
- - - - - - - - - - - - - - - - - - - - - - - -
</TABLE>
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM
logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La
Familia AIM de Fondos, La Familia AIM de Fondos and Design, Invierta con
Disciplina and Invest with Discipline are registered service marks and AIM Bank
Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM
Investor are service marks of A I M Management Group Inc.
No dealer, salesperson or any other person has been authorized to give any
information or to make any representations other than those contained in this
prospectus, and you should not rely on such other information or
representations.
<PAGE> 64
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
INVESTMENT OBJECTIVES AND STRATEGIES
--------------------------------------------------------------------------------
The fund's primary investment objective is growth of capital with a secondary
objective of current income. The investment objectives of the fund may be
changed by the Board of Trustees without shareholder approval.
The fund seeks to meet its objectives by investing at least 65% of its total
assets in securities of established companies that have long-term above-average
growth in earnings and dividends, and growth companies that the portfolio
managers believe have the potential for above-average growth in earnings and
dividends. The portfolio managers consider whether to sell a particular security
when they believe the security no longer has that potential. The fund may also
invest up to 25% of its total assets in foreign securities. Any percentage
limitations with respect to assets of the fund are applied at the time of
purchase.
The fund may engage in active and frequent trading of portfolio securities to
achieve its investment objectives. If the fund does trade in this way, it may
incur increased transaction costs and brokerage commissions, both of which can
lower the actual return on your investment.
In anticipation of or in response to adverse market conditions, for cash
management purposes, or for defensive purposes, the fund may temporarily hold
all or a portion of its assets in cash, money market instruments, shares of
affiliated money market funds, bonds or other debt securities. As a result, the
fund may not achieve its investment objectives.
PRINCIPAL RISKS OF INVESTING IN THE FUND
--------------------------------------------------------------------------------
There is a risk that you could lose all or a portion of your investment in the
fund and that the income you may receive from your investment may vary. The
value of your investment in the fund will go up and down with the prices of the
securities in which the fund invests. The prices of equity securities change in
response to many factors, including the historical and prospective earnings of
the issuer, the value of its assets, general economic conditions, interest
rates, investor perceptions and market liquidity. The values of the convertible
securities in which the fund may invest also will be affected by market interest
rates, the risk that the issuer may default on interest or principal payments
and the value of the underlying common stock into which these securities may be
converted. Specifically, since these types of convertible securities pay fixed
interest and dividends, their values may fall if market interest rates rise and
rise if market interest rates fall. Additionally, an issuer may have the right
to buy back certain of the convertible securities at a time and at a price that
is unfavorable to the fund.
The prices of foreign securities may be further affected by other factors,
including:
- Currency exchange rates--The dollar value of the fund's foreign investments
will be affected by changes in the exchange rates between the dollar and the
currencies in which those investments are traded.
- Political and economic conditions--The value of the fund's foreign investments
may be adversely affected by political and social instability in their home
countries and by changes in economic or taxation policies in those countries.
- Regulations--Foreign companies generally are subject to less stringent
regulations, including financial and accounting controls, than are U.S.
companies. As a result, there generally is less publicly available information
about foreign companies than about U.S. companies.
- Markets--The securities markets of other countries are smaller than U.S.
securities markets. As a result, many foreign securities may be less liquid
and more volatile than U.S. securities.
These factors may affect the prices of securities issued by foreign companies
located in developing countries more than those in countries with mature
economies. For example, many developing countries have, in the past, experienced
high rates of inflation or sharply devaluated their currencies against the U.S.
dollar, thereby causing the value of investments in companies located in those
countries to decline. Transaction costs are often higher in developing countries
and there may be delays in settlement procedures.
1
<PAGE> 65
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
PERFORMANCE INFORMATION
-------------------------------------------------------------------------------
The bar chart and table shown below provide an indication of the risks of
investing in the fund. The fund's past performance is not necessarily an
indication of its future performance. The bar chart and performance table shown
do not reflect charges at the separate account level. If they did, the
performance shown would be lower.
ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
The following bar chart shows changes in the performance of the fund's shares
from year to year.
[GRAPH]
<TABLE>
<CAPTION>
ANNUAL
YEAR ENDED TOTAL
DECEMBER 31 RETURNS
----------- -------
<S> <C>
1995 ............................................ 33.86%
1996 ............................................ 19.95%
1997 ............................................ 25.72%
1998 ............................................ 27.68%
1999 ............................................ 34.25%
</TABLE>
During the periods shown in the bar chart, the highest quarterly return was
26.48% (quarter ended December 31, 1998) and the lowest quarterly return was
-11.76% (quarter ended September 30, 1998).
PERFORMANCE TABLE
The following performance table compares the fund's performance to that of a
broad-based securities market index.
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURNS
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
(for the periods ended SINCE INCEPTION
December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE
-----------------------------------------------------------------
<S> <C> <C> <C> <C>
AIM V.I. Growth and
Income Fund 34.25% 28.18% 24.49% 05/02/94
Standard & Poor's 500
Index(1) 21.03% 28.54% 25.65%(2) 04/30/94(2)
----------------------------------------------------------------
</TABLE>
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks
frequently used as a general measure of U.S. stock market performance.
(2) The average annual total return given is since the date closest to the
inception date of the fund.
2
<PAGE> 66
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
FUND MANAGEMENT
--------------------------------------------------------------------------------
THE ADVISOR
A I M Advisors, Inc. (the advisor) serves as the fund's investment advisor. The
advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173.
The advisor supervises all aspects of the fund's operations and provides
investment advisory services to the fund, including obtaining and evaluating
economic, statistical and financial information to formulate and implement
investment programs for the fund.
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 fund, encompassing a broad range of
investment objectives.
ADVISOR COMPENSATION
During the fund's last fiscal year ended December 31, 1999, the advisor received
compensation of 0.61% of the fund's average net assets.
PORTFOLIO MANAGERS
The advisor uses a team approach to investment management. The individual
members of the team who are primarily responsible for the day-to-day management
of the fund's portfolio, all of whom are officers of A I M Capital Management,
Inc., a wholly owned subsidiary of the advisor, are as follows:
- Monika H. Degan, Senior Portfolio Manager, who has been responsible for the
fund since 2000 and has been associated with the advisor and/or its affiliates
since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for
Shell Oil Co. Pension Trust.
- Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for
the fund since 1994, and has been associated with the advisor and/or its
affiliates since 1987.
OTHER INFORMATION
--------------------------------------------------------------------------------
PURCHASE AND REDEMPTION OF SHARES
The fund ordinarily effects orders to purchase and redeem shares at the fund's
next computed net asset value after it receives an order. Life insurance
companies participating in the fund serve as the fund's designee for receiving
orders of separate accounts that invest in the fund.
The fund currently offers shares only to insurance company separate accounts.
In the future, the fund may offer them to pension and retirement plans that
qualify for special federal income tax treatment.
The Board of Trustees monitors for possible conflicts among separate accounts
(and will do so for plans) buying shares of the fund. A fund's net asset value
could decrease if it had to sell investment securities to pay redemption
proceeds to a separate account (or plan) withdrawing because of a conflict.
PRICING OF SHARES
The fund prices its shares based on its net asset value. The fund values
portfolio securities for which market quotations are readily available at market
value. The fund values short-term investments maturing within 60 days at
amortized cost, which approximates market value. The fund values all other
securities and assets at their fair value. Securities and other assets quoted in
foreign currencies are valued in U.S. dollars based on the prevailing exchange
rates on that day. In addition, if, between the time trading ends on a
particular security and the close of the New York Stock Exchange (NYSE), events
occur that materially affect the value of the security, the fund may value the
security at its fair value as determined in good faith by or under the
supervision of the Board of Trustees. The effect of using fair value pricing is
that the fund's net asset value will be subject to the judgment of the Board of
Trustees or its designee instead of being determined by the market. Because the
fund may invest in securities that are primarily listed on foreign exchanges,
the value of the fund's shares may change on days when the separate account will
not be able to purchase or redeem shares. The fund determines the net asset
value of its shares as of the close of the NYSE on each day the NYSE is open for
business.
TAXES
The amount, timing and character of distributions to the separate account may be
affected by special tax rules applicable to certain investments purchased by the
fund. Holders of variable contracts should refer to the prospectus for their
contracts for information regarding the tax consequences of owning such
contracts and should consult their tax advisors before investing.
DIVIDENDS AND DISTRIBUTIONS
DIVIDENDS
The fund generally declares and pays dividends, if any, annually to separate
accounts of participating life insurance companies.
The fund expects that its distributions will consist primarily of capital gains.
CAPITAL GAINS DISTRIBUTIONS
The fund generally distributes long-term and short-term capital gains (including
any net gains from foreign currency transactions), if any, annually to separate
accounts of participating life insurance companies.
At the election of participating life insurance companies, dividends and
distributions are automatically reinvested at net asset value in shares of the
fund.
3
<PAGE> 67
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
FINANCIAL HIGHLIGHTS
--------------------------------------------------------------------------------
The financial highlights table is intended to help you understand the fund's
financial performance. Certain information reflects financial results for a
single fund share.
The total returns in the table represent the rate that an investor would have
earned (or lost) on an investment in the fund (assuming reinvestment of all
dividends and distributions).
The table shows the financial highlights for a share of the fund outstanding
during each of the fiscal years (or periods) indicated.
This information has been audited by Tait, Weller & Baker, whose report, along
with the fund's financial statements, is included in the fund's annual report,
which is available upon request.
<TABLE>
<CAPTION>
YEAR ENDED
YEAR ENDED DECEMBER 31, JANUARY 31,
1999(a) 1998(a) 1997 1996 1995 1995
----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98 $10.00
Income from investment operations:
Net investment income 0.06 0.26 0.13 0.16 0.14 0.11
Net gains (losses) on securities (both
realized and unrealized) 8.05 4.95 3.74 2.36 3.11 (0.02)
Total from investment operations 8.11 5.21 3.87 2.52 3.25 0.09
Less distributions:
Dividends from net investment income (0.16) (0.09) (0.01) (0.14) (0.14) (0.11)
Distributions from net realized gains (0.11) (0.24) (0.02) (0.03) (0.41) --
Total distributions (0.27) (0.33) (0.03) (0.17) (0.55) (0.11)
Net asset value, end of period $ 31.59 $ 23.75 $ 18.87 $ 15.03 $ 12.68 $ 9.98
Total return(b) 34.25% 27.68% 25.72% 19.95% 32.65% 0.90%
----------------------------------------------------------------------------------------------------------------------------
Ratios/supplemental data:
----------------------------------------------------------------------------------------------------------------------------
Net assets, end of period (000s omitted) $2,443,264 $1,262,059 $639,113 $209,332 $38,567 $7,380
Ratio of expenses to average net assets 0.77%(c) 0.65% 0.69% 0.78% 0.78%(d) 1.07%(d)(e)
Ratio of net investment income to average net
assets 0.22%(c) 1.34% 1.15% 2.05% 1.92%(d) 1.95%(d)(e)
Portfolio turnover rate 93% 140% 135% 148% 145% 96%
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
(a) Calculated using average shares outstanding.
(b) Total returns are not annualized for periods less than one year.
(c) Ratios are based on average net assets of $1,718,996,207.
(d) Annualized.
(e) After fee waivers and/or expense reimbursements. Ratios of expenses and net
investment income to average net assets prior to fee waivers and/or expense
reimbursements were 1.72% (annualized) and 1.30% (annualized), respectively.
4
<PAGE> 68
-------------------------------
AIM V.I. GROWTH AND INCOME FUND
-------------------------------
OBTAINING ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
More information may be obtained free of charge upon request. The Statement of
Additional Information (SAI), a current version of which is on file with the
Securities and Exchange Commission (SEC), contains more details about the fund
and is incorporated by reference into the prospectus (is legally a part of this
prospectus). Annual and semiannual reports to shareholders contain additional
information about the fund's investments. The fund's annual report also
discusses the market conditions and investment strategies that significantly
affected the fund's performance during its last fiscal year.
If you wish to obtain free copies of the fund's current SAI, please send a
written request to A I M Distributors, Inc., 11 Greenway Plaza, Suite 100,
Houston, Texas 77046-1173 or call (800) 410-4246.
You also can review and obtain copies of the fund's SAI, reports and other
information at the SEC's Public Reference Room in Washington, DC; on the EDGAR
database on the SEC's Internet website (http://www.sec.gov); or, after paying a
duplication fee, by sending a letter to the SEC's Public Reference Section,
Washington, DC 20549-0102 or by sending an electronic mail request to
[email protected]. Please call the SEC at 1-202-942-8090 for information about
the Public Reference Room.
-----------------------------------
AIM V.I. Growth and Income Fund
SEC 1940 Act file number: 811-7452
-----------------------------------
[AIM LOGO APPEARS HERE] www.aimfunds.com INVEST WITH DISCIPLINE
--Registered Trademark--
<PAGE> 69
APPENDIX III
The Managers' Overview
AIM V.I. GROWTH AND INCOME FUND OUTPERFORMS BENCHMARK
A roundtable discussion with the fund management team for AIM V.I. Growth and
Income Fund for the fiscal year ended December 31, 1999.
<TABLE>
<CAPTION>
<S> <C> <C>
Q. THE STOCK MARKET HAS BEEN Q. WHAT WERE MARKET CONDITIONS many large companies, fewer stocks met
VERY VOLATILE OVER THE REPORTING LIKE OVER THE REPORTING PERIOD? our investment criteria. Over the fiscal
PERIOD. HOW DID AIM V.I. GROWTH A. Most market trends of the last few year, we cut the number of holdings in
AND INCOME FUND PERFORM? years continued. The largest stocks in the fund's portfolio. Paring down the port-
A. AIM V.I. Growth and Income Fund the S&P 500 again dominated that index's folio allowed us to concentrate on
produced outstanding results despite returns while the remainder produced stocks that exhibited the strongest
market volatility. For the year ended lackluster results. In fact, despite earnings performance.
December 31, 1999, the fund produced advances by the main market indexes,
a total return of 34.25%, significantly out- most S&P 500 stocks lost value during Q. WHAT WERE THE TOP SECTORS
performing the S&P 500, which returned the fiscal year. FOR THE FUND?
21.03% over the same period. In one of the biggest shake-ups of its A. The fund continued to focus on lead-
103-year history, in October the Dow ing technology, financial and health-care
AIM V.I. GROWTH AND INCOME Jones Industrial Average revised its mem- stocks. Over the fiscal year, the fund's
FUND VS. BENCHMARK INDEX bership to include Microsoft, Intel, SBC technology concentration increased,
Communications and Home Depot. The while its investments in financial and
One-year return as of 12/31/99 move signaled the markets' transition to health-care stocks held steady or
the "new economy," dominated by tech- decreased slightly.
AIM nology, telecommunications and ware-
V.I. GROWTH and S & P 500 house retailers. As of December 31, Q. WHY IS TECHNOLOGY SO
INCOME FUND INDEX 1999, the fund had holdings in Microsoft, IMPORTANT TO THE FUND?
--------------- ---------- SBC Communications and Home Depot. A. Technology was one of the strongest
34.25% 21.03% market sectors over the fiscal year. Our
Q. HOW DID YOU MANAGE THE FUND heavy weighting in technology is one of
DURING THESE CONDITIONS? the main reasons the fund beat the S&P
A. With earnings growth slowing for 500 over the fiscal year.
The fund held the stocks of companies
PORTFOLIO COMPOSITION involved in Internet infrastructure, such
as software, wireless communications
As of 12/31/99, based on total net assets and cable-TV firms. A new stock among
our top 10 holdings is Novell, which
TOP 10 HOLDINGS TOP 10 INDUSTRIES makes software that connects PCs to cor-
porate networks. The company has seen
1. Novell, Inc. 5.15% 1. Computers (Software & Services) 17.17% excellent growth this year based on the
2. Microsoft Corp. 4.78 2. Communications Equipment 8.06 success of its Internet-related products.
3. Tyco International Ltd. 3.58 3. Health Care (Diversified) 7.51
4. Warner-Lambert Co. 3.35 4. Financial (Diversified) 5.40 Q. THE FUND HOLDS MICROSOFT
5. Cisco Systems Inc. 3.07 5. Investment Banking/Brokerage 4.90 STOCK. HOW WILL THE RULING IN
6. Dayton-Hudson Corp. 3.01 6. Manufacturing (Diversified) 3.98 THE DEPARTMENT OF JUSTICE CASE
7. Morgan Stanley Dean Witter 7. Broadcasting AFFECT YOUR INVESTMENT?
& Co. 2.97 (Television, Radio & Cable) 3.80 A. In November, a federal judge ruled
8. Sun Microsystems Inc. 2.92 8. Computers (Hardware) 3.75 that Microsoft is a monopoly. As of this
9. American Express Co. 2.89 9. Retail (General Merchandise) 3.45 writing, neither a settlement nor an
10. General Electric Co. 2.69 10. Computers (Networking) 3.07 appeal has been announced, and it's
unlikely that a final decision will be made
The fund's portfolio composition is subject to change, and there is no assurance until 2001. While we cannot comment on
that the fund will continue to hold any particular security.
</TABLE>
130 AIM V.I. GROWTH AND INCOME FUND
<PAGE> 70
<TABLE>
<CAPTION>
<S> <C> <C>
our specific plans to buy or sell stocks, [GRAPH APPEARS HERE]
we can say that as of this time, Microsoft RESULTS OF A $10,000 INVESTMENT
remains a large holding in the fund. We -------------------------------
believe that the company's growth 5/2/94 - 12/31/99
prospects remain strong, especially with
the upcoming introduction of two new AVERAGE ANNUAL TOTAL RETURNS
software products: Office 2000 and As of 12/31/99
Windows 2000. Over the short term, the Inception (5/2/94) 24.49%
stock may be volatile, but this is a core 5 Years 28.18
growth company that should continue to 1 Year 34.25
be a part of our portfolio.
AIM V.I.
Q. WHAT WERE CONDITIONS LIKE FOR GROWTH AND INCOME RUSSELL S & P
FINANCIAL STOCKS? (In thousands) FUND 1000 500
A. Interest-rate concerns have plagued ------------------------------------------
financial stocks, causing them to experi- 5/2/94 10,000 10,000 10,000
ence substantial volatility. But the long- 12/94 9,999 10,326 10,396
term prospects for banks and insurance 12/95 13,385 14,227 14,299
companies seem favorable based on the 12/96 16,054 17,420 17,579
continued strength of their earnings. 12/97 20,183 23,143 23,443
Another issue gives us reason to believe 12/98 25,771 29,397 30,147
that financial stocks may soon recover. 12/99 34,597 35,545 36,489
Late in 1999, Congress reformed the
Glass-Steagall Act, which was created to ----------------------------------
separate commercial and investment SOURCE: LIPPER, INC.
banking. Many analysts believe this may Past performance cannot guarantee comparable future results.
set off a blizzard of merger-and-acqui-
sition activity among banks, insurance MARKET VOLATILITY CAN SIGNIFICANTLY IMPACT SHORT-TERM PERFORMANCE.
companies, investment managers and RESULTS OF AN INVESTMENT MADE TODAY MAY DIFFER SUBSTANTIALLY FROM
brokers. THE HISTORICAL PERFORMANCE SHOWN.
Q. WHAT HAPPENED IN THE HEALTH- The performance figures shown here, which represent AIM V.I. Growth and
CARE INDUSTRY OVER THE PAST YEAR? Income Fund, are not intended to reflect actual annuity values, and they do
A. Health-care stocks have been disap- not reflect charges at the separate-account level which (if applied) would
pointing for several reasons: First, at lower them. AIM V.I. Growth and Income Fund's performance figures are
times during 1999 growth stocks such as historical, and they reflect changes in net asset value and the reinvestment
health care went out of favor and of distributions. The fund's investment return and principal value will
investors looked into cyclical stocks that fluctuate, so an investor's shares, when redeemed, may be worth more or less
are more sensitive to the economy. than their original cost.
Second, many health-care stocks were The unmanaged Russell 1000 Stock Index (the Russell 1000) is generally
considered too expensive, and they have considered representative of the performance of the stocks of
fallen out of favor with some investors. large-capitalization companies. The unmanaged Standard & Poor's Composite of
Third, concerns about political reform 500 Stocks (the S&P 500) is generally considered representative of the
continue to hang over the health-care performance of the stock market in general. Data for the indexes are for the
industry. Recent changes in Medicare's period 4/30/94-12/31/99.
reimbursement programs affect the bot- The fund will no longer measure its performance against the S&P 500,
tom lines of hospitals, nursing homes and the index published in previous shareholder reports. Because this is the
other service providers. Over the long first reporting period since we have adopted the new index, SEC guidelines
term, we believe the industry will make a require us to compare the fund's performance to that of both the old and the
comeback, if for the simple fact that baby new index. An investment cannot be made in an index. Unless otherwise
boomers will spend more money on indicated, index results include reinvested dividends.
health care as they age. The fund's health-
care holdings decreased over the year. Q. BESIDES TECHNOLOGY, WHAT Q. WHAT'S YOUR OUTLOOK FOR THE
OTHER AREAS PERFORMED WELL FOR NEAR TERM?
THE FUND? A. Our outlook for the market remains
A. The fund increased its holdings in positive. The United States is experiencing
consumer cyclicals, including retail one of the longest expansion periods in
stocks. Consumer-cyclical companies its history and inflation is low. We believe
benefited from a booming economy, the environment remains favorable for
nearly full employment and robust sales. equities despite short-term market
Dayton-Hudson, which owns Marshall volatility.
Fields, Target and Mervyn's stores,
became a top 10 holding for the fund
during the year. The company, which
operates more than 1,200 stores, report-
ed strong earnings in its most recent
quarter.
</TABLE>
AIM V.I. GROWTH AND INCOME FUND 131
<PAGE> 71
PART B
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GROWTH AND INCOME FUND
PORTFOLIOS OF
AIM VARIABLE INSURANCE FUNDS
11 Greenway Plaza
Suite 100
Houston, Texas 77046-1173
Toll Free: (800) 410-4246
STATEMENT OF ADDITIONAL INFORMATION
(2000 Special Meeting of Shareholders of the Acquired Fund)
This Statement of Additional Information ("SAI") is not a prospectus, but you
should read it in conjunction with the Combined Proxy Statement and Prospectus
dated July 18, 2000 of AIM V.I. Global Growth and Income Fund ("Acquired Fund"),
a portfolio of AIM Variable Insurance Funds ("AVIF"), for use in connection with
the Special Meeting of Shareholders of the Acquired Fund to be held on September
1, 2000.
For a free copy of the Combined Proxy Statement and Prospectus, please write
AVIF at the address shown above or call 1-800-410-4246. Unless otherwise
indicated, capitalized terms used in this SAI and not otherwise defined have the
same meanings as are given to them in the Combined Proxy Statement and
Prospectus.
This Statement of Additional Information consists of this cover page and the
Statement of Additional Information for AVIF dated May 1, 2000, which is
attached hereto and incorporated herein by reference.
The date of this Statement of Additional Information is July 20, 2000.
<PAGE> 72
STATEMENT OF
ADDITIONAL INFORMATION
A I M V A R I A B L E I N S U R A N C E F U N D S
11 GREENWAY PLAZA
SUITE 100
HOUSTON, TX 77046-1173
(713) 626-1919
<TABLE>
<S> <C>
AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. BALANCED FUND
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GOVERNMENT SECURITIES FUND
AIM V.I. GROWTH AND INCOME FUND AIM V.I. GROWTH FUND
AIM V.I. HIGH YIELD FUND AIM V.I. INTERNATIONAL EQUITY FUND
AIM V.I. MONEY MARKET FUND AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
AIM V.I. VALUE FUND
</TABLE>
THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS.
IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH
MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING
A I M DISTRIBUTORS, INC., P. O. BOX 4739,
HOUSTON, TX 77210-4739
OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS)
OR (800) 410-4246 (ALL OTHERS).
-----------
STATEMENT OF ADDITIONAL INFORMATION DATED: MAY 1, 2000,
RELATING TO PROSPECTUS DATED: MAY 1, 2000
<PAGE> 73
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
INTRODUCTION......................................................................................................1
GENERAL INFORMATION ABOUT THE FUNDS...............................................................................1
The Trust and Its Shares.................................................................................1
PERFORMANCE.......................................................................................................3
Total Return Calculations................................................................................3
Historical Portfolio Results.............................................................................3
Yield Information........................................................................................5
PORTFOLIO TRANSACTIONS AND BROKERAGE..............................................................................6
General Brokerage Policy.................................................................................6
Allocation of IPO Securities Transactions................................................................8
Section 28(e) Standards..................................................................................8
Portfolio Turnover......................................................................................10
Brokerage Commissions Paid..............................................................................10
INVESTMENT STRATEGIES AND RISKS..................................................................................10
Aggressive Growth Fund..................................................................................11
Balanced Fund...........................................................................................11
Blue Chip Fund..........................................................................................11
Capital Appreciation Fund...............................................................................12
Capital Development Fund................................................................................13
Dent Demographic Trends Fund............................................................................13
Diversified Income Fund.................................................................................13
Global Growth and Income Fund...........................................................................14
Global Utilities Fund...................................................................................14
Government Securities Fund..............................................................................15
Growth Fund.............................................................................................15
High Yield Fund.........................................................................................15
International Equity Fund...............................................................................16
Money Market Fund.......................................................................................16
Telecommunications and Technology Fund..................................................................17
Value Fund..............................................................................................18
INVESTMENT RESTRICTIONS..........................................................................................18
Fundamental Restrictions................................................................................18
Non-fundamental Restrictions............................................................................19
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES.....................................................................20
Money Market Obligations................................................................................20
Repurchase Agreements...................................................................................21
U.S. Government Agency Mortgage-Backed Securities.......................................................21
Convertible Securities..................................................................................22
Real Estate Investment Trusts ("REITs").................................................................22
Foreign Securities......................................................................................22
Foreign Exchange Transactions...........................................................................23
ADRs and EDRs...........................................................................................24
Lending of Portfolio Securities.........................................................................24
Reverse Repurchase Agreements...........................................................................24
Delayed Delivery Agreements and When-Issued Securities..................................................25
Dollar Roll Transactions................................................................................26
</TABLE>
i
<PAGE> 74
<TABLE>
<S> <C>
Illiquid Securities.....................................................................................26
Special Situations......................................................................................26
Warrants................................................................................................27
Short Sales.............................................................................................27
Rule 144A Securities....................................................................................27
Equity-Linked Derivatives...............................................................................27
Investment in Other Investment Companies................................................................28
Temporary Defensive Investments.........................................................................28
Asset Allocation Among Countries........................................................................28
Utilities Industry......................................................................................28
OPTIONS, FUTURES AND CURRENCY STRATEGIES.........................................................................29
Introduction............................................................................................29
General Risks of Options, Futures and Currency Strategies...............................................29
Cover...................................................................................................30
Writing Call Options....................................................................................30
Writing Put Options.....................................................................................31
Purchasing Put Options..................................................................................31
Purchasing Call Options.................................................................................32
Over-The-Counter Options................................................................................32
Index Options...........................................................................................33
Limitations on Options..................................................................................33
Interest Rate, Currency and Stock Index Futures Contracts...............................................33
Options on Futures Contracts............................................................................34
Forward Contracts.......................................................................................34
Limitations on Use of Futures, Options on Futures and Certain Options on Currencies.....................35
RISK FACTORS.....................................................................................................35
Small Capitalization Companies..........................................................................35
Non-Investment Grade Debt Securities....................................................................35
Foreign Securities......................................................................................36
Non-diversified Portfolio (Global Utilities Fund Only)..................................................36
MANAGEMENT.......................................................................................................37
Trustees and Officers...................................................................................37
Remuneration of Trustees.......................................................................40
AIM Funds Retirement Plan for Eligible Directors/Trustees......................................41
Deferred Compensation Agreements...............................................................42
Investment Advisory, Sub-Advisory and Administrative Services Agreements................................42
The Distribution Agreement..............................................................................49
DETERMINATION OF NET ASSET VALUE.................................................................................49
PURCHASE AND REDEMPTION OF SHARES................................................................................51
DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS.........................................................................52
MISCELLANEOUS INFORMATION........................................................................................54
Audit Reports...........................................................................................54
Legal Matters...........................................................................................54
Custodian and Transfer Agent............................................................................54
Principal Holders of Securities.........................................................................54
Other Information.......................................................................................59
APPENDIX A......................................................................................................A-1
APPENDIX B......................................................................................................B-1
</TABLE>
ii
<PAGE> 75
<TABLE>
<S> <C>
APPENDIX C......................................................................................................C-1
FINANCIAL STATEMENTS.............................................................................................FS
</TABLE>
iii
<PAGE> 76
INTRODUCTION
AIM Variable Insurance Funds (the "Trust") is a mutual fund. The rules
and regulations of the United States Securities and Exchange Commission (the
"SEC") require all mutual funds to furnish prospective investors certain
information concerning the activities of the fund being considered for
investment. This information is included in Prospectuses dated May 1, 2000
(referred to collectively as the "Prospectuses" and separately as a
"Prospectus"), which relate to one or more of the seventeen series portfolios of
the Trust (referred to collectively as the "Funds" and separately as a
"Fund"). One or more of the Funds may not be available under a particular
variable annuity contract or variable life insurance policy. Accordingly, this
Statement of Additional Information may contain information that is not relevant
to the investment options under such a contract or policy. Copies of each
Prospectus available under a contract or policy and additional copies of this
Statement of Additional Information may be obtained without charge by contacting
the principal distributor of each Fund's shares, A I M Distributors, Inc. ("AIM
Distributors"), 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 or by
calling (800) 410-4246. Investors must receive a Prospectus before they invest.
To the extent that this Statement of Additional Information contains information
concerning a Fund that is not available under a contract or policy, the
Statement of Additional Information does not constitute the offer of the shares
of that Fund.
This Statement of Additional Information is intended to furnish
prospective investors with additional information concerning the Funds. Some of
the information required to be in this Statement of Additional Information is
also included in the Funds' current Prospectus and, in order to avoid
repetition, reference will be made to sections of the Prospectus. Additionally,
the Prospectus and this Statement of Additional Information omit certain
information contained in the Registration Statement filed with the SEC. Copies
of the Registration Statement, including items omitted from the Prospectus and
this Statement of Additional Information, may be obtained from the SEC by paying
the charges prescribed under its rules and regulations.
GENERAL INFORMATION ABOUT THE FUNDS
THE TRUST AND ITS SHARES
The Trust was previously organized on January 22, 1993, as a Maryland
corporation. Pursuant to an agreement and plan of reorganization, the Funds were
reorganized on May 1, 2000 as portfolios of AIM Variable Insurance Funds, a
Delaware business trust which is registered under the Investment Company Act of
1940, as amended (the "1940 Act") as an open-end series management investment
company. The Trust currently is organized under an Agreement and Declaration of
Trust, dated December 7, 1999, (the "Trust Agreement"). Each Fund is a series of
shares of the Trust. The Trust currently consists of seventeen separate
portfolios: AIM V.I. Aggressive Growth Fund ("Aggressive Growth Fund"), AIM V.I.
Balanced Fund ("Balanced Fund"), AIM V.I. Blue Chip Fund ("Blue Chip Fund"), AIM
V.I. Capital Appreciation Fund ("Capital Appreciation Fund"), AIM V.I. Capital
Development Fund ("Capital Development Fund"), AIM V.I. Dent Demographic Trends
Fund ("Dent Demographic Trends Fund"), AIM V.I. Diversified Income Fund
("Diversified Income Fund"), AIM V.I. Global Growth and Income Fund ("Global
Growth and Income Fund"), AIM V.I. Global Utilities Fund ("Global Utilities
Fund") (formerly known as the AIM V.I. Utilities Fund), AIM V.I. Government
Securities Fund ("Government Fund"), AIM V.I. Growth Fund ("Growth Fund"), AIM
V.I. Growth and Income Fund ("Growth and Income Fund"), AIM V.I. High Yield Fund
("High Yield Fund"), AIM V.I. International Equity Fund ("International Fund"),
AIM V.I. Telecommunications and Technology Fund ("Telecommunications and
Technology Fund"), AIM V.I. Money Market Fund ("Money Market Fund") and AIM V.I.
Value Fund ("Value Fund"). Each Fund, with the exception of the Global Utilities
Fund, is a "diversified management company" as defined in the 1940 Act). Under
the Trust Agreement, the Board of Trustees is authorized to create new series
of shares without the necessity of a vote of shareholders of the Trust.
1
<PAGE> 77
On May 1, 2000, the Funds succeeded to the assets and assumed the
liabilities of the funds with corresponding names (the "Predecessor Funds") of
AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"), pursuant to
an Agreement and Plan of Reorganization between the Trust and AVIF. All
historical financial and other information contained in this Statement of
Additional Information for periods prior to May 1, 2000 relating to the Funds is
that of the Predecessor Funds. Shares of beneficial interest of the Trust are
redeemable at their net asset value at the option of the shareholder or at the
option of the Trust in certain circumstances. For information concerning
redemptions, investors should consult the Prospectuses under the caption
"Purchase and Redemption of Shares."
The assets received by the Trust from the issue or sale of shares of
each of its series of shares, and all income, earnings, profits and proceeds
thereof, subject only to the rights of creditors, are specifically allocated to
the appropriate Fund. They constitute the underlying assets of each Fund, are
required to be segregated on the Trust's books of account, and are to be charged
with the expenses with respect to such Fund. Any general expenses of the Trust
not readily identifiable as belonging to a particular Fund are allocated by or
under the direction of the Board of Trustees, primarily on the basis of relative
net assets, or other relevant factors.
Each share of each Fund represents an equal proportionate interest in
that Fund with each other share and is entitled to such dividends and
distributions out of the income belonging to such Fund as are declared by the
Board. Upon any liquidation of the Trust, shareholders of each Fund are entitled
to share pro rata in the net assets belonging to the applicable Fund available
for distribution after satisfaction of outstanding liabilities of the Fund.
The Trust is not required to hold annual or regular meetings of
shareholders. Meetings of shareholders of a Fund will be held from time to time
to consider matters requiring a vote of such shareholders in accordance with the
requirements of the 1940 Act, state law or the provisions of the Trust
Agreement. It is not expected that shareholder meetings will be held annually.
The Trust understands that insurance company separate accounts owning
shares of the Funds will vote their shares in accordance with the instructions
received from Contract owners, annuitants and beneficiaries. Fund shares held by
a registered separate account as to which no instructions have been received
will be voted for or against any proposition, or in abstention, in the same
proportion as the shares of that separate account as to which instructions have
been received. Fund shares held by a registered separate account that are not
attributable to Contracts will also be voted for or against any proposition in
the same proportion as the shares for which voting instructions are received by
that separate account. If an insurance company determines, however, that it is
permitted to vote any such shares of the Funds in its own right, it may elect to
do so, subject to the then current interpretation of the 1940 Act and the rules
thereunder.
Shareholders of each Fund are entitled to one vote per share (with
proportionate voting for fractional shares), irrespective of the relative net
asset value of the shares of a Fund. However, on matters affecting an individual
Fund, a separate vote of shareholders of that Fund is required. Shareholders of
a Fund are not entitled to vote on any matter which does not affect that Fund
but which requires a separate vote of another Fund. An example of a matter which
would be voted on separately by shareholders of each Fund is the approval of the
Advisory Agreement. When issued, shares of each Fund are fully paid and
nonassessable, have no preemptive or subscription rights, and are fully
transferable. Shares do not have cumulative voting rights, which means that in
situations in which shareholders elect trustees, holders of more than 50% of the
shares voting for the election of trustees can elect all of the trustees of the
Trust, and the holders of less than 50% of the shares voting for the election of
trustees will not be able to elect any trustees.
The Trust Agreement provides that the trustees of the Trust shall hold
office during the existence of the Trust, except as follows: (a) any trustee may
resign or retire; (b) any trustee may be removed by a vote of at least
two-thirds of the outstanding shares of the Trust, or at any time by written
instrument signed by at least two-thirds of the trustees and specifying when
such removal becomes effective; or (c) any trustee who has died or become
incapacitated and is unable to serve may be removed by a written instrument
signed by a majority of the trustees.
2
<PAGE> 78
Under Delaware law, shareholders of a Delaware business trust shall be
entitled to the same limitations of liability extended to shareholders of
private for-profit corporations, however, there is a remote possibility that
shareholders could, under certain circumstances, be held liable for the
obligations of the Trust to the extent the courts of another state which does
not recognize such limited liability were to apply the laws of such state to a
controversy involving such obligations. However, the Trust Agreement disclaims
shareholder liability for acts or obligations of the Trust and requires that
notice of such disclaimer be given in each agreement, obligation or instrument
entered into or executed by the Trust or the trustees to all parties, and each
party thereto must expressly waive all rights of action directly against
shareholders of the Trust. The Trust Agreement provides for indemnification out
of the property of a Fund for all losses and expenses of any shareholder of such
Fund held liable on account of being or having been a shareholder. Thus, the
risk of a shareholder incurring financial loss due to shareholder liability is
limited to circumstances in which a Fund would be unable to meet its obligations
and wherein the complaining party was held not to be bound by the disclaimer.
The Trust Agreement further provides that the trustees and officers
will not be liable for any act, omission or obligation of the Trust or any
trustee or officer. However, nothing in the Trust Agreement protects a trustee
or officer against any liability to the Trust or to the shareholders to which a
trustee or officer would otherwise be subject by reason of willful misfeasance,
bad faith, gross negligence, or reckless disregard of the duties involved in the
conduct of his office with the Trust. The Trust Agreement provides for
indemnification by the Trust of the trustees, the officers and employees or
agents of the Trust, if it is determined that such person acted in good faith
and reasonably believed: (1) in the case of conduct in his or her official
capacity for the Trust, that his or her conduct was in the Trust's best
interests, (2) in all other cases, that his or her conduct was at least not
opposed to the Trust's best interests and (3) in a criminal proceeding, that he
or she had no reason to believe that his or her conduct was unlawful. Such
person may not be indemnified against any liability to the Trust or to the
Trust's shareholders to which he or she would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence or reckless disregard of the
duties involved in the conduct of his office. The Trust Agreement also
authorizes the purchase of liability insurance on behalf of trustees and
officers.
PERFORMANCE
TOTAL RETURN CALCULATIONS
Total returns quoted in advertising reflect all aspects of the
applicable Fund's return, including the effect of reinvesting dividends and
capital gain distributions, and any change in such Fund's net asset value per
share (NAV) over the period. Average annual returns are calculated by
determining the growth or decline in value of a hypothetical investment in a
particular Fund over a stated period, and then calculating the annually
compounded percentage rate that would have produced the same result if the rate
of growth or decline in value had been constant over the period. While average
annual returns are a convenient means of comparing investment alternatives,
investors should realize that a Fund's performance is not constant over time,
but changes from year to year, and that average annual returns do not represent
the actual year-to-year performance of such Fund.
In addition to average annual returns, each Fund may quote unaveraged
or cumulative total returns reflecting the simple change in value of an
investment over a stated period. Average annual and cumulative total returns may
be quoted as a percentage or as a dollar amount, and may be calculated for a
single investment, a series of investments, and/or a series of redemptions, over
any time period. Total returns may be broken down into their components of
income and capital (including capital gains and changes in share price) in order
to illustrate the relationship of these factors and their contributions to total
return. Total returns and other performance information may be quoted
numerically or in a table, graph, or similar illustration.
HISTORICAL PORTFOLIO RESULTS
The Funds' average annual total returns for the one and five year
periods ended December 31, 1999, and average annual and cumulative total returns
for each of the funds since their inception are as follows:
3
<PAGE> 79
<TABLE>
<CAPTION>
Since
Year Ended Inception
December 31, 1999 ------------------------------
----------------- Average
One Five Inception Annual Cumulative
Year Year Date Return Return
---- ---- ---- ------ ------
<S> <C> <C> <C> <C> <C>
AIM V.I. Aggressive Growth Fund 44.67% N/A 05/01/98 24.07% 43.31%
AIM V.I. Balanced Fund 19.31% N/A 05/01/98 19.62% 34.84%
AIM V.I. Blue Chip N/A N/A 12/29/99 N/A 0%
AIM V.I. Capital Appreciation Fund 44.61% 25.59% 05/05/93 22.33% 282.65%
AIM V.I. Capital Development Fund 29.10% N/A 05/01/98 11.22% 19.41%
AIM V.I. Dent Demographic Trends Fund N/A N/A 12/29/99 N/A 0%
AIM V.I. Diversified Income Fund -1.92% 7.83% 05/05/93 5.93% 46.74%
AIM V.I. Global Growth and Income Fund* -0.13 13.28% 02/10/93 11.63% 113.34%
AIM V.I. Global Utilities Fund 33.56% 21.87% 05/02/94 18.45% 160.94%
AIM V.I. Government Securities Fund -1.32% 6.33% 05/05/93 4.67% 35.50%
AIM V.I. Growth Fund 35.24% 29.64% 05/05/93 22.93% 295.21%
AIM V.I. Growth and Income Fund 34.25% 28.18% 05/02/94 24.49% 245.97%
AIM V.I. High Yield Fund 10.52% N/A 05/01/98 1.26% 2.12%
AIM V.I. International Equity Fund 55.04% 21.93% 05/05/93 18.82% 215.25%
AIM V.I. Money Market Fund 4.66% 5.10% 05/05/93 4.60% 34.90%
AIM V.I. Telecommunications and Technology Fund* 106.52% 33.65% 10/18/93 29.52% 397.56%
AIM V.I. Value Fund 29.90% 27.23% 05/05/93 23.07% 298.25%
</TABLE>
* Performance prior to October 15, 1999 was for a predecessor fund.
The total returns quoted above do not reflect charges levied at the
insurance company separate account level. For a complete description of the
applicable charges, see the fee table in the prospectus for the appropriate
insurance company separate account.
Each Fund's performance may be compared in advertising to the
performance of other mutual funds in general, or of particular types of mutual
funds, especially those with similar objectives. Such performance data may be
prepared by Lipper Inc., Morningstar, Inc. and other independent services which
monitor the performance of mutual funds. The Funds may also advertise mutual
fund performance rankings which have been assigned to each respective Fund by
such monitoring services.
Each Fund's performance may also be compared in advertising to the
performance of comparative benchmarks such as the Consumer Price Index ("CPI"),
the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such
as bank certificates of deposit and/or savings accounts.
The International Fund's performance may also be compared in
advertising to performance of comparative benchmarks such as The Financial
Times-Actuaries World Indices (a wide range of comprehensive measures of stock
price performance for the major stock markets and regional areas), Morgan
Stanley Capital International Indices (including the EAFE Index) Pacific Basin
Index and Pacific Ex Japan Index (a widely recognized series of indices in
international market performance), and indices of stocks comparable to those in
which the Fund invests.
Each Fund's advertising may from time to time include historical
discussions of general economic conditions such as inflation rates and changes
in the stock market, foreign and domestic interest rates and foreign and
domestic political circumstances and events.
From time to time, Dent Demographic Trends Fund sales literature and/or
advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming
decade may offer unprecedented opportunities for investors, including his
opinions on the stock market outlook and where growth may be strongest; (ii)
Harry S. Dent, Jr.'s opinions and theories from his books and publications,
including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring
2000s, including his beliefs that (a) people's spending patterns may help
predict the
4
<PAGE> 80
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. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund,
AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM
V.I. Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I.
International Equity Fund and AIM V.I. Telecommunications and Technology Fund
(i.e., funds that have a small asset base) any investment a Fund may make in
IPOs may significantly increase its total returns. There is no guarantee that
as a Fund's assets grow, it will continue to experience substantially similar
performance by investing in IPOs.
From time to time, the Funds' sales literature and/or advertisements
may discuss generic topics pertaining to the mutual fund industry. This
includes, but is not limited to, literature addressing general information about
mutual funds, variable annuities, variable life insurance, dollar-cost
averaging, stocks, bonds, money markets, certificates of deposit, retirement,
retirement plans, asset allocation, tax-free investing, college planning and
inflation.
YIELD INFORMATION
Quotations of yield on the Money Market Fund may appear from time to
time in the financial press and in advertisements.
The Money Market Fund's yield is its investment income, less expenses,
expressed as a percentage of assets on an annualized basis for an identified
period, usually seven days. The yield is expressed as a simple annualized yield
and as a compounded effective yield. The yield does not reflect the fees and
charges imposed on the assets of the insurance company separate account.
The standard formulas prescribed by the SEC for calculating yield and
effective yield for the Money Market Fund are described below:
The simple annualized yield is computed by determining the net change
(exclusive of realized gains and losses from the sale of securities, unrealized
appreciation and depreciation, and income other than investment income) in the
value of a hypothetical pre-existing account having a balance of one share at
the beginning of the period, dividing the net change in account value by the
value of the account at the beginning of the period, and annualizing the
resulting quotient (base period return) on a 365-day basis. The net change in
account value reflects the value of additional shares purchased with dividends
from the original shares in the
5
<PAGE> 81
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 Trustees of the Trust,
AIM is responsible for decisions to buy and sell securities for each Fund, for
the selection of broker-dealers, for the execution of the Fund's investment
portfolio transactions, for the allocation of brokerage fees in connection with
such transactions and, where applicable, for the negotiation of commissions and
spreads on transactions. AIM's primary consideration in effecting a security
transaction is to obtain the best net price and the most favorable execution of
the order. While AIM generally seeks reasonably competitive commission rates,
each Fund does not necessarily pay the lowest commission or spread available.
Purchases and sales of portfolio securities for the Diversified Income
Fund, the Money Market Fund and the Government Fund are generally transacted
with the issuer or a primary market maker. In addition, a portion of the
securities in which the Funds invest may be traded in over-the-counter ("OTC")
markets. In such transactions, the Fund deals directly with the dealers who make
markets in the securities involved, except in those circumstances where better
prices and executions are available elsewhere. Portfolio transactions placed
through dealers serving as primary market makers are effected at net prices,
without commissions as such, but which include compensation to the dealer in the
form of mark up or mark down.
Traditionally, commission rates have not been negotiated on stock
markets outside the United States. In recent years, however, an increasing
number of overseas stock markets have adopted a system of negotiated rates,
although a number of markets continue to be subject to an established schedule
of minimum commission rates.
Foreign equity securities may be held by a Fund in the form of American
Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs"), or other
securities representing underlying securities of foreign issuers, or securities
convertible into foreign equity securities. These securities may not necessarily
be denominated in the same currency as the securities into which they may be
converted. ADRs are receipts typically issued by a United States bank or trust
company which evidence ownership of underlying securities issued by a foreign
corporation. EDRs are receipts issued in Europe which evidence a similar
ownership arrangement. Generally, ADRs, in registered form, are designed for use
in the United States securities markets, and EDRs, in bearer form, are designed
for use in European securities markets. ADRs and EDRs may be listed on stock
exchanges, or traded in OTC markets in the United States or Europe, as the case
may be. ADRs, like other securities traded in the United States, will be subject
to negotiated commission rates.
The Funds are not under any obligation to deal with any broker or group
of brokers in the execution of transactions in portfolio securities. Brokers who
provide supplemental investment research to AIM
6
<PAGE> 82
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 investment in the securities of the
same issue may likewise vary. The timing and amount of purchases by each account
will also be determined by its cash position. If the purchase or sale of
securities is consistent with the investment policies of a Fund(s) and one or
more of these accounts is considered at or about the same time, AIM will fairly
allocate transactions in such securities among the Fund(s) and these accounts.
AIM may combine such transactions, in accordance with applicable laws and
regulations, in order to obtain the best net price and most favorable execution.
Simultaneous transactions could, however, adversely affect the ability of a Fund
to obtain or dispose of the full amount of a security which it seeks to purchase
or sell.
These combined transactions, and related brokerage charges, will be
allocated among the Fund(s) and such accounts in a manner consistent with
guidelines and procedures approved by the Trust's Board of Trustees that are
designed to achieve an equitable manner of allocation. In some cases the
procedure for allocating portfolio transactions among the various investment
accounts advised by AIM could have an adverse effect on the price or amount of
securities available to a Fund. In making such allocations, the main factors
considered by AIM are the respective investment objectives and policies of its
advisory clients, the relative size of portfolio holdings of the same or
comparable securities, the availability of cash for investment, the size of
investment commitments generally held and the judgments of the persons
responsible for recommending the investment.
From time to time, an identical security may be sold by an AIM Fund or
another investment account advised by AIM or A I M Capital Management, Inc.
("AIM Capital") and simultaneously purchased by another investment account
advised by AIM or AIM Capital, when such transactions comply with applicable
rules and regulations and are deemed consistent with the investment objective(s)
and policies of the investment accounts advised by AIM or AIM Capital.
Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions
between investment accounts advised by AIM or AIM Capital have been adopted by
the Boards of Directors/Trustees of the various AIM Funds, including the Trust.
Although such transactions may result in custodian, tax or other related
expenses, no brokerage commissions or other direct transaction costs are
generated by transactions among the investment accounts advised by AIM or AIM
Capital.
7
<PAGE> 83
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 and account that
seeks to participate in a particular IPO by reviewing a number of factors,
including suitability of the investment with the AIM Fund's investment
objective, policies and strategies, the liquidity of the AIM Fund or account if
such investment is purchased, and whether the portfolio manager intends to hold
the security as a long-term investment. The allocation of limited supply
securities issued in IPOs will be made to eligible AIM Funds and accounts in a
manner designed to be fair and equitable for the eligible AIM Funds and
accounts, and so that there is equal allocation of IPOs over the longer term.
Where multiple funds or accounts are eligible, rotational participation may
occur, based on the extent to which an AIM Fund or account has participated in
previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM
Fund and account with an asset level of less than $500 million will be placed in
one of three tiers, depending upon its asset level. The AIM Funds and accounts
in the tier containing funds and accounts with the smallest asset levels will
participate first, each receiving a 40 basis point allocation (rounded to the
nearest share round lot that approximates 40 basis points) (the "Allocation"),
based on that AIM Fund's or accounts net assets. This process continues until
all of the AIM Funds and accounts in the three tiers receive their Allocations,
or until the shares are all allocated. Should securities remain after this
process, eligible AIM Funds and accounts will receive their Allocations on a
straight pro rata basis. For the tier of AIM Funds and 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.
When any AIM Fund and/or account with substantially identical
investment objectives and policies participate in syndicates, they will do so in
amounts that are substantially proportionate to each other. In these cases, the
net assets of the largest AIM Fund will be used to determine in which tier, as
described in the paragraph above, such group of AIM Funds or accounts will be
placed. If no AIM Fund is participating, then the net assets of the largest
account will be used to determine tier placement. The price per share of
securities purchased in such syndicate transactions will be the same for each
AIM Fund and account.
SECTION 28(e) STANDARDS
As permitted by Section 28(e) of the Securities Exchange Act of 1934,
AIM may cause a Fund to pay a broker that provides brokerage and research
services to AIM an amount of commission for effecting a securities transaction
for the Fund in excess of the commission another broker would have charged for
effecting that transaction. To obtain the benefit of Section 28(e), AIM must
make a good faith determination that the commissions paid are "reasonable in
relation to the value of the brokerage and research services provided . . .
viewed in terms of either that particular transaction or [its] overall
responsibilities with respect to the accounts as to which [it] exercises
investment discretion" and that the services provided by a broker provide AIM
with lawful and appropriate assistance in the performance of its investment
decision-making responsibilities. Accordingly, the price to a Fund in any
transaction may be less favorable than that available from another broker-dealer
if the difference is reasonably justified by other aspects of the portfolio
execution services offered.
Broker-dealers utilized by AIM may furnish statistical, research and
other information or services which are deemed by AIM to be beneficial to the
Funds' investment programs. Research services received from brokers supplement
AIM's own research (and the research of sub-advisors to other clients of AIM)
and may include the following types of information: statistical and background
information on industry groups and individual companies; forecasts and
interpretations with respect to U.S. and foreign economies, securities markets,
specific industry groups and individual companies; information on political
developments; portfolio management strategies; performance information on
securities and information concerning prices of securities; and information
supplied by specialized services to AIM and to the Trust's trustees with respect
to the performance, investment activities and fees and expenses of other mutual
funds. Such information may be communicated electronically, orally, in written
form or on computer software. Research services may also
8
<PAGE> 84
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:
<TABLE>
<CAPTION>
Commissions Transactions
------------ --------------
<S> <C> <C>
AIM V.I. Aggressive Growth Fund $ 2,352 $ 1,602,079
AIM V.I. Balanced Fund $ 1,690 $ 1,424,718
AIM V.I. Capital Appreciation Fund $ 125,531 $ 104,465,850
AIM V.I. Capital Development Fund $ 2,132 $ 1,042,603
AIM V.I. Diversified Income Fund $ 416 $ 224,341
AIM V.I. Global Growth and Income Fund $ 13,369 $ 6,616,895
AIM V.I. Global Utilities Fund $ 1,794 $ 1,016,887
AIM V.I. Growth Fund $ 99,052 $ 103,527,973
AIM V.I. Growth and Income Fund $ 342,607 $ 351,987,293
AIM V.I. International Equity Fund $ 16,910 $ 9,546,491
AIM V.I. Telecommunications and
Technology Fund $ 18,478 $ 21,790,567
AIM V.I. Value Fund $ 244,625 $ 266,257,808
</TABLE>
As of December 31, 1999, the following Funds entered into repurchase
agreements with the following regular brokers, as that term is defined in Rule
10b-1 under the 1940 Act, having the noted market values.
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------
FUNDS BANK ONE CAPITAL CIBC OPPENHEIMER GOLDMAN SACHS
MARKETS, INC. CORP.
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
AIM V.I. Blue Chip Fund $230,000 $ 230,000 $ --
--------------------------------------------------------------------------------------------------------------------
AIM V.I. Dent Demographic Trends Fund $230,000 $ 230,000 $ --
--------------------------------------------------------------------------------------------------------------------
AIM V.I. Money Market Fund $ -- $14,862,435 $3,500,000
--------------------------------------------------------------------------------------------------------------------
</TABLE>
9
<PAGE> 85
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, respectively.
PORTFOLIO TURNOVER
The portfolio turnover rate of each Fund is shown under "Financial
Highlights" in the Prospectus. In any particular year, however, market
conditions could result in portfolio activity at a rate greater or lesser than
anticipated. The estimated portfolio turnover rate for the Blue Chip Fund and
Dent Demographic Trends Fund is less than 100%. Higher portfolio turnover
increases transaction costs to the Fund.
BROKERAGE COMMISSIONS PAID
Brokerage commissions paid by each of the Funds (except the AIM V.I.
Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) listed below were
as follows for the fiscal years ended December 31, 1999, December 31, 1998 and
December 31, 1997. The significant change in commissions paid from year to year
for AIM V.I. Capital Appreciation Fund and AIM V.I. Growth and Income Fund is
due to the increase in asset level.
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ 12,853 $ 2,983* $ N/A
AIM V.I. Balanced Fund $ 18,419 $ 2,241* $ N/A
AIM V.I. Capital Appreciation Fund $ 1,028,908 $ 1,017,185 $ 644,279
AIM V.I. Capital Development Fund $ 14,060 $ 3,748* $ N/A
AIM V.I. Diversified Income Fund $ 1,626 $ 282 $ 2,818
AIM V.I. Global Growth and Income Fund $ 96,559 $ 19,966 $ 42,783
AIM V.I. Global Utilities Fund $ 21,661 $ 18,422 $ 12,208
AIM V.I. Government Securities Fund $ -0- $ -0- $ -0-
AIM V.I. Growth Fund $ 940,142 $ 876,546 $ 621,467
AIM V.I. Growth and Income Fund $ 2,951,259 $ 2,834,451 $ 1,190,597
AIM V.I. High Yield Fund $ -0- $ -0-* $ N/A
AIM V.I. International Equity Fund $ 1,061,593 $ 814,499 $ 605,318
AIM V.I. Money Market Fund $ -0- $ -0- $ -0-
AIM V.I. Telecommunications and Technology Fund $ 131,019 $ 120,189 $ 123,863
AIM V.I. Value Fund $ 1,978,681 $ 1,920,264 $ 1,503,734
</TABLE>
* Commissions paid are for the period May 1,1998 (date operations commenced)
through December 31, 1998.
INVESTMENT STRATEGIES AND RISKS
Information concerning each Fund's non-fundamental investment objective
is set forth in the Prospectus under the heading "Investment Objectives and
Strategies." There can be no assurance that any Fund will achieve its objective.
The principal features of each Fund's investment program and the primary risks
associated with that investment program are discussed in the Prospectus under
the following headings: "Investment Objectives and Strategies" and "Principal
Risks of Investing in the Funds". The following discussion of investment
policies supplements the discussion of the investment strategies and risks set
forth in the Prospectus.
Set forth in this section is further information with respect to
certain Fund's investment policies, strategies and practices. The investment
objective(s) of each Fund are non-fundamental policies and may be changed by the
Board of Trustees may be changed by the Board of Trustees without shareholder
approval. Each Fund's investment policies, strategies and practices are also
non-fundamental. The Board of Trustees of the Trust reserves the right to change
any
10
<PAGE> 86
of these non-fundamental investment policies, strategies or practices without
shareholder approval. However, shareholders will be notified before any material
change in the investment policies become effective. Each Fund has adopted
certain investment restrictions, some of which are fundamental and cannot be
changed without shareholder approval. See "Investment Restrictions" in this
Statement of Additional Information. Individuals considering the purchase of
shares of any Fund should recognize that there are risks in the ownership of any
security.
AGGRESSIVE GROWTH FUND
The Fund will invest primarily in common stocks, convertible bonds,
convertible preferred stocks and warrants of companies in the small to
medium-sized category (i.e., companies with a market capitalization within the
range of small cap stocks in the Russell 2000 Index). Management of the Fund
will be particularly interested in companies that are likely to benefit from new
or innovative products, services or processes that should enhance such
companies" prospects for future growth in earnings. As a result of this policy,
the market prices of many of the securities purchased and held by the Fund may
fluctuate widely. Any income received from securities held by the Fund will be
incidental, and an investor should not consider a purchase of shares of the Fund
as equivalent to a complete investment program. The Fund's portfolio is
primarily comprised of securities of two basic categories: (a) "core" companies,
which Fund management considers to have experienced above-average and consistent
long-term growth in earnings and to have excellent prospects for outstanding
future growth, and (b) "earnings acceleration" companies which Fund management
believes are currently enjoying dramatic increase in profits. The Fund's
strategy does not preclude investment in large, seasoned companies which in the
judgement of AIM possess superior potential returns similar to companies with
formative growth profiles. The Fund will also invest in established smaller
companies (under $500 million in market capitalization) which offer exceptional
value based upon substantially above average earnings growth potential relative
to market value. The Fund may invest in non-equity securities, such as corporate
bonds or U.S. Government obligations during periods when, in the opinion of AIM,
prevailing market, financial, or economic conditions warrant, as well as when
such holdings are advisable in light of a change in circumstances of a
particular company or within a particular industry.
BALANCED FUND
The Fund will invest in a broadly diversified portfolio of
common stocks, preferred stocks, convertible securities and bonds. Although
equity securities will be purchased primarily for capital appreciation and fixed
income securities will be purchased primarily for income purposes, income and
capital appreciation potential will be considered in connection with all
investments. Most of such fixed income securities will be rated Baa or better by
Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard &
Poor's Rating Services ("S&P") or, if unrated, deemed to be of comparable
quality by AIM, although the Fund may invest to a limited extent in lower-rated
securities. (For a description of the various rating categories, see Appendix A
to this Statement of Additional Information.) The fixed income securities in
which the Fund invests may include U.S. Government obligations, mortgage-backed
securities, asset-backed securities, bank obligations, corporate debt
obligations and unrated obligations, including those of foreign issuers. The
Fund may, in pursuit of its objective, invest up to 10% of its total assets in
debt securities rated lower than Baa by Moody's or BBB by S&P, which are
commonly known as "junk bonds." See "Risk Factors -- Non-Investment Grade Debt
Securities" for more information concerning the risk factors associated with
investing in such securities. The Fund may also invest up to 25% of its total
assets in convertible securities. Compliance with all of the above percentage
requirements may limit the ability of the Fund to maximize total return. The
actual percentage of the assets invested in equity and fixed income securities
will vary from time to time, depending on the judgment of AIM as to general
market and economic conditions and trends, yields and interest rates and changes
in fiscal and monetary policies.
BLUE CHIP FUND
The Fund will invest primarily in common stocks, convertible securities
and bonds of blue chip companies (i.e., companies with leading market positions
and which possess strong financial characteristics, as described below).
The Fund intends to invest at least 65% of its total assets in the
common stocks of blue chip companies as determined by AIM. These companies will
have the potential for above-average growth in
11
<PAGE> 87
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:
o Market Characteristics
Blue chip companies are those which occupy (or in AIM's
judgment have the potential to occupy) leading market
positions that are expected to be maintained or enhanced over
time. Strong market positions, particularly in growing
industries, can give a company pricing flexibility as well as
the potential for strong unit sales. These factors can in turn
lead to higher earnings growth and greater share price
appreciation. Market leaders can be identified within an
industry as those companies which have:
- superior growth prospects compared with other companies in
the same industry;
- possession of proprietary technology with the potential to
bring about major changes within an industry; and/or
- leading sales within an industry, or the potential to become
a market leader.
o Financial Characteristics
Blue chip companies possess at least one of the following
attributes:
- faster earnings growth than its competitors and the market
in general;
- higher profit margins relative to its competitors;
- strong cash flow relative to its competitors; and/or
- a balance sheet with relatively low debt and a high return
on equity relative to its competitors.
When AIM believes securities other than common stocks offer opportunity
for long-term growth of capital and income, the Fund may invest in United States
government securities, corporate bonds and debentures and convertible preferred
stocks and debt securities. The Fund will invest only in debt securities (other
than convertible debt securities) which are rated at "Investment Grade" by
either S&P or Moody's. Debt securities in the lowest investment grade (e.g.,
rated BBB by S&P or Baa by Moody's) have speculative characteristics and changes
in economic conditions and other circumstances are more likely to lead to a
weakened capacity on the part of the issuer to make principal and interest
payments than is the case with higher grade bonds. The Fund will limit its
investments in convertible securities to those in which the underlying common
stock is a suitable investment for the Fund without regard to debt rating
category, but will not invest more than 10% of its total assets in convertible
securities. The Fund may invest in United States government securities and
corporate bonds and debentures when AIM believes interest rates on such
investments may decline thereby potentially increasing the market value of such
securities or to meet the additional investment objective of producing current
income. Under normal market conditions, the Fund expects at all times to have at
least 65% of its total assets invested in securities which AIM believes offer
opportunity for long-term growth of capital or income.
The Fund may invest up to 25% of total assets in securities of issuers
domiciled in foreign countries. For the risks involved in investing in foreign
securities, see "Risk Factors - Foreign Securities" in this Statement of
Additional Information.
CAPITAL APPRECIATION FUND
AIM will be particularly interested in companies that are likely to
benefit from new or innovative products, services or processes that should
enhance such companies" prospects for future growth in earnings.
12
<PAGE> 88
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 consistent long-term growth in earnings and to
have strong prospects for outstanding future growth, and (2) "earnings
acceleration" companies which AIM believes are currently enjoying a dramatic
increase in profits.
CAPITAL DEVELOPMENT FUND
The Fund will invest primarily in securities of small and medium-sized
companies (i.e., companies which fall in the smallest 85% by market
capitalization of publicly traded companies in the United States). Among factors
that AIM may consider when selecting investments in a company for the Fund are
(i) the growth prospects for a company's products, (ii) the economic outlook for
its industry, (iii) a company's new product development, (iv) its operating
management capabilities, (v) the relationship between the price of the security
and its estimated fundamental value, (vi) relevant market, economic and
political environments and (vii) financial characteristics such as balance sheet
analysis and return on assets. The Fund may invest in issuers making initial
public offerings of their securities if AIM determines that the issuer has good
prospects for growth.
DENT DEMOGRAPHIC TRENDS FUND
Harry S. Dent, Jr., President of H.S. Dent Advisors, Inc., is an
internationally known strategic consultant and best-selling author who provides
the Fund's portfolio managers with macroeconomic and sector research, along with
investment and market capitalization recommendations. The Fund's portfolio
managers then focus on companies within those sectors and market
capitalizations that have historically experienced or are deemed to have the
potential for above-average, long-term growth in revenues and earnings. The Fund
makes use of a unique investment style that blends AIM's earnings momentum
approach with proprietary guidance from Dent.
The Fund's portfolio managers may sell stocks that experience
decelerated earnings and negative earnings revisions. They actively monitor
valuation targets and may reduce positions that they believe have become too
heavily weighted in the Fund's portfolio.
The Fund may invest in companies of various market capitalizations and
is not limited exclusively to small-, mid- or large-cap stocks, which may help
minimize the risks associated with sector investing.
Demographic, economic and lifestyle trends may occur in different
phases around the world. The Fund is positioned to potentially take advantage of
these differing phases by investing in both domestic and foreign stock issuers.
DIVERSIFIED INCOME FUND
The Fund may invest up to 10% of its total assets in common stocks,
preferred stocks, similar equity securities and convertible securities of U.S.
and foreign companies. The Fund does not intend to invest more than 50% of its
total assets in lower-rated or unrated high yield securities or more than 50% of
its total assets in foreign debt securities. (For a description of the various
rating categories of corporate debt securities in which the Fund may invest, see
Appendix A to this Statement of Additional Information. For a description of
U.S. Government Agency Mortgage-Backed Securities, see Appendix B to this
Statement of Additional Information.) However, the Fund may from time to time
invest up to 100% of its total assets in U.S. Government securities and, as a
defensive measure, may invest up to 100% of its total assets in money market
securities. For a discussion of the investment risks associated with investments
in high yield securities and foreign securities, see "Risk Factors" in this
Statement of Additional Information.
13
<PAGE> 89
GLOBAL GROWTH AND INCOME FUND
The Fund will normally invest at least 65% of its total assets in a
combination of blue chip equity securities and high quality government bonds.
Government bonds are deemed to be high quality if at the time of the Fund's
investment they are rated within one of the two highest ratings categories of
Moody's or S&P i.e., rated Aaa or Aa by Moody's or AAA or AA by S&P (or a
comparable rating of any other nationally recognized statistical rating
organizations "NRSROs") or, if unrated, are determined by AIM 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 believes will assist the Fund in achieving its
objectives.
Equity securities that the Fund may purchase include common stocks,
preferred stocks, and warrants to acquire such stocks and other equity
securities. Government bonds that the Fund may purchase include debt obligations
issued or guaranteed by the U.S. or foreign governments (including foreign
states, provinces or municipalities) or their agencies, authorities or
instrumentalities and debt obligations of supranational entities organized or
supported by several national governments, such as the World Bank and the Asian
Development Bank. The debt obligations held by the Fund may include debt
obligations convertible into equity securities or having attached warrants or
rights to purchase equity securities.
AIM 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's assessment of global political and economic conditions and the relative
strengths and weaknesses of the world equity and debt markets. To enable the
Fund to respond to general economic changes and market conditions around the
world, the Fund is authorized to invest up to 100% of its assets in either
equity securities or debt securities.
Investments in securities of issuers in any one country other than the
United States, will represent no more than 40% of the Fund's total assets. The
Fund may purchase securities of an issuer located in one country but denominated
in the currency of another country (or a multinational currency unit).
GLOBAL UTILITIES FUND
Under normal circumstances, at least 65% of the Fund's total assets
will be invested in securities of public utility companies (either domestic or
foreign). Public utility companies include companies that produce or supply
electricity, natural gas, water, sanitary services, and telephone, telegraph,
cable, satellite or other communication or information transmission services, as
well as holding companies which derive at least 40% of their revenues from
utility-related activities and companies that provide advanced technologies for
use by the utilities industry. The Fund will seek to position itself to take
advantage of deregulation in the utility industry, and advances in communication
and natural gas technology. In addition to the Fund's investments in common and
preferred stocks of public utility companies, the Fund may invest up to 25% of
its total assets in convertible securities. When AIM deems it appropriate, the
Fund may also purchase the bonds of such companies. Investments in
non-convertible bonds, however, will not exceed 25% of the Fund's total assets.
The Fund may invest up to 10% of its total assets in lower-rated or unrated high
yield securities. (For a description of the various rating categories of
corporate debt securities in which the Fund may invest, see Appendix A to this
Statement of Additional Information.) The Fund may also invest up to 80% of its
total assets in securities of foreign companies, including investments in
American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and
underlying securities of foreign issuers. For a discussion of the investment
risks associated with investments in non-investment grade debt securities and
foreign securities, see "Risk Factors" in this Statement of Additional
Information.
A portfolio of utility company securities is subject to a different
degree of volatility than a more broadly diversified portfolio. Economic,
operational or regulatory changes that affect utility companies will have a
material impact upon the value of the securities that the Fund owns. Events,
such as changing weather
14
<PAGE> 90
patterns, emergencies involving nuclear power plants, or rapidly changing fuel
prices that have no direct connection with companies whose securities are owned
by the Fund may affect the prices of those securities.
Moreover, a portfolio of utilities industry securities is subject to
the risks unique to that industry, such as inflationary or other increases in
fuel and operating expenses, possible increases in the interest costs of loans
needed for capital construction programs, compliance with environmental
regulations, possible adverse changes in the regulatory climate and availability
of fuel sources.
GOVERNMENT SECURITIES FUND
The government securities which may be purchased by the Fund include
but are not limited to (1) U.S. Treasury obligations such as Treasury Bills
(maturities of one year or less), Treasury Notes (maturities of one to ten
years) and Treasury Bonds (generally maturities of greater than ten years) and
(2) obligations issued or guaranteed by U.S. Government agencies and
instrumentalities ("Agency Securities") which are supported by any of the
following: (a) the full faith and credit of the U.S. Treasury, such as
obligations of the Government National Mortgage Association ("GNMA"), (b) the
right of the issuers to borrow an amount limited to a specific line of credit
from the U.S. Treasury, such as obligations of the Federal National Mortgage
Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service or
(c) the credit of the agency or instrumentality, such as obligations of the
Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System.
Although their close relationship with the U.S. Government is believed to make
them high-quality securities with minimal credit risks, the U.S. Government is
not required by law to support the agencies and instrumentalities listed in (b)
and (c), above. Accordingly, such securities may involve risk of loss of
principal and interest; however, historically there have not been any defaults
of such issues. For a listing of some of the types of Agency Securities in which
the Fund may invest, see Appendix B to this Statement of Additional Information.
The Fund's investments include high coupon U.S. Government Agency
Mortgage-Backed Securities, which provide a higher coupon at the time of
purchase than the prevailing market rate yield. The prices of high coupon U.S.
Government Agency Mortgage-Backed Securities do not tend to rise as rapidly as
those of traditional fixed rate securities at times when interest rates are
decreasing, and tend to decline more slowly at times when interest rates are
increasing. The Fund may purchase such securities at a premium, which means that
a faster principal prepayment rate than expected will reduce the market value of
and income from such securities, while a slower prepayment rate will tend to
increase the market value of and income from such securities.
The composition and weighted average maturity of the Fund's portfolio
will vary from time to time, based upon the determination of AIM and how best to
further the Fund's investment objective. The Fund may invest in government
securities of all maturities, short-term, intermediate-term and long-term. The
Fund intends to maintain a dollar-weighted average portfolio maturity of between
three and ten years. This policy regarding portfolio maturity is a
non-fundamental policy of the Fund.
GROWTH FUND
Current income will not be an important criterion of investment
selection, and any such income should be considered incidental. The Fund's
portfolio is primarily comprised of securities of two basic categories of
companies: (1) "core" companies, which AIM considers to have experienced
consistent long-term growth in earnings and to have strong prospects for
outstanding future growth, and (2) "earnings acceleration" companies which AIM
believes are currently enjoying a dramatic increase in profits.
HIGH YIELD FUND
The Fund invests principally in publicly traded non-investment grade
debt securities. The Fund will also consider the possibility of capital growth
when it purchases and sells securities. Debt securities of less than investment
grade are considered "high risk" securities (commonly referred to as junk
bonds). The Fund will invest over 50% of the value of its total assets in
securities that are rated Baa, Ba or B by Moody's or BBB, BB, or B by S&P, or
securities of comparable quality in the opinion of the fund's portfolio
managers, that are either unrated or rated by other NRSROs. (For a description
of the various rating categories, see Appendix A to this
15
<PAGE> 91
Statement of Additional Information.) The Fund may also hold, from time to time,
securities rated Caa by Moody's or CCC by S&P, or if unrated or rated by other
NRSROs, securities of comparable quality as determined by AIM. It should be
noted, however, that achieving the Fund's investment objective may be more
dependent on the credit analysis of AIM, and less on that of credit rating
agencies, than may be the case for funds that invest in more highly rated bonds.
While the securities held by the Fund are expected to provide greater
income and, possibly, opportunity for greater gain than investments in more
highly rated securities, they may be subject to greater risk of loss of income
and principal and are more speculative in nature. The Fund's yield and the net
asset value of its shares may be expected to fluctuate over time. Therefore, an
investment in the Fund may not be appropriate for some investors and should not
constitute a complete investment program for others. See "Risk Factors --
Non-Investment Grade Debt Securities."
The Fund may invest in both illiquid securities and securities which
are subject to restrictions on resale because they have not been registered
under the Securities Act of 1933. See "Illiquid Securities" for further
information regarding such investments.
INTERNATIONAL EQUITY FUND
In managing the Fund, AIM seeks to apply to a diversified portfolio of
international equity securities substantially the same investment strategy which
it applies to the Growth Fund with respect to that Fund's investment in United
States equities markets. The Fund will utilize to the extent practicable a fully
managed investment policy providing for the selection of securities which meet
certain quantitative standards determined by AIM. AIM will review carefully the
earnings history and prospects for growth of each company considered for
investment by the Fund. It is expected that the Fund's portfolio, when fully
invested, will generally be comprised of two basic categories of foreign
companies: (1) "core" companies, which AIM considers to have experienced
consistent long-term growth in earnings and to have strong prospects for
outstanding future growth, and (2) companies that AIM believes are currently
experiencing a greater than anticipated increase in earnings. If a particular
foreign company meets the quantitative standards determined by AIM, its
securities may be acquired by the Fund regardless of the location of the company
or the percentage of the Fund's investments in the company's country or region.
However, AIM will also consider other factors in making investment decisions for
the Fund, including such factors as the prospects for relative economic growth
among countries or regions, economic and political conditions, currency exchange
fluctuations, tax considerations and the liquidity of a particular security. For
a discussion of the investment risks associated with investments in foreign
securities, see "Risk Factors" in this Statement of Additional Information.
MONEY MARKET FUND
The Fund invests in a diversified portfolio of high quality U.S. dollar
denominated money market instruments and other similar instruments with
maturities of 397 days or less from the date of purchase, and will maintain a
dollar weighted-average portfolio maturity of 90 days or less. Securities
subject to repurchase agreements may bear longer maturities.
The Fund invests in a broad range of U.S. Government and foreign
government obligations, and bank and commercial instruments that may be
available in the money markets. Such obligations include U.S. Treasury
obligations and repurchase agreements secured by such obligations. The Money
Market Fund intends to invest in bankers' acceptances, certificates of deposit,
repurchase agreements, time deposits, variable rate master demand notes, taxable
municipal securities and commercial paper, and U.S. Government direct
obligations and U.S. Government agencies' securities. Bankers acceptances,
certificates of deposit and time deposits may be purchased from U.S. or foreign
banks. All of these instruments, which are collectively referred to as "Money
Market Obligations," are briefly described in Appendix C to this Statement of
Additional Information.
The Fund will limit investments in Money Market Obligations to those
which are denominated in U.S. dollars and which at the date of purchase are
"First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule
may be amended from time to time. Generally "First Tier" securities are
securities that are rated in the highest rating category by two NRSROs, or, if
only rated by one NRSRO, are rated in the highest rating
16
<PAGE> 92
category by that NRSRO, or, if unrated, are determined by AIM (under the
supervision of and pursuant to guidelines established by the Board of Trustees)
to be of comparable quality to a rated security that meets the foregoing quality
standards. For a more complete definition of a "First Tier" security, see "Money
Market Obligations" in this Statement of Additional Information.
The Money Market Fund may invest up to 100% of its total assets in
obligations issued by banks. While the Fund will limit its investments in bank
instruments to U.S. dollar denominated obligations, it may invest in Eurodollar
obligations (i.e., U.S. dollar-denominated obligations issued by a foreign
branch of a domestic bank), Yankee dollar obligations (i.e., U.S.
dollar-denominated obligations issued by a domestic branch of a foreign bank)
and obligations of foreign branches of foreign banks. The Money Market Fund will
limit its aggregate investments in foreign bank obligations, including
Eurodollar obligations and Yankee dollar obligations, to 50% of its total assets
at the time of purchase, provided that there is no limitation upon the Fund's
investments in (a) Eurodollar obligations, if the domestic parent of the foreign
branch issuing the obligation is unconditionally liable in the event that the
foreign branch for any reason fails to pay on the Eurodollar obligation; and (b)
Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to
the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign
bank obligations include time deposits, which are non-negotiable deposits
maintained in a bank for a specified period of time at a stated interest rate.
For a discussion of the risks pertaining to investments in foreign securities,
see "Risk Factors" in this Statement of Additional Information.
TELECOMMUNICATIONS AND TECHNOLOGY FUND
At least 65% of the Fund's total assets normally will be invested in
securities issued by companies in the telecommunications and technology
industries.
Telecommunications and technology companies cover a variety of sectors,
ranging from companies concentrating on established technologies to those
primarily engaged in emerging or developing technologies. The characteristics of
companies focusing on the same technology will vary among countries depending
upon the extent to which the technology is established in the particular
country. AIM will allocate the Fund's investments among these sectors depending
upon its assessment of their relative long-term growth potential.
Examples of telecommunications/technology companies include those
engaged in designing, developing or providing the following products and
services: communications equipment and services (including equipment and
services for both data and voice transmission); electronic components and
equipment; broadcasting (including television and radio, satellite, microwave
and cable television and narrowcasting); computer equipment, mobile
communications and cellular radio/paging; electronic mail; local and wide area
networking and linkage of word and data processing systems; publishing and
information systems; videotext and teletext; and emerging technologies combining
telephone, television and/or computer systems.
AIM believes that there are opportunities for continued growth in
demand for components, products, media and systems to collect, store, retrieve,
transmit, process, distribute, record, reproduce and use information. The
pervasive societal impact of communications and information technologies has
been accelerated by the lower costs and higher efficiencies that result from the
blending of computers with telecommunications and technology systems.
Accordingly, companies engage in the production of methods for using electronic
and, potentially, video technology to communicate information are expected to be
important in the Fund's portfolio. Older technologies, such as photography and
print, also may be represented, however.
Telecommunications and technology are global industries with
significant, growing markets outside of the United States. A sizeable proportion
of the companies that comprise the telecommunications industry are headquartered
outside of the United States. From time to time, however, a significant portion
of the Fund's assets may be invested in the securities of domestic issuers.
AIM uses its financial expertise in markets located throughout the
world in attempting to identify those countries and telecommunications and
technology companies then providing the greatest potential for long-term capital
appreciation. AIM will allocate the Fund's assets among securities of countries
and in currency denominations and industry sectors where opportunities for
meeting the Fund's investment objective are expected to be the most attractive.
17
<PAGE> 93
The Fund may, in pursuit of its objective, invest up to 5% of its total
assets in below investment grade debt securities. See "Risk Factors --
Non-Investment Grade Debt Securities" for more information concerning the risk
factors associated with investing in such securities.
VALUE FUND
The Fund invests primarily in equity securities judged by AIM to be
undervalued relative to the current or projected earnings of the companies
issuing the securities, or relative to current market values of assets owned by
the companies issuing the securities or relative to the equity market generally.
The secondary objective of income would be satisfied principally from the income
(interest and dividends) generated by the common stocks, convertible bonds and
convertible preferred stocks held in the Fund's portfolio. The Fund may also
acquire preferred stocks and debt instruments having prospects for growth of
capital.
INVESTMENT RESTRICTIONS
FUNDAMENTAL RESTRICTIONS
Each Fund is subject to the following fundamental investment
restrictions, except Global Utilities Fund is not subject to restrictions
(1) or (4). Fundamental restrictions may be changed only by a vote of the lesser
of (i) 67% or more of the Fund's shares present at a meeting if the holders of
more than 50% of the outstanding shares are present in person or represented by
proxy, or (ii) more than 50% of the Fund's outstanding shares. Consistent with
applicable law and unless otherwise provided, all percentage limitations apply
at the time of purchase.
(1) The Fund is a "diversified company" as defined in the 1940 Act. The
Fund will not purchase the securities of any issuer if, as a result, the Fund
would fail to be a diversified company within the meaning of the 1940 Act, and
the rules and regulations promulgated thereunder, as such statute, rules and
regulations are amended from time to time or are interpreted from time to time
by the SEC staff (collectively, the 1940 Act Laws and Interpretations) or except
to the extent that the Fund may be permitted to do so by exemptive order or
similar relief (collectively, with the 1940 Act Laws and Interpretations, the
1940 Act Laws, Interpretations and Exemptions). In complying with this
restriction, however, the Fund may purchase securities of other investment
companies to the extent permitted by the 1940 Act Laws, Interpretations and
Exemptions;
(2) The Fund may not borrow money or issue senior securities, except as
permitted by the 1940 Act Laws, Interpretations and Exemptions;
(3) The Fund may not underwrite the securities of other issuers. This
restriction does not prevent the Fund from engaging in transactions involving
the acquisition, disposition or resale of its portfolio securities, regardless
of whether the Fund may be considered to be an underwriter under the Securities
Act of 1933;
(4) The Fund will not make investments that will result in the
concentration (as that term may be defined or interpreted by the 1940 Act Laws,
Interpretations and Exemptions) of its investments in the securities of issuers
primarily engaged in the same industry. This restriction does not limit the
Fund's investments in (i) obligations issued or guaranteed by the U.S.
Government, its agencies or instrumentalities, (ii) tax-exempt obligations
issued by governments or political subdivisions of governments, or (iii) for
Money Market, bank instruments. In complying with this restriction, the Fund
will not consider a bank-issued guaranty or financial guaranty insurance as a
separate security;
(5) The Fund may not purchase real estate or sell real estate unless
acquired as a result of ownership of securities or other instruments. This
restriction does not prevent the Fund from investing in issuers that invest,
deal, or otherwise engage in transactions in real estate or interests therein,
or in investing in securities that are secured by real estate or interests
therein;
18
<PAGE> 94
(6) The Fund may not purchase physical commodities or sell physical
commodities unless acquired as a result of ownership of securities or other
instruments. This restriction does not prevent the Fund from engaging in
transactions involving futures contracts and options thereon or investing in
securities that are secured by physical commodities;
(7) The Fund may not make personal loans or loans of its assets to
persons who control or are under common control with the Fund, except to the
extent permitted by 1940 Act Laws, Interpretations and Exemptions. This
restriction does not prevent the Fund from, among other things, purchasing debt
obligations, entering into repurchase agreements, loaning its assets to
broker-dealers or institutional investors, or investing in loans, including
assignments and participation interests;
(8) The Fund may, notwithstanding any other fundamental investment
policy or limitation, invest all of its assets in the securities of a single
open-end management investment company with substantially the same fundamental
investment objectives, policies and limitations as that Fund; and
Global Utilities is also subject to the following fundamental
investment restriction:
The Fund will concentrate (as such term may be defined or
interpreted by the 1940 Act laws, interpretations, and exemptions) its
investments in the securities of domestic and foreign public utility companies.
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 Trustees
has adopted non-fundamental restrictions for the Funds relating to certain of
these restrictions which the advisor must follow in managing the Funds. Any
changes to these non-fundamental restrictions, which are set forth below,
require the approval of the Board of Trustees.
NON-FUNDAMENTAL RESTRICTIONS
The following non-fundamental investment restrictions apply to all of
the Funds, except Global Utilities Fund is not subject to restrictions (1) or
(3), but are not fundamental. They may be changed for any Fund without approval
of that Fund's voting securities.
(1) In complying with the fundamental restriction regarding issuer
diversification, the Fund will not, with respect to 75% of its total assets (and
for Money Market Fund, with respect to 100% of its total assets), purchase the
securities of any issuer (other than securities issued or guaranteed by the U.
S. Government or any of its agencies or instrumentalities), if, as a result, (i)
more than 5% of the Fund's total assets would be invested in the securities of
that issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii) the
Fund would hold more than 10% of the outstanding voting securities of that
issuer. The Fund may (i) purchase securities of other investment companies as
permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in
securities of money market funds and lend money to other investment companies
and their series portfolios that have AIM as an investment advisor, subject to
the terms and conditions of any exemptive orders issued by the SEC.
(2) In complying with the fundamental restriction regarding borrowing
money and issuing senior securities, the Fund may borrow money in an amount not
exceeding 33 1/3% of its total assets (including the amount borrowed) less
liabilities (other than borrowings). The Fund may borrow from banks,
broker/dealers or other investment companies or their series portfolios that
have AIM or an affiliate of AIM as an investment advisor (an "Advised Fund").
The Fund may not borrow for leveraging, but may borrow for temporary or
emergency purposes, in anticipation of or in response to adverse market
conditions, or for cash management purposes. The Fund may not purchase
additional securities when any borrowing from banks exceeds 5% of the Fund's
total assets.
(3) In complying with the fundamental restriction regarding industry
concentration, the Fund may invest up to 25% of its total assets in the
securities of issuers whose principal business activities are in the same
industry.
19
<PAGE> 95
(4) In complying with the fundamental restriction with regard to making
loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to
another Advised Fund, on such terms and conditions as the SEC may require in an
exemptive order.
(5) Not withstanding the fundamental restriction with regard to
investing all assets in an open-end fund, the Fund may not invest all of its
assets in the securities of a single open-end management investment company with
the same fundamental investment objectives, policies and restrictions as the
Fund.
For purposes of Global Utilities Fund's fundamental restriction
regarding industry concentration, public utility companies shall consist of
companies that produce or supply electricity, natural gas, water, sanitary
services, and telephone, cable, satellite, telegraph or other communication or
information transmission services, as well as developing utility technology
companies and holding companies which derive at least 40% of their revenues from
utility-related activities.
CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES
Each of the Funds has the flexibility to invest, to the extent
described below, in a variety of instruments designed to enhance its investment
capabilities. Each of the Funds may invest in money market obligations, foreign
securities (including ADRs and EDRs), repurchase agreements, reverse repurchase
agreements, taxable municipal securities, illiquid securities and Rule 144A
securities; the Diversified Income Fund and the Government Fund may invest in
U.S. Government Agency Mortgage-Backed Securities; each of the Funds may
purchase or sell securities on a delayed delivery or when-issued basis and may
borrow money; each of the Funds, other than the Money Market Fund, may lend
portfolio securities and make short sales "against the box." A short sale is
"against the box" to the extent that the Fund contemporaneously owns or has the
right to obtain securities identical to those sold short without payment of any
further consideration.
Each of the Funds, other than the Money Market Fund, may write (i.e.,
sell) "covered" put and call options and buy put and call options on domestic
and foreign securities, securities indices and currencies. Each of the Funds,
other than the Money Market Fund, may use exchange-traded financial futures
contracts, options thereon, and forward contracts as a hedge to protect against
possible changes in market values. A brief description of these investment
instruments and their risks appears below. See "Hedging and Other Investment
Techniques" in this Statement of Additional Information for more detailed
information.
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, may invest all or substantially all of the assets
of each Fund (other than Money Market Fund) in cash or Money Market
Obligations, including repurchase agreements, denominated in foreign currencies.
As set forth in the Prospectus, the Money Market Fund will limit its
purchases of Money Market Obligations to U.S. dollar denominated securities
which are "First Tier" securities, as such term is defined from time to time in
Rule 2a-7 under the 1940 Act. A First Tier Security is generally a security
that: (i) has received a short-term rating, or is subject to a guarantee that
has received a short-term rating, or, in either case, is issued by an issuer
with a short-term rating from the Requisite NRSROs in the highest short-term
rating category for debt obligations; (ii) is an unrated security that the
Fund's investment adviser has determined are of comparable
20
<PAGE> 96
quality to a rated security described in (i); (iii) is a security issued by a
registered investment company that is a money market fund; or (iv) is a
Government Security.
Subsequent to its purchase by the Fund, an issue of Money Market
Obligations may cease to be a First Tier security. Subject to certain exceptions
set forth in Rule 2a-7, such an event will not require the elimination of the
security from the Fund, but AIM will consider such an event to be relevant in
its determination of whether the Fund should continue to hold the security.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements with
institutions believed by the Trust's Board of Trustees to present minimal credit
risk. A repurchase agreement is an instrument under which the Fund acquires
ownership of a debt security and the seller agrees, at the time of the sale, to
repurchase the obligation at a mutually agreed upon time and price, thereby
determining the yield during the Fund's holding period. With regard to
repurchase transactions, in the event of a bankruptcy or other default of a
seller of a repurchase agreement (such as the sellers' failure to repurchase the
obligation in accordance with the terms of the agreement), a Fund could
experience both delays in liquidating the underlying securities and losses,
including: (a) a possible decline in the value of the underlying security during
the period while the Fund seeks to enforce its rights thereto; (b) possible
subnormal levels of income and lack of access to income during this period; and
(c) expenses of enforcing its rights. Repurchase agreements are considered to be
loans by the Fund under the 1940 Act. Repurchase agreements will be secured by
U.S. Treasury securities, U.S. Government agency securities (including, but not
limited to, those which have been stripped of their interest payments and
mortgage-backed securities) and commercial paper.
Although the underlying collateral for repurchase agreements may have
maturities exceeding one year, the Funds will not enter into repurchase
agreements expiring in more than seven days. The Fund may, however, enter into a
"continuing contract" or "open" repurchase agreement under which the seller is
under a continuing obligation to repurchase the underlying obligation from the
Fund on demand and the effective interest rate is negotiated on a daily basis.
Repurchase agreements are considered to be loans by the Fund under the 1940 Act.
Securities subject to repurchase agreements will be held in the custodian's
account with the Federal Book-Entry System on behalf of the Fund.
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.
21
<PAGE> 97
CONVERTIBLE SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds (except the Money Market Fund) may invest in convertible
securities. Convertible securities usually consist of corporate debt securities
or preferred stock that may in certain circumstances be converted into a
predetermined number of shares of another form of that issuer's equity, usually
common stock. Convertible securities consequently often involve attributes of
both debt and equity instruments, and investment in such securities requires
analysis of both credit and stock market risks. Convertible securities rank
senior to common stock in a corporation's capital structure but are usually
subordinated to comparable nonconvertible securities. Convertible securities may
be subject to redemption at the option of the issuer at a price established in
the convertible security's governing instrument. Although the Funds will only
purchase convertible securities that AIM considers to have adequate protection
parameters, including an adequate capacity to pay interest and repay principal
in a timely manner, each applicable Fund invests in such securities without
regard to corporate bond ratings.
REAL ESTATE INVESTMENT TRUSTS ("REITs")
To the extent consistent with their respective investment objectives
and policies, each of the Funds (except the Government Fund and the Money Market
Fund) may invest in equity and/or debt securities issued by REITs. Such
investments will not exceed (i) 25% of the total assets of the Aggressive Growth
Fund, the Balanced Fund, the Blue Chip Fund, the Capital Appreciation Fund, the
Capital Development Fund, the Dent Demographic Trends Fund, the Global Growth
and Income Fund, the Global Utilities Fund, the Growth Fund, the Growth and
Income Fund, the International Fund, the Telecommunications and Technology Fund
and the Value Fund; and (ii) 10% of the total assets of the Diversified Income
Fund and the High Yield Fund.
REITs are trusts which sell equity or debt securities to investors and
use the proceeds to invest in real estate or interest therein. A REIT may focus
on particular projects, such as apartment complexes, or geographic regions, such
as the Southeastern United States, or both.
To the extent that the Fund has the ability to invest in REITs, the
Fund could conceivably own real estate directly as a result of a default on the
securities it owns. The Fund, therefore, may be subject to certain risks
associated with the direct ownership of real estate including difficulties in
valuing and trading real estate, declines in the value of real estate, risks
related to general and local economic conditions, adverse changes in the climate
for real estate, increases in property taxes and operating expenses, changes in
zoning laws, casualty or condemnation losses, limitations on rents, changes in
neighborhood values, the appeal of properties to tenants, and increases in
interest rates.
In addition to the risks described above, equity REITs may be affected
by any changes in the value of the underlying property owned by the trusts,
while mortgage REITs may be affected by the quality of any credit extended.
Equity and mortgage REITs are dependent upon management skill, are not
diversified, and are therefore subject to the risk of financing single or a
limited number of projects. Such trusts are also subject to heavy cash flow
dependency, defaults by borrowers, self-liquidation, and the possibility of
failing to maintain exemption from the 1940 Act. Changes in interest rates may
also affect the value of debt securities held by a Fund. By investing in REITs
indirectly through a Fund, a shareholder will bear not only his/her
proportionate share of the expenses of the Fund, but also, indirectly, similar
expenses of the REITs.
FOREIGN SECURITIES
To the extent consistent with their respective investment objectives,
each of the Funds may invest in foreign securities. It is not anticipated that
such foreign securities will constitute more than: (i) 20% of the value of the
total assets of the Government Fund; (ii) 25% of the value of the total assets
of the Aggressive Growth Fund, the Balanced Fund, the Blue Chip Fund, the
Capital Appreciation Fund, the Capital Development Fund, the Dent Demographic
Trends Fund, the Growth Fund, the Growth and Income Fund, the High Yield Fund
and the Value Fund; (iii) 50% of the value of the total assets of the
Diversified Income Fund and the Money Market Fund (however, the Money Market
Fund may only invest in foreign securities denominated in U.S. dollars); (iv)
75% of the value of the total assets of the Telecommunications and Technology
Fund; (v) 80% of the value of the total assets of the Global Utilities Fund;
and (vi) 90% of the value of the total assets of the Global Growth and Income
Fund. The International Fund intends to invest at least 70% of its total
assets in foreign securities.
22
<PAGE> 98
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.
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
23
<PAGE> 99
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.
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.
24
<PAGE> 100
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 Trustees has determined that entering into delayed delivery agreements does
not present a materially increased risk of loss to shareholders, but the Board
of Trustees may restrict the use of delayed delivery agreements if the risk of
loss is determined to be material or if it affects the constant net asset value
of the Money Market Fund.
Many new issues of debt securities are offered on a "when-issued"
basis, that is, the date for delivery of and payment for the securities is not
fixed at the date of purchase, but is set after the securities are issued
(normally within forty-five days after the date of the transaction). The payment
obligation and the interest rate that will be received on the securities are
fixed at the time the buyer enters into the commitment. The Funds will only make
commitments to purchase such debt securities with the intention of actually
acquiring such securities, but the Funds may each sell these securities before
the settlement date if it is deemed advisable. The Fund holds, and maintains
until the settlement date segregated liquid assets of a dollar value sufficient
at all times to make payment for the when-issued securities. The securities will
be marked-to-market and additional assets will be segregated if necessary to
maintain adequate coverage of the when-issued commitments.
Securities purchased on a when-issued basis and the securities held in
the Funds' portfolios are subject to changes in market value based upon the
public's perception of the creditworthiness of the issuer and changes in the
level of interest rates (which will generally result in all of those securities
changing in value in the same way, i.e., all those securities experiencing
appreciation when interest rates rise). Therefore, if, in order to achieve
higher interest income, a Fund is to remain substantially fully invested at the
same time that it has purchased securities on a when-issued basis, there will be
a possibility that the market value of the Fund's assets will fluctuate to a
greater degree. Furthermore, when the time comes for the Fund to meet its
obligations under when-issued commitments, the Fund will do so by using
then-available cash flow, by sale of the segregated securities, by the sale of
other securities or, although it would not normally expect to do so, by
directing the sale of the when-issued securities themselves (which may have a
market value greater or less than the applicable Fund's payment obligation).
A sale of securities to meet such obligations carries with it a greater
potential for the realization of net short-term capital gains, which are not
exempt from federal income taxes. The value of when-issued securities on the
settlement date may be more or less than the purchase price.
If a Fund enters into a delayed delivery agreement or purchases a
when-issued security, the Fund will direct its custodian bank to segregate
liquid assets in an amount equal to its delayed delivery agreements or
when-issued commitments. If the market value of such securities declines,
additional cash or securities will be segregated on a daily basis so that the
market value of the account will equal the amount of such Fund's delayed
delivery agreements and when-issued commitments. To the extent that funds are
segregated, they will not be available for new investment or to meet
redemptions. Investment in securities on a when-issued basis and use of delayed
delivery agreements may increase the Fund's exposure to market fluctuation, or
may
25
<PAGE> 101
increase the possibility that the Fund will incur a short-term loss, if the
Fund must engage in portfolio transactions in order to honor a when-issued
commitment or accept delivery of a security under a delayed delivery agreement.
The Fund may employ techniques designed to minimize these risks. No additional
delayed delivery agreements or when-issued commitments will be made by a Fund
if, as a result, more than 25% of the Fund's net assets would become so
committed.
The Government Fund may engage in buy/sell back transactions (a form of
delayed delivery agreement). In a buy/sell back transaction, the Fund enters a
trade to sell securities at one price and simultaneously enters a trade to buy
the same securities at another price for settlement at a future date.
DOLLAR ROLL TRANSACTIONS
In order to enhance portfolio returns and manage prepayment risk, the
Diversified Income Fund and the Government Fund may engage in dollar roll
transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC.
In a dollar roll transaction, the Fund sells a mortgage security held in the
portfolio to a financial institution such as a bank or broker-dealer, and
simultaneously agrees to repurchase a substantially similar security (same type,
coupon and maturity) from the institution at a later date at an agreed upon
price. The mortgage securities that are repurchased will bear the same interest
rate as those sold, but generally will be collateralized by different pools of
mortgages with different prepayment histories. During the period between the
sale and repurchase, the Fund will not be entitled to receive interest and
principal payments on the securities sold. Proceeds of the sale will be invested
in short-term instruments, and the income from these investments, together with
any additional fee income received on the sale, could generate income for the
Fund exceeding the yield on the sold security.
Dollar roll transactions involve the risk that the market value of the
securities retained by the Fund may decline below the price of the securities
that the Fund has sold but is obligated to repurchase under the agreement. In
the event the buyer of securities under a dollar roll transaction files for
bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of
the securities may be restricted pending a determination by the other party, or
its trustee or receiver, whether to enforce the Fund's obligation to repurchase
the securities. See "Borrowing," below for the applicable limitation on dollar
roll transactions.
ILLIQUID SECURITIES
None of the Funds will invest more than 15% of their respective net
assets in illiquid securities, including restricted securities which are
illiquid. The Money Market Fund will not invest more than 10% of its net assets
in illiquid securities.
SPECIAL SITUATIONS
Although the Capital Appreciation Fund does not currently intend to do
so, it may invest in "special situations." A special situation arises when, in
the opinion of the Fund's management, the securities of a particular company
will, within a reasonably estimable period of time, be accorded market
recognition at an appreciated value solely by reason of a development applicable
to that company, and regardless of general business conditions or movements of
the market as a whole. Developments creating special situations might include,
among others: liquidations, reorganizations, recapitalizations, mergers,
material litigation, technical breakthroughs and new management or management
policies. Although large and well known companies may be involved, special
situations more often involve comparatively small or unseasoned companies.
Investments in unseasoned companies and special situations often involve much
greater risk than is inherent in ordinary investment securities.
26
<PAGE> 102
WARRANTS
The Aggressive Growth Fund, the Blue Chip Fund, the Capital Development
Fund, the Dent Demographic Trends Fund, the Global Growth and Income Fund, the
Growth and Income Fund, the High Yield Fund and the Telecommunications and
Technology Fund may, from time to time, invest in warrants. Warrants are, in
effect, longer-term call options. They give the holder the right to purchase a
given number of shares of a particular company at specified prices within
certain periods of time. The purchaser of a warrant expects that the market
price of the security will exceed the purchase price of the warrant plus the
exercise price of the warrant, thus giving him a profit. Of course, since the
market price may never exceed the exercise price before the expiration date of
the warrant, the purchaser of the warrant risks the loss of the entire purchase
price of the warrant. Warrants generally trade in the open market and may be
sold rather than exercised. Warrants are sometimes sold in unit form with other
securities of an issuer. Units of warrants and common stock may be employed in
financing young, unseasoned companies. The purchase price of a warrant varies
with the exercise price of a warrant, the current market value of the underlying
security, the life of the warrant and various other investment factors.
SHORT SALES
Each of the Funds (except the Money Market Fund) may enter into short
sales transactions from time to time. None of these Funds will make short sales
of securities nor maintain a short position unless at all times when a short
position is open, the Fund owns an equal amount of such securities or securities
convertible into or exchangeable, without payment of any further consideration,
for securities of the same issue as, and equal in amount to, the securities sold
short. This is a technique known as selling short "against the box." Such short
sales will be used by each of the Funds for the purpose of deferring recognition
of gain or loss for federal income tax purposes. In no event may more than 10%
of the value of any such Fund's total assets be deposited or pledged as
collateral for such sales at any time.
RULE 144A SECURITIES
Each of the Funds may invest in securities that are subject to
restrictions on resale because they have not been registered under the
Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred
to as private placements. Although securities which may be resold only to
"qualified institutional buyers" in accordance with the provisions of Rule 144A
under the 1933 Act are technically considered "restricted securities," the Funds
may each purchase Rule 144A securities without regard to the limitation on
investments in illiquid securities described above under "Illiquid Securities,"
provided that a determination is made that such securities have a readily
available trading market. AIM will determine the liquidity of Rule 144A
securities under the supervision of the Trust's Board of Trustees. Determination
of whether a Rule 144A security is liquid or not is a question of fact. In
making this determination AIM will consider the trading markets for the specific
security taking into account the unregistered nature of a Rule 144A security. In
addition, AIM could consider the (i) frequency of trades and quotes, (ii) number
of dealers and potential purchasers, (iii) dealer undertakings to make a market,
and (iv) nature of the security and of market place trades (for example, the
time needed to dispose of the security, the method of soliciting offers and the
mechanics of transfer). The liquidity of Rule 144A securities will be monitored
by AIM and, if as a result of changed conditions, it is determined that a Rule
144A security is no longer liquid, the Fund's holdings of illiquid securities
will be reviewed to determine what, if any, action is required to assure that
the Fund does not exceed its applicable percentage limitation for investments in
illiquid securities.
EQUITY-LINKED DERIVATIVES
Aggressive Growth Fund, Balanced Fund, Blue Chip Fund, Capital
Appreciation Fund, Capital Development Fund, Dent Demographic Trends Fund,
Global Growth and Income Fund, Global Utilities Fund, Growth and Income Fund,
Growth Fund, International Equity Fund, Telecommunications and Technology Fund
and Value Fund may invest in equity-linked derivative products designed to
replicate the composition and performance of particular indices. Examples of
such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark
Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial
Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities
("OPALS"). Investments in equity-linked derivatives involve the same risks
associated with a direct investment in the types of securities
27
<PAGE> 103
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.
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
28
<PAGE> 104
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.
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.
29
<PAGE> 105
(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 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
30
<PAGE> 106
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.
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.
31
<PAGE> 107
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 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.
32
<PAGE> 108
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 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.
33
<PAGE> 109
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 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
34
<PAGE> 110
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 and Technology Fund may seek to meet their
respective investment objectives by investing in non-investment grade debt
securities, commonly known as "junk bonds." While generally providing greater
income and opportunity for gain, non-investment grade debt securities may be
subject to greater risks than higher-rated securities. Economic downturns tend
to disrupt the market for junk bonds and adversely affect their values. Such
economic downturns may be expected to result in increased price volatility for
junk bonds and of the value of shares of the above-named Funds, and increased
issuer defaults on junk bonds.
In addition, many issuers of junk bonds are substantially leveraged,
which may impair their ability to meet their obligations. In some cases, junk
bonds are subordinated to the prior payment of senior indebtedness, which
potentially limits a Fund's ability to fully recover principal or to receive
payments when senior securities are subject to a default.
The credit rating of a junk bond does not necessarily address its
market value risk, and ratings may from time to time change to reflect
developments regarding the issuer's financial condition. Junk bonds have
speculative characteristics which are likely to increase in number and
significance with each successive lower rating category.
When the secondary market for junk bonds becomes more illiquid, or in
the absence of readily available market quotations for such securities, the
relative lack of reliable objective data makes it more difficult for the Trust's
trustees to value a Fund's securities, and judgment plays a more important role
in determining such valuations. Increased illiquidity in the junk bond market
also may affect a Fund's ability to dispose of such securities at desirable
prices.
In the event a Fund experiences an unexpected level of net redemptions,
the Fund could be forced to sell its junk bonds without regard to their
investment merits, thereby decreasing the asset based upon which
35
<PAGE> 111
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.
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.)
36
<PAGE> 112
MANAGEMENT
TRUSTEES AND OFFICERS
The trustees and officers of the Trust and their principal occupations
during at least the last five years are set forth below. Unless otherwise
indicated, the address of each trustee and executive officer is 11 Greenway
Plaza, Suite 100, Houston, Texas 77046.
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
*CHARLES T. BAUER (80) Trustee and Director and Chairman, A I M Management Group
Chairman Inc., A I M Advisors, Inc., A I M Capital
Management, Inc., A I M Distributors, Inc.,
A I M Fund Services, Inc. and Fund Management
Company; and Executive Vice Chairman and
Director, AMVESCAP PLC.
--------------------------------------------------------------------------------------------------------------------
BRUCE L. CROCKETT (55) Trustee Director, ACE Limited (insurance company).
906 Frome Lane Formerly, Director, President and Chief Executive
McLean, VA 22102 Officer, COMSAT Corporation; and Chairman, Board
of Governors of INTELSAT (international
communications company).
--------------------------------------------------------------------------------------------------------------------
OWEN DALY II (75) Trustee Formerly, Director, Cortland Trust Inc. (investment
Six Blythewood Road company), CF & I Steel Corp., Monumental Life
Baltimore, MD 21210 Insurance Company and Monumental General Insurance
Company; and Chairman of the Board of Equitable
Bancorporation.
--------------------------------------------------------------------------------------------------------------------
EDWARD K. DUNN, JR. (64) Trustee Chairman of the Board of Directors, Mercantile
2 Hopkins Plaza, 8th Floor Mortgage Corp. Formerly, Vice Chairman of the
Suite 805 Board of Directors, President and Chief Operating
Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and
President, Mercantile Bankshares.
--------------------------------------------------------------------------------------------------------------------
JACK FIELDS (48) Trustee Chief Executive Officer, Texana Global, Inc.
8810 Will Clayton Parkway (foreign trading company) and Twenty First
Jetero Plaza, Suite E Century, Inc. (a governmental affairs company);
Humble, TX 77338 and Director, Telscape International and
Administaff. Formerly, Member of the U.S. House of
Representatives.
--------------------------------------------------------------------------------------------------------------------
</TABLE>
----------------
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
37
<PAGE> 113
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
**CARL FRISCHLING (62) Trustee Partner, Kramer, Levin, Naftalis & Frankel (law
919 Third Avenue firm). Formerly Partner, Reid and Priest (law
New York, NY 10022 firm).
--------------------------------------------------------------------------------------------------------------------
*ROBERT H. GRAHAM (53) Trustee and Director, President and Chief Executive Officer,
President A I M Management Group Inc.; Director and
President, A I M Advisors, Inc.; Director and
Senior Vice President, A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc. and Fund Management Company; and
Director and CEO, Managed Products, AMVESCAP PLC.
--------------------------------------------------------------------------------------------------------------------
PREMA MATHAI-DAVIS (49) Trustee Chief Executive Officer, YWCA of the U.S.A.
350 Fifth Avenue, Suite 301
New York, NY 10118
--------------------------------------------------------------------------------------------------------------------
LEWIS F. PENNOCK (57) Trustee Partner, Pennock & Cooper (law firm).
6363 Woodway, Suite 825
Houston, TX 77057
--------------------------------------------------------------------------------------------------------------------
LOUIS S. SKLAR (60) Trustee Executive Vice President, Development and
The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership
2800 Post Oak Blvd. (real estate development).
Houston, TX 77056
--------------------------------------------------------------------------------------------------------------------
GARY T. CRUM (52) Senior Vice Director and President, A I M Capital
President Management, Inc.; Director and Executive Vice
President, A I M Management Group Inc.; Director
and Senior Vice President, A I M Advisors, Inc.; and
Director, A I M Distributors, Inc. and AMVESCAP
PLC.
====================================================================================================================
</TABLE>
--------------------
* A trustee who is an "interested person" of A I M Advisors, Inc. and the
Trust as defined in the 1940 Act.
** A trustee who is an "interested person" of the Trust as defined in the
1940 Act.
38
<PAGE> 114
<TABLE>
<CAPTION>
====================================================================================================================
POSITIONS HELD
NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
--------------------------------------------------------------------------------------------------------------------
CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel
President and and Secretary, A I M Advisors, Inc.; Senior Vice
Secretary President, General Counsel and Secretary,
A I M Management Group Inc.; Director, Vice
President and General Counsel, Fund Management
Company; General Counsel and Vice President,
A I M Fund Services, Inc.; and Vice President,
A I M Capital Management, Inc. and
A I M Distributors, Inc.
--------------------------------------------------------------------------------------------------------------------
DANA R. SUTTON (41) Vice President and Vice President and Fund Controller,
Treasurer A I M Advisors, Inc.; and Assistant Vice
President and Assistant Treasurer, Fund
Management Company.
--------------------------------------------------------------------------------------------------------------------
ROBERT G. ALLEY (51) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
--------------------------------------------------------------------------------------------------------------------
STUART W. COCO (44) Vice President Senior Vice President, A I M Capital Management,
Inc. and Vice President, A I M Advisors, Inc.
--------------------------------------------------------------------------------------------------------------------
MELVILLE B. COX (56) Vice President Vice President and Chief Compliance Officer,
A I M Advisors, Inc., A I M Capital Management,
Inc., A I M Distributors, Inc., A I M Fund
Services, Inc., and Fund Management Company.
--------------------------------------------------------------------------------------------------------------------
KAREN DUNN KELLEY (39) Vice President Senior Vice President, A I M Capital Management,
Inc.; and Vice President, A I M Advisors, Inc.
--------------------------------------------------------------------------------------------------------------------
EDGAR M. LARSEN (59) Vice President Vice President, A I M Capital
Management, Inc.
====================================================================================================================
</TABLE>
The standing committees of the Board are the Audit Committee, the
Investments Committee and the Nominating and Compensation Committee.
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: (i) considering management's recommendations
of independent accountants for each Fund and evaluating such accountants'
performance, costs and financial stability; (ii) with AIM, reviewing and
coordinating audit plans prepared by the Funds' independent accountants and
management's internal audit staff; and (iii) reviewing financial statements
contained in periodic reports to shareholders with the Funds' independent
accountants and management.
The members of the Investments Committee are Messrs. Bauer, Crockett,
Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr.
Mathai-Davis. The Investments Committee is responsible for: (i) overseeing AIM's
investment-related compliance systems and procedures to ensure their continued
adequacy; and (ii) considering and acting, on an interim basis between meetings
of the full Board, on
39
<PAGE> 115
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: (i) considering
and nominating individuals to stand for election as independent trustees as long
as the company maintains a distribution plan pursuant to Rule 12b-1 under the
1940 Act; (ii) reviewing from time to time the compensation payable to the
independent trustees; and (iii) making recommendations to the Board regarding
matters related to compensation, including deferred compensation plans and
retirement plans for the independent trustees.
The Nominating and Compensation Committee will consider nominees
recommended by a shareholder to serve as trustees, provided (i) that such
person was a shareholder of record at the time they submit such names and is
entitled to vote at the meeting, and (ii) that the Nominating and Compensation
Committee or the Board, as applicable, shall make the final determination of
persons to be nominated.
All of the Trust's trustees also serve as directors or trustees of some
or all of the other investment companies managed or advised by AIM. All of the
Trust's executive officers hold similar offices with some or all of the other
investment companies managed or advised by AIM.
Remuneration of Trustees
Each trustee is reimbursed for expenses incurred in connection with
each meeting of the Board of Trustees or any Committee thereof. Each trustee of
the Trust who is not also an officer of the Trust is compensated for his or her
services according to a fee schedule which recognizes the fact that such trustee
also serves as a director or trustee of certain other investment companies
advised or managed by AIM. Each such trustee receives a fee, allocated among the
AIM Funds for which he or she serves as a director or trustee, which consists of
an annual retainer component and a meeting fee component.
Set forth below is information regarding compensation paid or accrued
during the fiscal year ended December 31, 1999 for each trustee of the Trust:
40
<PAGE> 116
<TABLE>
<CAPTION>
====================================================================================================================
AGGREGATE RETIREMENT BENEFITS TOTAL
COMPENSATION ACCRUED BY COMPENSATION
TRUSTEE FROM TRUST(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3)
--------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Charles T. Bauer $ -0- $ -0- $ -0-
--------------------------------------------------------------------------------------------------------------------
Bruce L. Crockett $ 14,751 $ 37,485 $ 103,500
--------------------------------------------------------------------------------------------------------------------
Owen Daly II $ 14,751 $ 122,898 $ 103,500
--------------------------------------------------------------------------------------------------------------------
Edward K. Dunn, Jr. $ 14,751 $ -0- $ 103,500
--------------------------------------------------------------------------------------------------------------------
Jack Fields $ 14,473 $ 15,826 $ 101,500
--------------------------------------------------------------------------------------------------------------------
Carl Frischling(4) $ 14,751 $ 97,791 $ 103,500
--------------------------------------------------------------------------------------------------------------------
Robert H. Graham $ -0- $ -0- $ -0-
--------------------------------------------------------------------------------------------------------------------
Prema Mathai-Davis $ 14,443 $ -0- $ 101,500
--------------------------------------------------------------------------------------------------------------------
Lewis F. Pennock $ 14,751 $ 45,766 $ 103,500
--------------------------------------------------------------------------------------------------------------------
Ian W. Robinson(5) $ 3,464 $ 94,442 $ 25,000
--------------------------------------------------------------------------------------------------------------------
Louis S. Sklar $ 14,443 $ 90,232 $ 101,500
====================================================================================================================
</TABLE>
------------------
(1) The total amount of compensation deferred by all trustees of the Trust
during the fiscal year ended December 31, 1999, including interest
earned thereon, was $111,120.
(2) During the fiscal year ended December 31, 1999, the total amount of
expenses allocated to the Trust in respect of such retirement benefits
was $28,223. Data reflects compensation estimated for the calendar year
ended December 31, 1999.
(3) Each trustee serves as a director or trustee of a total of 12
registered investment companies advised by AIM. Data reflects
compensation estimated for the calendar year ended December 31, 1999.
(4) The Trust paid the law firm of Kramer, Levin, Naftalis & Frankel LLP
$54,485 in legal fees for services provided to the Funds during the
fiscal year ended December 31, 1999. Mr. Frischling, a trustee of the
Trust, is a partner in such firm.
(5) Mr. Robinson was a trustee until March 12, 1999, when he retired.
AIM Funds Retirement Plan for Eligible Directors/Trustees
Under the terms of the AIM Funds Retirement Plan for Eligible
Directors/Trustees (the "Plan"), each trustee (who is not a employee of any of
the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be
entitled to certain benefits upon retirement from the Board of Trustees.
Pursuant to the Plan, the normal retirement date is the date on which the
eligible trustee has attained age 65 and has completed at least five years of
continuous service with one or more of the regulated investment companies
managed, administered or distributed by AIM or its affiliates (the "Applicable
AIM Funds"). Each eligible trustee is entitled to receive an annual benefit from
the Applicable AIM Funds commencing on the first day of the calendar quarter
coincident with or following his or her date of retirement equal to a maximum of
75% of the annual retainer paid or accrued by the Applicable AIM Funds for such
trustee during the twelve-month period immediately preceding the trustee's
retirement (including amounts deferred under a separate agreement between the
Applicable AIM Funds and the trustee) and based on the number of such trustee's
years of service (not in excess of 10 years of service) completed with respect
to any of the Applicable AIM Funds. Such benefit is payable to each eligible
trustee in quarterly installments. If an eligible trustee dies after attaining
the normal retirement date but before receipt of all benefits under the Plan,
the trustee's surviving spouse (if any) shall receive a quarterly survivor's
benefit equal to 50% of the amount payable to the deceased trustee, for no more
than ten years beginning the first day of the calendar quarter following the
date of the trustee's death. Payments under the Plan are not secured or funded
by any AIM Fund.
41
<PAGE> 117
Set forth below is a table that shows the estimated annual benefits
payable to an eligible trustee upon retirement assuming a specified level of
compensation and years of service classifications. The estimated credited years
of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock,
Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1
years, respectively.
ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
<TABLE>
<CAPTION>
============================================================
Number of
Years of
Service With Annual Retirement
the Applicable AIM Compensation Paid By All
Funds Applicable AIM Funds
============================================================
<S> <C>
10 $67,500
------------------------------------------------------------
9 $60,750
------------------------------------------------------------
8 $54,000
------------------------------------------------------------
7 $47,250
------------------------------------------------------------
6 $40,500
------------------------------------------------------------
5 $33,750
============================================================
</TABLE>
Deferred Compensation Agreements
Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis
(for purposes of this paragraph only, the "deferring trustees") have each
executed a Deferred Compensation Agreement (collectively, the "Agreements").
Pursuant to the Agreements, the deferring trustees elected to defer receipt of
100% of their compensation payable by the Trust, and such amounts are placed
into a deferral account. Currently, the deferring trustees may select various
AIM Funds in which all or part of their deferral account shall be deemed to be
invested. Distributions from the deferring trustees' deferral accounts will be
paid in cash, in generally equal quarterly installments over a period of five
(5) or ten (10) years (depending on the Agreement) beginning on the date the
deferring trustee's retirement benefits commence under the Plan. The Trust's
Board of Trustees, in its sole discretion, may accelerate or extend the
distribution of such deferral accounts after the deferring trustee's termination
of service as a trustee of the Trust. If a deferring trustee dies prior to the
distribution of amounts in his deferral account, the balance of the deferral
account will be distributed to his or her designated beneficiary in a single
lump sum payment as soon as practicable after such deferring trustee's death.
The Agreements are not funded and, with respect to the payments of amounts held
in the deferral accounts, the deferring trustees have the status of unsecured
creditors of the Trust and of each other AIM Fund from which they are deferring
compensation.
INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS
Each Fund has entered into a master investment advisory agreement (the
"Advisory Agreement") dated May 1, 2000, and a master administrative services
agreement (the "Administrative Services Agreement"), dated May 1, 1998, with
AIM. A prior investment advisory agreement with substantially similar terms to
the Advisory Agreement was in effect prior to May 1, 2000. A prior master
administrative services agreement ("Prior Administrative Services Agreement")
with substantially similar terms to the Administrative Services Agreement, was
in effect prior to May 1, 1998. In addition, AIM has also entered into a
sub-advisory agreement, dated May 1, 2000 (the Sub-Advisory Agreement), with
H.S. Dent Advisors, Inc. ("Dent"), with respect to the Dent Demographic Trends
Fund. A prior sub-advisory agreement with substantially identical terms was in
effect prior to May 1, 2000. The address of Dent is 6515 Gwin Road, Oakland,
California 94611. See "Fund Management" in each Prospectus.
42
<PAGE> 118
AIM was organized in 1976, and along with its subsidiaries, manages or
advises over 120 investment portfolios encompassing a broad range of investment
objectives. AIM is a wholly owned subsidiary of A I M Management Group Inc.
("AIM Management"), a holding company that has been engaged in the financial
services business since 1976. The address of AIM is 11 Greenway Plaza, Suite
100, Houston, Texas 77046-1173.
AIM and the Trust have adopted a Code of Ethics which requires
investment personnel and certain other employees to (a) pre-clear all personal
securities transactions subject to the Code of Ethics; (b) file reports
regarding such transactions; (c) 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 (subject to a
de minimis exception), and (iii) transactions involving securities being
considered for investment by an AIM Fund (subject to the de minimis exception);
and (d) abide by certain other provisions of the Code of Ethics. The de
minimis exception under the Code of Ethics covers situations where there is no
material conflict of interest because of the large market capitalization of a
security and the relatively small number of shares involved in a personal
transaction. The Code of Ethics also generally prohibits AIM employees from
purchasing securities in initial public offerings. Personal trading reports are
periodically reviewed by AIM, and the Board of Trustees reviews quarterly and
annual reports (which summarize any significant violations of the Code of
Ethics). Sanctions for violating the Code of Ethics may include censure,
monetary penalties, suspension or termination of employment.
The Advisory Agreement for the Funds provides that each Fund will pay
all expenses of the Fund, including, without limitation: brokerage commissions,
taxes, legal, auditing, or governmental fees, the cost of preparing share
certificates, custodian, transfer and shareholder service agent costs, expenses
of issue, sale, redemption and repurchase of shares, expenses of registering and
qualifying shares for sale, expenses relating to trustees and shareholder
meetings, the cost of preparing and distributing reports and notices to
shareholders, the fees and other expenses incurred by the Trust on behalf of the
Funds in connection with membership in investment company organizations, the
cost of printing copies of prospectuses and statements of additional information
distributed to the Fund's shareholders; and all other charges and costs of the
Fund's operations unless otherwise explicitly provided.
In addition, if a Fund engages in securities lending, AIM will provide
the Fund investment advisory services and related administrative services. The
Advisory Agreement describes the administrative services to be rendered by AIM
if a Fund engages in securities lending activities, as well as the compensation
AIM may receive for such administrative services. Services to be provided
include: (a) overseeing participation in the securities lending program to
ensure compliance with all applicable regulatory and investment guidelines; (b)
assisting the securities lending agent or principal (the agent) in determining
which specific securities are available for loan; (c) monitoring the agent to
ensure that securities loans are effected in accordance with AIM's instructions
and with procedures adopted by the Board; (d) preparing appropriate periodic
reports for, and seeking appropriate approvals from, the Board with respect to
securities lending activities; (e) responding to agent inquiries; and (f)
performing such other duties as may be necessary.
AIM's compensation for advisory services rendered in connection with
securities lending is included in the advisory fee schedule. As compensation for
the related administrative services AIM will provide, a lending Fund will pay
AIM a fee equal to 25% of the net monthly interest or fee income retained or
paid to the Fund from such activities. AIM currently intends to waive such fee,
and has agreed to seek Board approval prior to its receipt of all or a portion
of such fee.
The Advisory Agreement for the Funds and the Sub-Advisory Agreement for
the Dent Demographic Trends Fund provide that they will each remain in effect
until June 30, 2001, and continue in effect from year to year thereafter only if
such continuance is specifically approved at least annually (i) by the Trust's
Board of Trustees or by the vote of a majority of the outstanding voting
securities of the Funds (as defined in the 1940 Act); and (ii) by the
affirmative vote of a majority of the trustees who are not parties to the
agreement or "interested persons" of any such party (the "Non-Interested
Trustees") by votes cast in person at a meeting called for such purpose. The
Advisory Agreement was initially approved by the Trust's Board of Trustees
(including the affirmative vote of all of the Non-Interested Trustees) on
February 3, 2000, and was approved by the Funds' shareholders on April 10, 2000.
The Advisory Agreement became effective on May 1, 2000. The Sub-Advisory
Agreement for the Dent Demographic Trends Fund was initially approved by the
Trust's Board
43
<PAGE> 119
of Trustees (including the affirmative vote of all of the Non-Interested
Trustees) on February 3, 2000, and was approved by the applicable Fund's
shareholders and became effective May 1, 2000.
The Advisory and Sub-Advisory Agreement provide that each of AIM (in
the case of the Advisory Agreement), and Dent (in the case of the Sub-Advisory
Agreement), may terminate its agreement with respect to any Fund(s) on sixty
(60) days' written notice without penalty. In addition, the Trust (by vote of
the Board of Trustees or by vote of a majority of the outstanding voting
securities of a Fund) may terminate the Advisory or Sub-Advisory Agreements with
respect to a Fund on 60 days' written notice without penalty. Each agreement
terminates automatically in the event of its assignment.
As compensation for its services, AIM pays 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%
Over $2 billion ...................................................... 0.07%
</TABLE>
AIM may from time to time waive or reduce its fee. Voluntary fee
waivers or reductions may be rescinded at any time without further notice to
investors. During periods of voluntary fee waivers or reductions, AIM will
retain its ability to be reimbursed for such fee prior to the end of each fiscal
year. Contractual fee waivers or reductions set forth in the Fee Table in a
Prospectus may not be terminated or amended to the Fund's detriment during the
period stated in the agreement between AIM and the Fund.
Pursuant to the Advisory Agreement, AIM receives a fee from each of the
AIM V.I. Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I. Blue
Chip Fund, the AIM V.I. Capital Appreciation Fund, the AIM V.I. Capital
Development Fund, the AIM V.I. Dent Demographic Trends Fund, the AIM V.I.
Diversified Income Fund, the AIM V.I. Global Growth and Income Fund, the AIM
V.I. Global Utilities Fund, the AIM V.I. Government Securities Fund, the AIM
V.I. Growth Fund, the AIM V.I. Growth and Income Fund, the AIM V.I. High Yield
Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund,
the AIM V.I. Telecommunications and Technology Fund and the AIM V.I. Value Fund
calculated at the following annual rate, based on the average daily net assets
of the Fund during the year:
AIM V.I. CAPITAL APPRECIATION FUND
AIM V.I. GLOBAL UTILITIES FUND
AIM V.I. GROWTH FUND
AIM V.I. GROWTH AND INCOME FUND
AIM V.I. VALUE FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $250 million ................................................... 0.65%
Over $250 million .................................................... 0.60%
</TABLE>
AIM V.I. AGGRESSIVE GROWTH FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $150 million ................................................... 0.80%
Over $150 million .................................................... 0.625%
</TABLE>
AIM V.I. BALANCED FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $150 million ................................................... 0.75%
Over $150 million .................................................... 0.50%
</TABLE>
44
<PAGE> 120
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>
AIM V.I. DIVERSIFIED INCOME FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $250 million ................................................... 0.60%
Over $250 million .................................................... 0.55%
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
All .................................................................. 1.00%
</TABLE>
AIM V.I. GOVERNMENT SECURITIES FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $250 million ................................................... 0.50%
Over $250 million .................................................... 0.45%
</TABLE>
AIM V.I. HIGH YIELD FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $200 million ................................................... 0.625%
Next $300 million .................................................... 0.55%
Next $500 million .................................................... 0.50%
Amount over $1 billion ............................................... 0.45%
</TABLE>
AIM V.I. INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
ANNUAL
NET ASSETS RATE
---------- ----
<S> <C>
First $250 million ................................................... 0.75%
Over $250 million .................................................... 0.70%
</TABLE>
45
<PAGE> 121
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 a prior, substantially similar advisory agreement, as follows:
<TABLE>
<CAPTION>
December 31, December 31, December 31,
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
AIM V.I. Aggressive Growth Fund $ -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
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 and Technology Fund $ 756,068 N/A N/A
AIM V.I. Value Fund $10,380,472 $5,570,566 $ 3,303,799
</TABLE>
* Fees paid were for the period May 1, 1998 (date operations commenced)
through December 31, 1998.
46
<PAGE> 122
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 and Technology Fund $ -0- N/A $ N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fees waived were for the period May 1, 1998 (date operations
commenced) through December 31, 1998.
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-
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 and Technology Fund $ -0- N/A N/A
AIM V.I. Value Fund $ -0- $ -0- $ -0-
</TABLE>
* Fee amounts are for the period May 1, 1998 (date operations
commenced) through December 31, 1998.
47
<PAGE> 123
The Administrative Services Agreement for the Funds provides that AIM
may perform certain accounting and other administrative services to each Fund
which are not required to be performed by AIM under the Advisory Agreement. For
such services, AIM would be entitled to receive from each Fund reimbursement of
its expenses. In addition, AIM provides, or assures that Participating Insurance
Companies will provide, certain services implementing the Trust's funding
arrangements with Participating Insurance Companies. These services include:
establishment of compliance procedures; negotiation of participation agreements;
preparation of prospectuses, financial reports and proxy statements for existing
Contractowners; maintenance of master accounts; facilitation of purchases and
redemptions requested by Contractowners; distribution to existing Contractowners
of copies of prospectuses, proxy materials, periodic Fund reports and other
materials; maintenance of records; and Contractowner services and communication.
Effective May 1, 1998, the Funds reimburse AIM for its costs in providing, or
assuring that Participating Insurance Companies provide, these services,
currently in an amount up to 0.25% of the average net asset value of each Fund.
AIM has agreed to bear certain of these costs on the net assets of each Fund as
of April 30, 1998.
The Administrative Services Agreement for the Funds provides that the
agreement will remain in effect for the initial term and continue in effect from
year to year thereafter only if such continuance is specifically approved at
least annually (i) by the Trust's Board of Trustees or by the vote of a majority
of the outstanding voting securities of the Funds (as defined in the 1940 Act);
and (ii) by the affirmative vote of a majority of the Non-Interested Trustees,
by votes cast in person at a meeting called for such purpose. The agreement
terminates automatically in the event of its assignment or in the event of
termination of the Advisory Agreement.
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
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.
48
<PAGE> 124
THE DISTRIBUTION AGREEMENT
The Funds have entered into a master distribution agreement (the
"Distribution Agreement") with AIM Distributors, dated May 1, 2000.
Information concerning AIM Distributors and the continuous offering of the
Funds' shares is set forth in the Prospectus under the heading "Fund
Management." The Distribution Agreement provides that AIM Distributors will bear
the expenses of printing from the final proof and distributing prospectuses and
statements of additional information of the Funds relating to the sale of Fund
shares. The Distribution Agreement provides that the Funds shall bear the
expenses of qualification of shares of the Fund for sale in connection with the
public offering in any jurisdictions where qualification is required by law. AIM
Distributors has not undertaken to sell any specified number of shares of the
Funds.
The Distribution Agreement for the Funds provides that it will continue
in effect until June 30, 2001 and from year to year thereafter only if such
continuance is specifically approved at least annually (i) by the Trust's Board
of Trustees or by the vote of a majority of the outstanding voting securities of
the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a
majority of Non-Interested Trustees by votes cast in person at a meeting called
for such purpose. The Trust or AIM Distributors may terminate its Distribution
Agreement on sixty (60) days' written notice without penalty. The Distribution
Agreement will terminate automatically in the event of its assignment.
DETERMINATION OF NET ASSET VALUE
The net asset value per share (or share price) of each of the Funds
will be determined as of the close of regular trading of the New York Stock
Exchange ("NYSE") (generally 4:00 p.m. Eastern Time) on each "business day of
the Fund." In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern
Time) on a particular day, the net asset value of a Fund share is determined as
of the close of the NYSE on such day. For purposes of determining net asset
value per share, futures and options contracts generally will be valued 15
minutes after the close of trading of the NYSE. A "business day of a Fund" is
any day on which the NYSE is open for business. It is expected that the NYSE
will be closed during the next twelve months on Saturdays and Sundays and on the
observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day. The net asset value per share of a Fund is determined by
subtracting the liabilities (e.g., the expenses) of the Fund from the assets of
the Fund and dividing the result by the total number of shares outstanding of
such Fund. The determination of a Fund's net asset value per share is made in
accordance with generally accepted accounting principles.
VALUATION OF INVESTMENTS OF ALL FUNDS EXCEPT THE MONEY MARKET FUND.
Among other items, a Fund's liabilities include accrued expenses and dividends
payable, and its total assets include portfolio securities valued at their
market value as well as income accrued but not received. Securities for which
market quotations are not readily available are valued at fair value as
determined in good faith by or under the supervision of the Trust's officers and
in accordance with methods which are specifically authorized by the Board of
Trustees of the Trust. Short-term obligations with maturities of 60 days or less
are valued at amortized cost as reflecting fair value.
VALUATION OF THE MONEY MARKET FUND'S INVESTMENTS. The Money Market Fund
uses the amortized cost method of valuing the securities held by the Fund and
rounds the Fund's per share net asset value to the nearest whole cent;
therefore, it is anticipated that the net asset value of the shares of the Fund
will remain constant at $1.00 per share. However, the Trust can give no
assurance that the Fund can maintain a $1.00 net asset value per share.
FUTURES CONTRACTS. Initial margin deposits made upon entering into
futures contracts are recognized as assets due from the broker (the Fund's agent
in acquiring the futures position). During the period the futures contract is
open, changes in the value of the contract are recognized as unrealized gains or
losses by "marking-to-market" on a daily basis to reflect the market value of
the contract at the end of each day's trading. Variation margin payments are
made or received depending upon whether unrealized gains or losses are incurred.
When the contract is closed, the Fund that has entered into the futures contract
records a realized gain or loss equal to the difference between the proceeds
from (or cost of) the closing transaction and the Fund's basis in the contract.
49
<PAGE> 125
For the Money Market Fund: The net asset value per share of the Fund is
determined daily as of the close of trading on the New York Stock Exchange
("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund. In
the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a
particular day, the net asset value of a Fund share is determined as of the
close of the NYSE on such day. Net asset value per share is determined by
dividing the value of the Fund's securities, cash and other assets (including
interest accrued but not collected), less all its liabilities (including accrued
expenses and dividends payable), by the number of shares outstanding of the Fund
and rounding the resulting per share net asset value to the nearest one cent.
Determination of the Fund's net asset value per share is made in accordance with
generally accepted accounting principles.
The securities of the Fund are valued on the basis of amortized cost.
This method values a security at its cost on the date of purchase and thereafter
assumes a constant amortization to maturity of any discount or premium,
regardless of the impact of fluctuating interest rates on the market value of
the security. While this method provides certainty in valuation, it may result
in periods during which value, as determined by amortized cost, is higher or
lower than the price the Fund would receive if the security were sold. During
such periods, the daily yield on shares of the Fund computed as described under
"Yield Information" may differ somewhat from an identical computation made by
another investment company with identical investments utilizing available
indications as to the market value of its portfolio securities.
The valuation of the portfolio instruments based upon their amortized
cost and the concomitant maintenance of the net asset value per share of $1.00
for the Fund is permitted in accordance with applicable rules and regulations of
the SEC which require the Fund to adhere to certain conditions. The Fund will
invest only in "Eligible Securities," as defined in Rule 2a-7 of the 1940 Act,
which the Fund's Board of Trustees has determined present minimal credit risk.
Rule 2a-7 also requires, among other things, that the Fund maintain a
dollar-weighted average portfolio maturity of 90 days or less and purchase only
instruments having remaining maturities of 397 calendar days or less.
The Board of Trustees is required to establish procedures designed to
stabilize, to the extent reasonably practicable, the Fund's price per share at
$1.00 for the Fund as computed for the purpose of sales and redemptions. Such
procedures include review of the Fund's holdings by the Board of Trustees at
such intervals as they may deem appropriate, to determine whether the net asset
value calculated by using available market quotations or other reputable sources
for the Fund deviates from $1.00 per share and, if so, whether such deviation
may result in material dilution or is otherwise unfair to existing holders of
the Fund's shares. In the event the Board of Trustees determines that such a
deviation exists for the Fund, it will take such corrective action as the Board
of Trustees deems necessary and appropriate with respect to the Fund, including
the sale of portfolio instruments prior to maturity to realize capital gains or
losses or to shorten the average portfolio maturity; the withholding of
dividends; redemption of shares in kind; or the establishment of a net asset
value per share by using available market quotations.
The Fund intends to comply with any amendments made to Rule 2a-7 which
may require corresponding changes in the Fund's procedures which are designed to
stabilize the Fund's price per share at $1.00.
For All Other Funds: The net asset value per share of each Fund is
normally determined daily as of the close of trading on the NYSE (generally 4:00
p.m. Eastern time) on each business day of the Trust. In the event the NYSE
closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net
asset value of a Fund share is determined as of the close of the NYSE on such
day. For purposes of determining net asset value per share, futures and options
contracts closing prices which are available 15 minutes after the close of
trading of the NYSE will generally be used. Net asset value per share is
determined by dividing the value of the Fund's securities, cash and other assets
(including interest accrued but not collected), less all its liabilities
(including accrued expenses and dividends payable), by the total number of
shares outstanding. Determination of the Fund's net asset value per share is
made in accordance with generally accepted accounting principles.
Each equity security held by the Fund is valued at its last sales price
on the exchange where the security is principally traded or, lacking any sales
on a particular day, the security is valued at the closing bid price on that
day. Each security traded in the over-the-counter market (but not including
securities reported on
50
<PAGE> 126
the NASDAQ National Market System) is valued at the mean between the last bid
and asked prices based upon quotes furnished by market makers for such
securities. Each security reported on the NASDAQ National Market System is
valued at the last sales price on the valuation date or absent a last sales
price, at the closing bid price on that day. Debt securities are valued on the
basis of prices provided by an independent pricing service. Prices provided by
the pricing service may be determined without exclusive reliance on quoted
prices, and may reflect appropriate factors such as institution-size trading in
similar groups of securities, developments related to special securities, yield,
quality, coupon rate, maturity, type of issue, individual trading
characteristics and other market data. Securities for which market quotations
are not readily available are valued at fair value as determined in good faith
by or under the supervision of the Trust's officers in a manner specifically
authorized by the Board of Trustees of the Trust. Short-term obligations having
60 days or less to maturity are valued on the basis of amortized cost. For
purposes of determining net asset value per share, futures and options contracts
generally will be valued 15 minutes after the close of trading of the NYSE.
Generally, trading in foreign securities is substantially completed
each day at various times prior to the close of the NYSE. The values of such
foreign securities used in computing the net asset value of each Fund's shares
are determined at such times as trading is completed. Foreign currency exchange
rates are also generally determined prior to the close of the NYSE.
Occasionally, events affecting the values of such foreign securities and such
foreign securities exchange rates may occur after the time at which such
values are determined and prior to the close of the NYSE that will not be
reflected in the computation of a Fund's net asset value. If events materially
affecting the value of such securities occur during such period, then these
securities will be valued at their fair value as determined in good faith by
or under the supervision of the Board of Trustees.
PURCHASE AND REDEMPTION OF SHARES
The Trust offers the shares of the Funds, on a continuous basis, to
both registered and unregistered separate accounts of affiliated and
unaffiliated Participating Insurance Companies to fund variable annuity
contracts (the "Contracts") and variable life insurance policies ("Policies").
Each separate account contains divisions, each of which corresponds to a Fund in
the Trust. Net purchase payments under the Contracts are placed in one or more
of the divisions of the relevant separate account and the assets of each
division are invested in the shares of the Fund which corresponds to that
division. Each separate account purchases and redeems shares of these Funds for
its divisions at net asset value without sales or redemption charges. Currently
several insurance company separate accounts invest in the Funds.
The Trust, in the future, may offer the shares of its Funds to certain
pension and retirement plans ("Plans") qualified under the Internal Revenue
Code. The relationships of Plans and Plan participants to the Fund would be
subject, in part, to the provisions of the individual plans and applicable law.
Accordingly, such relationships could be different from those described in this
Prospectus for separate accounts and owners of Contracts and Policies, in such
areas, for example, as tax matters and voting privileges.
The Board of Trustees monitors for possible conflicts among separate
accounts (and will do so for plans) buying shares of the Funds. Conflicts could
develop for a variety of reasons. For example, differences in treatment under
tax and other laws or the failure by a separate account to comply with such laws
could cause a conflict. To eliminate a conflict, the Board of Trustees may
require a separate account or Plan to withdraw its participation in a Fund. A
Fund's net asset value could decrease if it had to sell investment securities to
pay redemptions proceeds to a separate account (or plan) withdrawing because of
a conflict.
Each Fund ordinarily effects orders to purchase or redeem its shares
that are based on transactions under Policies or Contracts (e.g., purchase or
premium payments, surrender or withdrawal requests, etc.) at the Fund's net
asset value per share next computed on the day on which the separate account
processes such transactions. Each Fund effects orders to purchase or redeem its
shares that are not based on such transactions at the Fund's net asset value per
share next computed on the day on which the Fund receives the orders.
Please refer to the appropriate separate account prospectus related to
your Contract for more information regarding the Contract.
51
<PAGE> 127
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.
TAX MATTERS. Each series of shares of the Trust is treated as a
separate association taxable as a corporation. Each Fund intends to qualify
under the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated
investment company ("RIC") for each taxable year. As a RIC, a Fund will not be
subject to federal income tax to the extent it distributes to its shareholders
its net investment income and net capital gains.
In order to qualify as a regulated investment company, each Fund must
satisfy certain requirements concerning the nature of its income,
diversification of its assets and distribution of its income to shareholders. In
order to ensure that individuals holding the Contracts whose assets are invested
in a Fund will not be subject to federal income tax on distributions made by the
Fund prior to the receipt of payments under the Contracts, each Fund intends to
comply with additional requirements of Section 817(h) of the Code relating to
both diversification of its assets and eligibility of an investor to be its
shareholder. Certain of these requirements in the aggregate may limit the
ability of a Fund to engage in transactions involving options, futures
contracts, forward contracts and foreign currency and related deposits.
The holding of the foreign currencies and investments by a Fund in
certain "passive foreign investment companies" may be limited in order to avoid
imposition of a tax on such Fund.
Each Fund investing in foreign securities may be subject to foreign
withholding taxes on income from its investments. In any year in which more than
50% in value of a Fund's total assets at the close of the taxable year consists
of securities of foreign corporations, the Fund may elect to treat any foreign
taxes paid by it as if they had been paid by its shareholders. The insurance
company segregated asset accounts holding Fund shares should consider the impact
of this election.
52
<PAGE> 128
Holders of Contracts under which assets are invested in the Funds
should refer to the prospectus for the Contracts for information regarding the
tax aspects of ownership of such Contracts.
Because each Fund intends to qualify under the Code as a RIC for each
taxable year, each Fund must, among other things, meet the following
requirements: A. Each Fund must generally derive at least 90% of its gross
income from dividends, interest, payments with respect to securities loans,
gains from the sale or other disposition of stock, securities, foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies. B. Each Fund must diversify its holdings
so that, at the end of each fiscal quarter or within 30 days thereafter: (i) at
least 50% of the market value of the Fund's assets is represented by cash, cash
items (including receivables), U.S. Government securities, securities of other
RICs, and other securities, with such other securities limited, with respect to
any one issuer, to an amount not greater than 5% of the Fund's assets and not
more than 10% of the outstanding voting securities of such issuer, and (ii) not
more than 25% of the value of the Fund's assets is invested in the securities of
any one issuer (other than U.S. Government securities or securities of other
RICs).
The Code imposes a nondeductible 4% excise tax on a RIC that fails to
distribute during each calendar year at least 98% of its ordinary income for the
calendar year, at least 98% of its capital gain net income for the 12-month
period ending on October 31 of the calendar year and certain other amounts. Each
Fund intends to make sufficient distributions to avoid imposition of the excise
tax. Some Funds meet an exception which results in their not being subject to
excise tax.
As a RIC, each Fund will not be subject to federal income tax on its
income and gains distributed to shareholders if it distributes at least (i) 90%
of its investment company taxable income for the taxable year; and (ii) 90% of
the excess of its tax-exempt interest income under Code Section 103(a) over its
deductions disallowed under Code Sections 265 and 171(a)(2).
Each Fund intends to comply with the diversification requirements
imposed by Section 817(h) of the Code and the regulations thereunder. These
requirements, which are in addition to the diversification requirements imposed
on each Fund by the 1940 Act and Subchapter M of the Code, place certain
limitations on (i) the assets of the insurance company separate accounts that
may be invested in securities of a single issuer and (ii) eligible investors.
Because Section 817(h) and those regulations treat the assets of each Fund as
assets of the corresponding division of the insurance company separate accounts,
each Fund intends to comply with these diversification requirements.
Specifically, the regulations provide that, except as permitted by the "safe
harbor" described below, as of the end of each calendar quarter or within 30
days thereafter no more than 55% of a Fund's total assets may be represented by
any one investment, no more than 70% by any two investments, no more than 80% by
any three investments and no more than 90% by any four investments. For this
purpose, all securities of the same issuer are considered a single investment,
and while each U.S. Government agency and instrumentality is considered a
separate issuer, a particular foreign government and its agencies,
instrumentalities and political subdivisions all will be considered the same
issuer. The regulations also provide that a Fund's shareholders are limited,
generally, to life insurance company separate accounts, general accounts of the
same life insurance company, an investment adviser or affiliate in connection
with the creation or management of a Fund or the trustee of a qualified pension
plan. Section 817(h) provides, as a safe harbor, that a separate account will be
treated as being adequately diversified if the diversification requirements
under Subchapter M are satisfied and no more than 55% of the value of the
account's total assets are cash and cash items, government securities and
securities of other RICs. Failure of a Fund to satisfy the Section 817(h)
requirements would result in taxation of and treatment of the Contract holders
investing in a corresponding division other than as described in the applicable
prospectuses of the various insurance company separate accounts.
53
<PAGE> 129
MISCELLANEOUS INFORMATION
AUDIT REPORTS
The Trust furnishes semi-annual reports containing information about
the Funds and their operations, including a list of the investments held in each
Fund's portfolio and their respective financial statements. Financial
statements, audited by independent auditors, will be issued annually. The firm
of Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia, PA 19103, serves
as the auditors of each Fund.
LEGAL MATTERS
Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Trust
on certain federal securities law matters.
CUSTODIAN AND TRANSFER AGENT
State Street Bank and Trust Company ("State Street"), 225 Franklin
Street, Boston, MA 02110, is custodian of all securities and cash of the Funds.
The custodian attends to the collection of principal and income, pays and
collects all monies for securities bought and sold by the Funds, and performs
certain other ministerial duties. State Street also acts as transfer and
dividend disbursing agent for the Funds. These services do not include any
supervisory function over management or provide any protection against any
possible depreciation of assets. The Funds pay State Street such compensation as
may be agreed upon from time to time.
PRINCIPAL HOLDERS OF SECURITIES
To the best of the knowledge of each Fund, the names of the record
holders of 5% or more of the outstanding shares of the Fund as of April 5,
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, Simsbury, 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.
54
<PAGE> 130
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 and Annuity Company -0- -0- 96.48%*
</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 and Annuity Company -0- -0- 77.31%*
Union Central Life Insurance Company -0- -0- 21.53%
</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>
Glenbrook Life and Annuity Company -0- -0- 71.00%*
A I M Advisors, Inc. -0- -0- 25.49%*
</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- 30.59%*
Glenbrook Life and Annuity Company -0- -0- 18.77%
Merrill Lynch Life Insurance Company -0- -0- 16.38%
Aetna Life Insurance and Annuity Company -0- -0- 11.18%
</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.
55
<PAGE> 131
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>
IDS Life Insurance Company -0- -0- 58.40%*
Glenbrook Life and Annuity Company -0- -0- 36.38%*
</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 and Annuity Company -0- -0- 85.57%*
A I M Advisors, Inc. -0- -0- 10.16%*
</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- 46.31%*
Glenbrook Life and Annuity Company -0- -0- 30.87%*
General American Life Insurance Company -0- -0- 13.36%
</TABLE>
AIM V.I. GLOBAL GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 97.29%*
</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- 45.41%*
Glenbrook Life and Annuity Company -0- -0- 44.21%*
</TABLE>
----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
56
<PAGE> 132
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>
Glenbrook Life and Annuity Company -0- -0- 28.86%*
Connecticut General Life Insurance Company -0- -0- 27.99%*
First Citicorp Life Insurance Company -0- -0- 18.68%
Security Life of Denver Insurance Company -0- -0- 13.34%
</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- 34.09%*
Glenbrook Life and Annuity Company -0- -0- 23.71%
Aetna Life Insurance and Annuity Company -0- -0- 11.49%
The Lincoln National Life Insurance Company -0- -0- 6.06%
</TABLE>
AIM V.I. GROWTH AND INCOME FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
IDS Life Insurance Company -0- -0- 60.71%*
Glenbrook Life and Annuity Company -0- -0- 9.43%
Pruco Life Insurance Company -0- -0- 8.11%
Connecticut General Life Insurance Company -0- -0- 7.19%
</TABLE>
----------
* A shareholder who beneficially owns more than 25% of the voting securities
of a Fund may be presumed to "control" the Fund. The Funds understand that
insurance company separate accounts owning shares of the Funds will vote
their shares in accordance with instructions received from Contract owners,
annuitants and beneficiaries. If an insurance company determines, however,
that it is permitted to vote any such shares of the Funds in its own right,
it may elect to do so, subject to the then current interpretation of the
1940 Act and the rules thereunder.
57
<PAGE> 133
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 and Annuity Company -0- -0- 60.01%*
Hartford Life Insurance Company -0- -0- 36.25%*
</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- 38.14%*
Glenbrook Life and Annuity Company -0- -0- 19.58%
General American Life Insurance Company -0- -0- 10.77%
First Citicorp Life Insurance Company -0- -0- 6.13%
</TABLE>
AIM V.I. MONEY MARKET FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
Connecticut General Life Insurance Company -0- -0- 49.04%*
Glenbrook Life and Annuity Company -0- -0- 35.31%*
General American Life Insurance Company -0- -0- 13.69%
</TABLE>
AIM V.I. TELECOMMUNICATIONS AND TECHNOLOGY FUND
<TABLE>
<CAPTION>
PERCENT OWNED PERCENT OWNED
NAME OF OF RECORD BENEFICIALLY PERCENT OWNED
RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY
------------ ---------------- ------------- --------------
<S> <C> <C> <C>
General American Life Insurance Company -0- -0- 91.19%*
Glenbrook Life and Annuity Company -0- -0- 7.09%
</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> 134
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- 23.74%*
Connecticut General Life Insurance Company -0- -0- 19.98%
Pruco Life Insurance Company of New Jersey -0- -0- 15.72%
Glenbrook Life and Annuity Company -0- -0- 12.16%
</TABLE>
As of April 5, 2000, the trustees and officers of the Trust as a
group owned beneficially less than 1% of the outstanding shares of the Trust.
OTHER INFORMATION
The Prospectus and this Statement of Additional Information omit
certain information contained in the Registration Statement which the Funds have
filed with the SEC under the Securities Act of 1933 and reference is hereby made
to the Registration Statement for further information with respect to the Funds
and the securities offered hereby. The Registration Statement is available for
inspection by the public at the SEC in Washington, D.C.
59
<PAGE> 135
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> 136
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> 137
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> 138
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> 139
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 backed
B-1
<PAGE> 140
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> 141
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> 142
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> 143
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> 144
FINANCIAL STATEMENTS
FS
<PAGE> 145
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> 146
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> 147
<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> 148
<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> 149
<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> 150
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> 151
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> 152
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> 153
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> 154
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> 155
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> 156
<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> 157
<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> 158
<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> 159
<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> 160
<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> 161
<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> 162
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> 163
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> 164
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> 165
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> 166
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> 167
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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> 168
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> 169
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> 170
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> 171
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> 172
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> 173
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> 174
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> 175
<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> 176
<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> 177
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> 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 (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> 179
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> 180
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> 181
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> 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. 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> 183
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> 184
<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> 185
<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> 186
<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> 187
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> 188
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> 189
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> 190
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> 191
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> 192
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> 193
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> 194
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> 195
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> 196
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> 197
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> 198
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> 199
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> 200
<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> 201
<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> 202
<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> 203
<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> 204
<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> 205
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> 206
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> 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 $ 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> 208
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> 209
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> 210
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> 211
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> 212
<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> 213
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> 214
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> 215
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> 216
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> 217
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> 218
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> 219
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> 220
<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> 221
<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> 222
<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> 223
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> 224
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> 225
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> 226
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> 227
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> 228
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> 229
<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> 230
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> 231
STATEMENT OF CHANGES IN NET ASSETS
For the years ended December 31, 1999 and 1998
<TABLE>
<CAPTION>
1999 1998
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income $ 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> 232
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> 233
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> 234
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Shareholders and Board of Directors
AIM Variable Insurance Funds, Inc.
We have audited the accompanying statement of assets and liabilities of AIM
V.I. 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> 235
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> 236
<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> 237
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> 238
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> 239
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> 240
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> 241
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> 242
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> 243
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> 244
<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> 245
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> 246
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> 247
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> 248
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> 249
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> 250
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> 251
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> 252
<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> 253
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> 254
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> 255
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> 256
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> 257
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> 258
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> 259
<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> 260
<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> 261
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> 262
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> 263
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> 264
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> 265
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> 266
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> 267
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> 268
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> 269
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> 270
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> 271
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> 272
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> 273
<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> 274
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> 275
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> 276
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> 277
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> 278
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> 279
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> 280
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> 281
<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> 282
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> 283
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> 284
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> 285
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> 286
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> 287
PART C
OTHER INFORMATION
ITEM 15. INDEMNIFICATION
The Registrant's Agreement and Declaration of Trust, dated December 6, 1999,
provides, among other things (i) that trustees and officers of the Registrant,
when acting as such, shall not be personally liable for any act, omission or
obligation of the Registrant or any trustee or officer (except for liabilities
to the Registrant or its shareholders by reason of willful misfeasance, bad
faith, gross negligence or reckless disregard of duty); (ii) for the
indemnification by the Registrant of the trustees, officers, employees and
agents of the Registrant to the fullest extent permitted by the Delaware
Business Trust Act and Bylaws and other applicable law; (iii) that shareholders
of the Registrant shall not be personally liable for the debts, liabilities,
obligations or expenses of the Registrant or any portfolio or class; and (iv)
for the indemnification by the Registrant, out of the assets belonging to the
applicable portfolio, of shareholders and former shareholders of the Registrant
in case they are held personally liable solely by reason of being or having been
shareholders of the Registrant or any portfolio or class and not because of
their acts or omissions or for some other reason.
In addition, under the terms of the agreements described in response to Item 16
of this Part C, various third parties have agreed to indemnify the registrant,
its trustees and officers, and, in some cases, its investment adviser and/or
principal underwriter, against certain liabilities that may arise in connection
with the performance of the agreements. The specific terms of such
indemnification are set out in the agreements, and are incorporated herein by
reference.
Insofar as indemnification for liability arising under the Securities Act of
1933 may be permitted to trustees, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in such Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a trustee, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
trustee, officer or controlling person in connection with the securities being
registered hereby, the Registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in such Act and will be governed by the final
adjudication of such issue. Insurance coverage is provided under a joint Mutual
Fund & Investment Advisory Professional Directors & Officers Liability Policy,
issued by ICI Mutual Insurance Company, with a $35,000,000 limit of liability.
1
<PAGE> 288
ITEM 16. EXHIBITS
References below to any pre or post-effective amendment relate to Registrant's
Registration Statement on Form N-1A (File No. 33-57340 and No. 811-7452), unless
otherwise noted.
Exhibit
Number Description
1 - Agreement and Declaration of Trust of Registrant, dated December
6, 1999, incorporated herein by reference to Post-Effective
Amendment No. 16 filed on February 17, 2000.
2 - By-Laws of Registrant dated effective December 8, 1999,
incorporated herein by reference to Post-Effective Amendment No.
16 filed on February 17, 2000.
3 - Voting Trust Agreement - None.
4 - Agreement and Plan of Reorganization by and among AIM Variable
Insurance Funds, on behalf of AIM V.I. Global Growth and Income
Fund and AIM V.I. Growth and Income Fund, and A I M Advisors,
Inc., incorporated herein by reference to Appendix I to the Proxy
Statement/Prospectus forming part of this Registration Statement
on Form N-14.
5 - Instruments Defining the Rights of Holders of the Securities
Being Registered - Incorporated herein by reference to Exhibits 1
and 2, above.
6(a) - Form of Master Investment Advisory Agreement between Registrant
and A I M Advisors, Inc., incorporated herein by reference to
Post-Effective Amendment No. 15 filed on February 16, 2000.
6(b) - (i)Foreign Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement, dated September 9, 1998,
between Registrant and A I M Advisors, Inc. was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 10 filed on October 2, 1998, and incorporated
herein by reference.
- (ii) Amendment No. 1, dated September 28, 1998, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between Registrant and
A I M Advisors, Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 filed on February
18, 1999, and is incorporated herein by reference.
2
<PAGE> 289
- (iii) Amendment No. 2, dated December 14, 1998, to Foreign
Country Selection and Mandatory Securities Depository
Responsibilities Delegation Agreement between Registrant and
A I M Advisors, Inc. was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 filed on February
18, 1999, and is incorporated herein by reference.
7(a) - (i) Master Distribution Agreement, dated October 18, 1993,
between Registrant and A I M Distributors, Inc., incorporated
herein by reference to Post-Effective Amendment No. 7 filed on
April 29, 1996.
- (ii) Amendment, dated April 28, 1994, to Master Distribution
Agreement, dated October 18, 1993, between Registrant and A I M
Distributors, Inc., incorporated herein by reference to
Post-Effective Amendment No. 7 filed on April 29, 1996.
(b) - (i) Master Distribution Agreement, dated February 28, 1997,
between Registrant and A I M Distributors, Inc., incorporated
herein by reference to Post-Effective Amendment No. 10 filed on
October 2, 1998.
- (ii) Amendment No. 1, dated April 15, 1998, to Master
Distribution Agreement, between Registrant and A I M
Distributors, Inc., incorporated herein by reference to
Post-Effective Amendment No. 10 filed on October 2, 1998.
- (iii) Amendment No. 2, dated December 14, 1998, to Master
Distribution Agreement, between Registrant and A I M
Distributors, Inc., incorporated herein by reference to
Post-Effective Amendment No. 11 filed on February 18, 1999.
- (iv) Amendment No. 3, dated September 24, 1999, to Master
Distribution Agreement, dated February 28, 1997, between
Registrant and A I M Distributors, Inc., incorporated herein by
reference to Post-Effective Amendment No. 14 filed on September
28, 1999.
- (v) Amendment No. 4, dated December 29, 1999, to Master
Distribution Agreement, dated February 28, 1997, between
Registrant and A I M Distributors, Inc., incorporated herein by
reference to Registrant's Post-Effective Amendment No. 15 filed
on February 16, 2000.
(c) - Distribution Agreement, dated March 31, 1993, between Registrant
and A I M Distributors, Inc., incorporated herein by reference to
Registrant's Pre-Effective Amendment No. 1 filed on April 19,
1993.
3
<PAGE> 290
8(a) - Retirement Plan of Registrant's Non-Affiliated Directors,
effective March 8, 1994, incorporated herein by reference to
Registrant's Post-Effective Amendment No. 4 filed on November 3,
1994.
(b) - Retirement Plan of Registrant's Non-Affiliated Directors,
effective March 8, 1994, as restated September 18, 1995,
incorporated herein by reference to Post-Effective Amendment No.
7 filed on April 29, 1996.
(c) - Form of Deferred Compensation Agreement of Registrant's
Non-Affiliated Directors, incorporated herein by reference to
Post-Effective Amendment No. 4 filed on November 3, 1994.
(d) - Form of Deferred Compensation Agreement of Registrant's
Non-Affiliated Directors, as approved on December 5, 1995,
incorporated herein by reference to Post-Effective Amendment No.
7 filed on April 29, 1996.
(e) - Form of Deferred Compensation Agreement, incorporated herein by
reference to Post-Effective Amendment No. 9 filed on February 13,
1998.
9(a) - (i) Custodian Agreement, dated March 31, 1993, between Registrant
and State Street Bank and Trust Company, incorporated herein by
reference to Post-Effective Amendment No. 7 filed on April 29,
1996.
- (ii) Amendment No.1, dated April 25, 1994, to Custodian
Agreement, dated March 31, 1993, between Registrant and State
Street Bank and Trust Company, incorporated herein by reference
to Post-Effective Amendment No. 7 filed on April 29, 1996.
- (iii) Amendment No. 2, dated September 19, 1995, to Custodian
Agreement, dated March 31, 1993, between Registrant and State
Street Bank and Trust Company, incorporated herein by reference
to Post-Effective Amendment No. 7 filed on April 29, 1996.
- (iv) Amendment, dated September 9, 1998, to Custodian Agreement,
dated March 31, 1993, between Registrant and State Street Bank
and Trust Company, incorporated herein by reference to
Post-Effective Amendment No. 10 filed on October 2, 1998.
10(a) - Registrant's Plan pursuant to Rule 12b-1 under the 1940 Act -
None.
(b) - Multiple Class Plan (Rule 18f-3) - None.
11 - Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding the legality of the shares being registered under this
Registration
4
<PAGE> 291
Statement on Form N-14 by AIM Variable Insurance Funds on behalf
of the AIM V.I. Growth and Income Fund is hereby filed
electronically.
12 - Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
supporting the tax matters and consequences to shareholders
discussed in the Proxy Statement/Prospectus is hereby filed
electronically.
13(a) - Administrative Services Agreement, dated March 31, 1993, between
the Registrant and A I M Advisors, Inc., incorporated herein by
reference to Pre-Effective Amendment No. 1 filed on April 19,
1993.
(b) - (i) Master Administrative Services Agreement, dated October 18,
1993, between the Registrant and A I M Advisors, Inc.
incorporated herein by reference to Post-Effective Amendment No.
7 filed on April 29, 1996.
- (ii) Amendment No.1, dated April 28, 1994, to Master
Administrative Services Agreement, dated October 18, 1993,
between Registrant and A I M Advisors, Inc. incorporated herein
by reference to Registrant's Post-Effective Amendment No. 3 filed
on May 2, 1994, and was filed electronically as an Exhibit to
Post-Effective Amendment No. 7 filed on April 29, 1996.
(c) - Master Administrative Services Agreement, dated February 28,
1997, between Registrant and A I M Advisors, Inc., incorporated
herein by reference to Post-Effective Amendment No. 8 filed on
April 23, 1997.
(d) - (i) Master Administrative Services Agreement, as amended, dated
May 1, 1998, between Registrant and A I M Advisors, Inc.,
incorporated herein by reference to Post-Effective Amendment No.
10 filed on October 2, 1998.
- (ii) Amendment No. 1, dated December 14, 1998, to Master
Administrative Services Agreement, as amended, dated May 1, 1998,
between Registrant and A I M Advisors, Inc., incorporated herein
by reference to Post-Effective Amendment No. 11 filed on February
18, 1999.
- (iii) Amendment No. 2, dated September 24, 1999, to Master
Administrative Services Agreement, as amended, dated May 1, 1998,
between Registrant and A I M Advisors, Inc., incorporated herein
by reference to Registrant's Post-Effective Amendment No. 14
filed on September 23, 1999.
- (iv) Amendment No. 3, dated November 15, 1999 to Master
Administrative Services Agreement, as amended, May 1, 1998,
between Registrant and A I M Advisors, Inc., incorporated herein
by reference to Post-Effective Amendment No. 15 filed on February
16, 2000.
5
<PAGE> 292
- (v) Amendment No. 4, dated December 29, 1999, to Master
Administrative Services Agreement, as amended, dated May 1, 1998,
between Registrant and A I M Advisors, Inc., incorporated herein
by reference to Post-Effective Amendment No. 15 filed on February
16, 2000.
(e) - (i) Transfer Agency Agreement, dated March 19, 1993, between
Registrant and State Street Bank and Trust Company, incorporated
herein by reference to Post-Effective Amendment No. 7 filed on
April 29, 1996.
- (ii) Amendment No.1, dated April 25, 1994, to Transfer Agency
Agreement, dated March 19, 1993, between Registrant and State
Street Bank and Trust Company, incorporated herein by reference
to Post-Effective Amendment No. 7 filed on April 29, 1996.
(f) - Participation Agreement, dated February 25, 1993, between
Registrant, Connecticut General Life Insurance Company and A I M
Distributors, Inc., incorporated herein by reference to
Post-Effective Amendment No. 7 filed on April 29, 1996.
(g) - (i) Participation Agreement, dated February 10, 1995, between
Registrant and Citicorp Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 7 filed on
April 29, 1996.
- (ii) Amendment No. 1, dated February 3, 1997, to Participation
Agreement dated February 10, 1995, between Registrant and
Citicorp Life Insurance Company, incorporated herein by reference
to Post-Effective Amendment No. 9 filed on February 13, 1998.
(h) - (i) Participation Agreement, dated February 10, 1995, between
Registrant and First Citicorp Life Insurance Company incorporated
herein by reference to Registrant's Post-Effective Amendment No.
5 filed on February 28, 1995 and was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 filed on April 29,
1996, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated February 3, 1997, to Participation
Agreement, dated February 10, 1995, between Registrant and First
Citicorp Life Insurance Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on February 13, 1998,
and is incorporated herein by reference.
(i) - (i) Participation Agreement, dated December 19, 1995, between
Registrant and Glenbrook Life and Annuity Company was filed
electronically as an
6
<PAGE> 293
Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and
is incorporated herein by reference.
- (i)(1) Side Letter Agreement, dated December 1, 1995, among
Registrant and Glenbrook Life and Annuity Company, incorporated
herein by reference to Post-Effective Amendment No. 8 filed on
April 23, 1997.
- (ii) Amendment No. 1, dated November 7, 1997, to Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 10 on October 2, 1998,
and is incorporated herein by reference.
- (iii) Amendment No. 2, dated September 2, 1997, to Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 9 on February 13, 1998,
and is incorporated herein by reference.
- (iv) Amendment No. 3, dated January 26, 1998, to Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 10 filed on October 2,
1998, and is incorporated herein by reference.
- (v) Amendment No. 4, dated May 1, 1998, to Participation
Agreement, dated December 19, 1995, between Registrant and
Glenbrook Life and Annuity Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 10 on October 2, 1998,
and is incorporated herein by reference.
- (vi) Amendment No. 5, dated January 12, 1999, to the
Participation Agreement, dated December 19, 1995, between
Registrant and Glenbrook Life and Annuity Insurance Company was
filed electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(j) - Participation Agreement, dated March 4, 1996, between Registrant
and IDS Life Insurance Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 7 on April 29, 1996.
(k) - (i) Participation Agreement, dated October 7, 1996, between
Registrant and IDS Life Insurance Company (supersedes and
replaces Participation Agreement dated March 4, 1996),
incorporated herein by reference to Post-Effective Amendment No.
8 filed on April 23, 1997.
7
<PAGE> 294
- (i)(1) Side Letter Agreement, dated September 27, 1996, between
Registrant, IDS Life Insurance Company and IDS Life Insurance
Company of New York was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 13, 1998, and is
incorporated herein by reference.
- (ii) Amendment 1, dated November 11, 1997, the Participation
Agreement, dated October 7, 1996, between registrant and IDS Life
Insurance Company was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 11 on February 18, 1999
and is hereby incorporated by reference.
(l) - (i) Participation Agreement, dated October 7, 1996, between
Registrant and IDS Life Insurance Company of New York,
incorporated herein by reference to Post-Effective Amendment No.
8 filed on April 23, 1997.
- (ii) Amendment No. 1, dated November 11, 1997, to the
Participation Agreement, dated October 7, 1996 between registrant
and IDS Life Insurance Company of New York was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(m) - Participation Agreement, dated April 8, 1996, between Registrant
and Connecticut General Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 7 on
April 29, 1996, and is incorporated herein by reference.
(n) - (i) Participation Agreement, dated September 21, 1996, between
Registrant and Pruco Life Insurance Company, incorporated herein
by reference to Post-Effective Amendment No. 8 filed on April 23,
1997.
- (ii) Amendment No. 1, dated July 1, 1997, to Participation
Agreement, dated September 21, 1996, between Registrant and Pruco
Life Insurance Company was filed electronically as an Exhibit to
Post-Effective Amendment No. 9 on February 13, 1998, and is
incorporated herein by reference.
- (iii) Amendment No. 2, dated August 1, 1998, to Participation
Agreement, dated September 21, 1996, between Registrant and Pruco
Life Insurance Company, incorporated herein by reference
Post-Effective Amendment No. 10 filed on October 2, 1998.
8
<PAGE> 295
(o) - (i) Participation Agreement, dated October 1, 1996, between
Registrant and Allstate Life Insurance Company of New York,
incorporated herein by reference to Post-Effective Amendment No.
8 filed on April 23, 1997.
- (i)(1) Side Letter Agreement, dated October 1, 1996, between
Registrant and Allstate Life Insurance Company of New York was
filed as Exhibit to Post-Effective Amendment No. 10 on October 2,
1998 and is incorporated herein by reference.
- (ii) Amendment No. 1, dated November 7, 1997, to Participation
Agreement, dated October 1, 1996, between Registrant and Allstate
Life Insurance Company of New York was filed electronically as an
Exhibit to Post-Effective Amendment No. 12 on April 29, 1999 and
is incorporated herein by reference.
(p) - (i) Participation Agreement, dated December 18, 1996, between
Registrant and Merrill Lynch Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 8 filed on
April 23, 1997.
- (i)(1)Side Letter Agreement, dated December 18, 1996, between
Registrant and Merrill, Lynch, Pierce, Fenner & Smith,
Incorporated, incorporated herein by reference to Post-Effective
Amendment No. 8 filed on April 23, 1997.
- (ii) Amendment No. 1, dated May 1, 1997, to Participation
Agreement, dated December 18, 1996, between Registrant and
Merrill Lynch Life Insurance Company, incorporated herein by
reference to Post-Effective Amendment No. 9 filed on February 13,
1998.
(q) - (i) Participation Agreement, dated December 18, 1996, between
Registrant and ML Life Insurance Company of New York,
incorporated herein by reference to Post-Effective Amendment No.
8 filed on April 23, 1997.
- (ii) Amendment No. 1, dated May 1, 1997, to Participation
Agreement, dated December 18, 1996, by and between Registrant and
ML Life Insurance Company of New York, incorporated herein by
reference to Post-Effective Amendment No. 9 filed on February 13,
1998.
(r) - Participation Agreement, dated February 14, 1997, between
Registrant and Pruco Life Insurance Company of New Jersey,
incorporated herein by reference to Post-Effective Amendment No.
8 filed on April 23, 1997.
(s) - Participation Agreement, dated April 30, 1997, between Registrant
and Prudential Insurance Company of America, incorporated herein
by reference to Post-Effective Amendment No. 9 filed on February
13, 1998.
9
<PAGE> 296
(t) - Participation Agreement, dated October 30, 1997, between
Registrant and American Centurion Life Assurance Company,
incorporated herein by reference to Post-Effective Amendment No.
9 filed on February 13, 1998.
(u) - (i) Participation Agreement, dated October 30, 1997, between
Registrant and American Enterprise Life Insurance Company,
incorporated herein by reference to Post-Effective Amendment No.
9 filed on February 13, 1998.
- (i)(1) Letter Agreement, dated October 30, 1997, between American
Enterprise Life Insurance Company and American Centurion Life
Assurance Company, incorporated herein by reference to
Post-Effective Amendment No. 9 filed on February 13, 1998.
(v) - Participation Agreement, dated November 20, 1997, between
Registrant and AIG Life Insurance Company, incorporated herein by
reference to Post-Effective Amendment No. 9 filed on February 13,
1998.
(w) - Participation Agreement, dated November 20, 1997, between
Registrant and American International Life Assurance Company of
New York, incorporated herein by reference to Post-Effective
Amendment No. 9 filed on February 13, 1998.
(x) - (i) Participation Agreement, dated November 4, 1997, between
Registrant and Nationwide Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 9 filed on
February 13, 1998.
- (ii) Amendment No. 1, dated June 15, 1998, to Participation
Agreement, dated November 4, 1997, between Registrant and
Nationwide Life Insurance Company, incorporated herein by
reference to Post-Effective Amendment No. 10 filed on October 2,
1998.
(y) - (i) Participation Agreement, dated December 3, 1997, between
Registrant and Security Life of Denver, incorporated herein by
reference to Post-Effective Amendment No. 9 filed on February 13,
1998.
- (ii) Amendment No. 1, dated June 23, 1998, to Participation
Agreement, dated December 3, 1997, between Registrant and
Security Life of Denver, incorporated herein by reference to
Post-Effective Amendment No. 10 filed on October 2, 1998.
- (iii) Amendment No. 2, dated May 20, 1999, to the Participation
Agreement, dated December 3, 1997, between Registrant and
Security Life of Denver Insurance Company, incorporated herein by
reference to Post-Effective Amendment No. 13 filed on July 13,
1999.
10
<PAGE> 297
- (iv) Amendment No. 3 dated November 1, 1999, between Registrant
and Security Life of Denver Insurance, incorporated herein by
reference to Post-Effective Amendment No. 15 filed on February
16, 2000.
(z) - (i) Participation Agreement, dated December 31, 1997, between
Registrant and Cova Financial Services Life Insurance Company,
incorporated herein by reference to Post-Effective Amendment No.
9 filed on February 13, 1998.
- (ii) Amendment No. 1, dated April 23, 1999, between Registrant
and Cova Financial Services Life Insurance Company, incorporated
herein by reference to Post-Effective Amendment No. 15 on
February 16, 2000.
(aa) - (i) Participation Agreement, dated December 31, 1997, between
Registrant and Cova Financial Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 9
filed on February 13, 1998, and is incorporated herein by
reference.
- (ii) Amendment No. 1, dated April 23, 1999, between Registrant
and Cova Financial Life Insurance Company, incorporated herein by
reference to Post-Effective Amendment No. 13 on July 13, 1999.
(bb) - (i) Participation Agreement, dated February 2, 1998, between
Registrant and The Guardian Insurance & Annuity Company,
incorporated herein by reference to Post-Effective Amendment No.
10 filed on October 2, 1998.
(ii) Amendment No. 1, dated July 1, 1999, between Registrant and
The Guardian Life Insurance & Annuity Company, incorporated
herein by reference to Post-Effective Amendment No. 14 filed on
September 28, 1999.
(cc) - (i) Participation Agreement, dated February 17, 1998, between
Registrant and Sun Life Assurance Company of Canada (U.S.),
incorporated herein by reference to Post-Effective Amendment No.
10 filed on October 2, 1998.
- (ii) Amendment No. 1, dated December 11, 1998, to the
Participation Agreement, dated February 17, 1998, between
Registrant and Sun Life Assurance Company of Canada (U.S.),
incorporated herein by reference to Post-Effective Amendment No.
11 filed on February 18, 1999.
(dd) - Participation Agreement, dated April 1, 1998, between Registrant
and United Life & Annuity Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
filed on October 2, 1998, and is incorporated herein by
reference.
11
<PAGE> 298
(ee) - (i) Participation Agreement, dated April 21, 1998, between
Registrant and Keyport Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated December 28, 1998, to the
Participation Agreement, dated April 21, 1998, between Registrant
and Keyport Life Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No. 11 on
February 18, 1999 and is hereby incorporated by reference.
(ff) - (i) Participation Agreement, dated May 1, 1998, between
Registrant and PFL Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated June 30, 1998, to Participation
Agreement, dated May 1, 1998, between Registrant and PFL Life
Insurance Company was filed electronically as an Exhibit to
Post-Effective Amendment No. 10 on October 2, 1998, and is
incorporated herein by reference.
- (iii) Amendment No. 2, dated November 27, 1998, to the
Participation Agreement, dated May 1, 1998, between Registrant
and PFL Life Insurance Company was filed electronically as an
Exhibit to Registrant's Post-Effective Amendment No. 11 on
February 18, 1999 and is hereby incorporated by reference.
(gg) - Participation Agreement, dated May 1, 1998, between Registrant
and Fortis Benefits Insurance Company was filed electronically as
an Exhibit to Post-Effective Amendment No. 10 on October 2, 1998,
and is incorporated herein by reference.
(hh) - (i) Participation Agreement, dated June 1, 1998, between
Registrant and American General Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
(ii) Amendment No. 1, dated January 1, 1999, to the Participation
Agreement, dated June 1, 1998, between Registrant and American
General Life Insurance Company was filed electronically as an
Exhibit to Post-Effective Amendment No. 12 on April 29, 1999, and
is incorporated herein by reference.
12
<PAGE> 299
(ii) - (i) Participation Agreement, dated June 16, 1998, between
Registrant and Lincoln National Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated November 20, 1998, to the
Participation Agreement, dated June 16, 1998, between Registrant
and Lincoln National Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(jj) - Participation Agreement, dated June 30, 1998, between Registrant
and Aetna Life Insurance and Annuity Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
(kk) - Participation Agreement, dated July 1, 1998, between Registrant
and The Union Central Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(ll) - Participation Agreement, dated July 1, 1998, between Registrant
and United Investors Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(mm) - Participation Agreement, dated July 2, 1998, between Registrant
and Hartford Life Insurance Company was filed electronically as
an Exhibit to Post-Effective Amendment No. 10 on October 2, 1998,
and is incorporated herein by reference.
(nn) - (i) Participation Agreement, dated July 13, 1998, between
Registrant and Keyport Benefit Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated December 28, 1998 to the
Participation Agreement, dated July 13, 1998, between Registrant
and Keyport Benefit Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(oo) - (i) Participation Agreement, dated July 27, 1998, between
Registrant and Allmerica Financial Life Insurance and Annuity
Company was filed
13
<PAGE> 300
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated February 11, 2000 to the
Participation Agreement dated July 27, 1998 between Registrant
and Allmerica Financial Life Insurance Company was filed as an
Exhibit to Post-Effective Amendment No. 16 on February 17, 2000,
and is incorporated herein by reference.
(pp) - Participation Agreement, dated July 27, 1998, between Registrant
and First Allmerica Financial Life Insurance Company was filed
electronically as an Exhibit to Post-Effective Amendment No. 10
on October 2, 1998, and is incorporated herein by reference.
- (ii) Amendment No. 1, dated February 11, 2000 to the
Participation Agreement dated July 27, 1998 between Registrant
and First Allmerica Financial Life Insurance Company was filed as
an Exhibit to Post-Effective Amendment No. 16 on February 17,
2000, and is incorporated herein by reference.
(qq) - Participation Agreement, dated October 15, 1998, between
Registrant and Lincoln Life & Annuity Insurance Company of New
York was filed electronically as an Exhibit to Post-Effective
Amendment No. 12 on April 29, 1999 and is incorporated by
reference.
(rr) - (i) Participation Agreement, dated November 23, 1998, between
Registrant and American General Annuity Insurance Company was
filed electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 was filed electronically as
an Exhibit to Post-Effective Amendment No. 12 on April 29, 1999
and is incorporated by reference.
- (ii) Amendment No. 1, dated July 1, 1999, to the Participation
Agreement, dated November 23, 1998, between Registrant and
American General Annuity Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and is incorporated herein
by reference.
(ss) - Participation Agreement, dated December 1, 1998, between
Registrant and the Prudential Insurance Company of America was
filed electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 11 on February 18, 1999 and is hereby incorporated
by reference.
(tt) - Participation Agreement, dated February 1, 1999, between
Registrant and Sage Life Assurance of America, Inc. was filed
electronically as an Exhibit
14
<PAGE> 301
to Post-Effective Amendment No. 12 on April 29, 1999 and is
incorporated by reference.
(uu) - Participation Agreement, dated April 1, 1999, between Registrant
and Liberty Life Assurance Company of Boston was filed
electronically as an Exhibit to Post-Effective Amendment No. 12
on April 29, 1999 and is incorporated by reference.
(vv) - Participation Agreement, dated April 1, 1999, between Registrant
and Liberty Life Assurance Company of Boston was filed as an
Exhibit to Registrant's Post-Effective Amendment No. 12 on April
29, 1999, and is incorporated herein by reference.
(ww) - Participation Agreement, dated April 13, 1999, between Registrant
and Western-Southern Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 13 on July 13, 1999 and is incorporated herein by
reference.
(xx) - Participation Agreement, dated May 1, 1999, between Registrant
and Columbus Life Insurance Company was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment No. 13 on
July 13, 1999 and is incorporated herein by reference.
(yy) - Participation Agreement, dated April 26, 1999, between Registrant
and First Variable Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 13 on July 13, 1999 and is incorporated herein by
reference.
(zz) - Participation Agreement, dated August 21, 1999, between
Registrant and Life Investors Insurance Company of America was
filed electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and incorporated herein by
reference.
(aaa) - Participation Agreement, dated June 8, 1999, between Registrant
and The Principal Life Insurance Company was filed electronically
as an Exhibit to Registrant's Post-Effective Amendment No. 13 on
July 13, 1999 and is incorporated herein by reference.
(bbb) - Participation Agreement dated June 8, 1999, between Registrant
and Principal Life Insurance Company was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and is incorporated herein by reference.
(ccc) - Participation Agreement, dated June 14, 1999, between Registrant
and Security First Life Insurance Company was filed
electronically as an
15
<PAGE> 302
Exhibit to Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and is incorporated herein by reference.
(ddd) - Participation Agreement, dated July 1, 1999, between Registrant
and Allstate Life Insurance Company was filed electronically as
an Exhibit to Registrant's Post-Effective Amendment No. 14 on
September 28, 1999 and is incorporated herein by reference.
(eee) - Participation Agreement, dated July 27, 1999, between Registrant
and Allianz Life Insurance Company of North America was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and is incorporated herein
by reference.
(fff) - Participation Agreement, dated July 27, 1999, between Registrant
and Preferred Life Insurance Company of New York was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and is incorporated herein
by reference.
(ggg) - Participation Agreement dated August 31, 1999, between Registrant
and John Hancock Mutual Life Insurance Company was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 14 on September 28, 1999 and is incorporated herein
by reference.
(hhh) - Participation Agreement, dated August 31, 1999, between
Registrant and The United States Life Insurance Company in the
City of New York was filed electronically as an Exhibit to
Registrant's Post-Effective Amendment No. 14 on September 28,
1999 and is incorporated herein by reference.
(iii) - Participation Agreement, dated November 1, 1999, between
Registrant and AETNA Insurance Company of America was filed
electronically as an Exhibit to Registrant's Post-Effective
Amendment No. 15 on February 16, 2000, and is incorporated herein
by reference.
(jjj) - Participation Agreement, dated January 28, 2000, between
Registrant and Northbrook Life Insurance Company was filed as an
Exhibit to Post-Effective Amendment No. 16 on February 17, 2000,
and is incorporated herein by reference.
(kkk) - Accounting Services Agreement, dated March 31, 1993, between the
Registrant and State Street Bank and Trust Company, incorporated
herein by reference to Post-Effective Amendment No. 7 filed on
April 29, 1996.
14 - Consent of Messrs. Tait, Weller & Baker is hereby filed
electronically.
16
<PAGE> 303
15 - Financial Statements Omitted from Item 22 - None.
16 - Manually signed powers of attorney pursuant to which the name of
any person has been signed to the registration statement - None.
17 - Form of Proxy is hereby filed electronically
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant agrees that prior to any public reoffering of
the securities registered through the use of a prospectus which is a part
of this registration statement by any person or party who is deemed to be
an underwriter within the meaning of Rule 145(c) of the Securities Act of
1933, the reoffering prospectus will contain the information called for by
the applicable registration form for reofferings by persons who may be
deemed underwriters, in addition to the information called for by the other
items of the applicable form.
(2) The undersigned Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as a part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the Securities Act
of 1933, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the offering
of the securities at that time shall be deemed to be the initial bona fide
offering of them.
17
<PAGE> 304
SIGNATURES
Pursuant to the Securities Act of 1933, as amended, the Registrant has duly
caused this Registration Statement on Form N-14 to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Houston, State of
Texas, on the 16th day of June, 2000.
AIM VARIABLE INSURANCE FUNDS
Registrant
By: /s/ ROBERT H. GRAHAM
--------------------------------------
Robert H. Graham
President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ CHARLES T. BAUER
--------------------------------------- Trustee & Chairman 06-16-00
Charles T. Bauer
/s/ ROBERT H. GRAHAM
--------------------------------------- Trustee & President (Principal 06-16-00
Robert H. Graham Executive Officer)
/s/ BRUCE L. CROCKETT
--------------------------------------- Trustee 06-16-00
Bruce L. Crockett
/s/ OWEN DALY II
--------------------------------------- Trustee 06-16-00
Owen Daly II
/s/ EDWARD K. DUNN, JR.
--------------------------------------- Trustee 06-16-00
Edward K. Dunn, Jr.
/s/ JACK FIELDS
--------------------------------------- Trustee 06-16-00
Jack Fields
/s/ CARL FRISCHLING
--------------------------------------- Trustee 06-16-00
Carl Frischling
/s/ PREMA MATHAI-DAVIS
--------------------------------------- Trustee 06-16-00
Prema Mathai-Davis
/s/ LEWIS F. PENNOCK
--------------------------------------- Trustee 06-16-00
Lewis F. Pennock
/s/ LOUIS SKLAR
--------------------------------------- Trustee 06-16-00
Louis Sklar
/s/ DANA R. SUTTON
--------------------------------------- Vice President & 06-16-00
Dana R. Sutton Treasurer (Principal Financial Officer)
</TABLE>
<PAGE> 305
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
No. Description
------- -----------
<S> <C>
11(b) - Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds
regarding the legality of the shares being registered under this
Registration Statement on Form N-14 by AIM Variable Insurance
Funds on behalf of the AIM V.I. Growth and Income Fund.
12 - Opinion and consent of Messrs. Freedman, Levy, Kroll & Simonds
supporting the tax matters and consequences to shareholders
discussed in the Proxy Statement/Prospectus.
14 - Consent of Messrs. Tait, Weller & Baker.
17 - Form of Proxy.
</TABLE>
