-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BFe4GlZxRFoTdNzlpFs7tP6/tqE+dXCFJlzuqrQjbOGLkkNMLlTFuxALYBlK+men CtBfoKbsv4DFsJV0oN5yGg== 0000950129-00-000688.txt : 20000217 0000950129-00-000688.hdr.sgml : 20000217 ACCESSION NUMBER: 0000950129-00-000688 CONFORMED SUBMISSION TYPE: 485BPOS PUBLIC DOCUMENT COUNT: 15 FILED AS OF DATE: 20000216 EFFECTIVENESS DATE: 20000216 FILER: COMPANY DATA: COMPANY CONFORMED NAME: AIM VARIABLE INSURANCE FUNDS INC CENTRAL INDEX KEY: 0000896435 STANDARD INDUSTRIAL CLASSIFICATION: UNKNOWN SIC - 0000 [0000] STATE OF INCORPORATION: MD FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 033-57340 FILM NUMBER: 547592 FILING VALUES: FORM TYPE: 485BPOS SEC ACT: SEC FILE NUMBER: 811-07452 FILM NUMBER: 547593 BUSINESS ADDRESS: STREET 1: 11 GREENWAY PLAZA STREET 2: STE 100 CITY: HOUSTON STATE: TX ZIP: 77046 BUSINESS PHONE: 7132141785 MAIL ADDRESS: STREET 1: 11 GREENWAY PLAZA STREET 2: SUITE 100 CITY: HOUSTON STATE: TX ZIP: 77046 485BPOS 1 AIM VARIABLE INSURANCE FUNDS, INC. - P.E AMEND. 15 1 As filed with the Securities and Exchange Commission on February 16, 2000 1933 Act Registration No. 33-57340 1940 Act Registration No. 811-7452 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 Pre-Effective Amendment No. ------ --- Post-Effective Amendment No. 15 X ------ --- and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 16 X ------ --- (Check appropriate box or boxes.) AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------------------------------- (Exact Name of Registrant as Specified in Charter) 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 ---------------------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including Area Code (713) 626-1919 ---------------- Charles T. Bauer 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 ---------------------------------------------------------- (Name and Address of Agent for Service) Copy to: Nancy L. Martin, Esquire A I M Advisors, Inc. 11 Greenway Plaza, Suite 100 Houston, Texas 77046-1173 Approximate Date of Proposed Public Offering: Continuous It is proposed that this filing will become effective (check appropriate box) X immediately upon filing pursuant to paragraph (b) --- on (date) pursuant to paragraph (b) --- 60 days after filing pursuant to paragraph (a)(1) --- on (date) pursuant to paragraph (a)(1) --- 75 days after filing pursuant to paragraph (a)(2) --- on (date) pursuant to paragraph (a)(2) of Rule 485. --- If appropriate, check the following: This post-effective amendment designates a new effective date for a --- previously filed post-effective amendment. Title of Securities Being Registered: Common Stock 2 AIM VARIABLE INSURANCE FUNDS, INC. -------------------------------------------------------------------------- --Registered Trademark-- AIM V.I. Aggressive Growth Fund AIM V.I. Government Securities Fund AIM V.I. Balanced Fund AIM V.I. Growth Fund AIM V.I. Blue Chip Fund AIM V.I. Growth and Income Fund AIM V.I. Capital Appreciation Fund AIM V.I. High Yield Fund AIM V.I. Capital Development Fund AIM V.I. International Equity Fund AIM V.I. Dent Demographic Trends Fund AIM V.I. Money Market Fund AIM V.I. Diversified Income Fund AIM V.I. Telecommunications Fund AIM V.I. Global Growth and Income Fund AIM V.I. Value Fund AIM V.I. Global Utilities Fund
Shares of the funds are currently offered only to insurance company separate accounts. The investment objective of each fund is described under the heading "Investment Objectives and Strategies." PROSPECTUS FEBRUARY 16, 2000 This prospectus contains important information. Please read it before investing and keep it for future reference. As with all other mutual fund securities, the Securities and Exchange Commission has not approved or disapproved these securities or determined whether the information in this Prospectus is adequate or accurate. Anyone who tells you otherwise is committing a crime. There can be no assurance that the AIM V.I. Money Market Fund will be able to maintain a stable net asset value of $1.00 per share. Investments in the funds: - are not FDIC insured; - may lose value; and - are not guaranteed by a bank. The Board of Directors voted to request shareholder approval of certain items. For further information on these items, see Submission of Matters to Shareholders in this prospectus. [AIM LOGO APPEARS HERE] INVEST WITH DISCIPLINE --Registered Trademark-- 3 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- TABLE OF CONTENTS - -------------------------------------------------------------------------------- INVESTMENT OBJECTIVES AND STRATEGIES 1 - - - - - - - - - - - - - - - - - - - - - - - - - PRINCIPAL RISKS OF INVESTING IN THE FUNDS 5 - - - - - - - - - - - - - - - - - - - - - - - - - PERFORMANCE INFORMATION 9 - - - - - - - - - - - - - - - - - - - - - - - - - Annual Total Returns 9 Performance Tables 17 FUND MANAGEMENT 22 - - - - - - - - - - - - - - - - - - - - - - - - - The Advisor 22 Advisor Compensation 22 Portfolio Managers 22 OTHER INFORMATION 25 - - - - - - - - - - - - - - - - - - - - - - - - - Purchase and Redemption of Shares 25 Pricing of Shares 25 Taxes 25 Dividends and Distributions 25 Future Fund Closure 25 Submission of Matters to Shareholders 25 FINANCIAL HIGHLIGHTS 27 - - - - - - - - - - - - - - - - - - - - - - - - - OBTAINING ADDITIONAL INFORMATION Back Cover - - - - - - - - - - - - - - - - - - - - - - - - -
The AIM Family of Funds, The AIM Family of Funds and Design (i.e., the AIM logo), AIM and Design, AIM, AIM LINK, AIM Institutional Funds, aimfunds.com, La Familia AIM de Fondos, La Familia AIM de Fondos and Design and Invest with Discipline are registered service marks and AIM Bank Connection, AIM Funds, AIM Funds and Design, AIM Internet Connect and AIM Investor are service marks of A I M Management Group Inc. No dealer, salesperson or any other person has been authorized to give any information or to make any representations other than those contained in this prospectus, and you should not rely on such other information or representations. 4 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- INVESTMENT OBJECTIVES AND STRATEGIES - -------------------------------------------------------------------------------- AIM V.I. AGGRESSIVE GROWTH FUND The fund's investment objective is to achieve long-term growth of capital. The fund seeks to meet this objective by investing primarily in common stocks, convertible bonds, convertible preferred stocks and warrants of small- and medium-sized companies whose earnings the fund's portfolio managers expect to grow more than 15% per year. The fund may also invest up to 25% of its total assets in foreign securities. The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. AIM V.I. BALANCED FUND The fund's investment objective is to achieve as high a total return as possible, consistent with preservation of capital. The fund seeks to meet this objective by investing in a broadly diversified portfolio of high-yielding securities, including common stocks, preferred stocks, convertible securities and bonds. The fund normally invests a minimum of 30% and a maximum of 70% of its total assets in equity securities and a minimum of 30% and a maximum of 70% of its total assets in non-convertible debt securities. The fund may also invest up to 25% of its total assets in convertible securities. The fund may invest up to 10% of its total assets in lower-quality debt securities, i.e., "junk bonds." The fund may also invest up to 20% of its total assets in foreign securities. In selecting the percentages of assets to be invested in equity or debt securities, the portfolio managers consider such factors as the general market and economic conditions, as well as trends, yields, interest rates and changes in fiscal and monetary policies. The portfolio managers will primarily purchase equity securities for growth of capital and debt securities for income purposes. However, the portfolio managers will focus on companies whose securities have the potential for both growth of capital and income generation. The portfolio managers consider whether to sell a particular security when they believe that security no longer has that potential. AIM V.I. BLUE CHIP FUND The fund's primary investment objective is long-term growth of capital with a secondary objective of current income. The fund seeks to meet these objectives by investing at least 65% of its total assets in the common stocks of blue chip companies. Blue chip companies are those companies that the fund's portfolio managers believe have the potential for above-average growth in earnings and that are well-established in their respective industries. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. The fund may invest in United States government securities, convertible securities and high-quality debt securities when the portfolio managers believe securities other than common stocks offer the opportunity for long-term growth of capital and current income. The fund may also invest up to 25% of its total assets in foreign securities. AIM V.I. CAPITAL APPRECIATION FUND The fund's investment objective is growth of capital through investment in common stocks, with emphasis on medium- and small-sized growth companies. The fund may also invest up to 20% of its total assets in foreign securities. The portfolio managers focus on companies they believe are likely to benefit from new or innovative products, services or processes as well as those that have experienced above-average, long-term growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. AIM V.I. CAPITAL DEVELOPMENT FUND The fund's investment objective is long-term growth of capital. The fund seeks to meet this objective by investing primarily in securities, including common stocks, convertible securities and bonds, of small- and medium-sized companies. The fund may also invest up to 25% of its total assets in foreign securities. Among factors which the portfolio managers may consider when purchasing these securities are: (1) the growth prospects for a company's products; (2) the economic outlook for its industry; (3) a company's new product development; (4) its operating management capabilities; (5) the relationship between the price of the security and its estimated fundamental value; (6) relevant market, economic and political environments; and (7) financial characteristics, such as balance sheet analysis and return on assets. The portfolio managers sell a particular security when any one of these factors materially changes. The fund may engage in active and frequent trading of portfolio securities to achieve its investment 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. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND The fund's investment objective is long-term growth of capital. The fund's investment objective may be changed by the fund's Board of Directors without shareholder approval. 1 5 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- The fund seeks to meet its objective by investing in securities of companies that are likely to benefit from changing demographic, economic and lifestyle trends. These securities may include common stocks, convertible bonds, convertible preferred stocks and warrants of companies within a broad range of market capitalizations. The fund may also invest up to 25% of its total assets in foreign securities. The portfolio managers purchase securities of companies that have experienced, or that they believe have the potential for, above-average, long-term growth in revenues and earnings. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. AIM V.I. DIVERSIFIED INCOME FUND The fund's investment objective is to achieve a high level of current income. The fund seeks to meet this objective by investing primarily in (1) domestic and foreign corporate debt securities; (2) U.S. Government securities, including U.S. Government agency mortgage-backed securities; (3) securities issued by foreign governments, their agencies or instrumentalities; and (4) lower-quality debt securities, i.e., "junk bonds," of U.S. and foreign companies. The fund's assets will normally be invested in each of these four sectors, however the fund may invest up to 100% of its total assets in U.S. Government securities. The fund may invest up to 50% of its total assets in foreign securities, including securities of issuers located in developing countries. The fund may invest up to 25% of its total assets in government securities of any one foreign country. The fund may also invest up to 10% of its total assets in equity securities and convertible debt securities of U.S. and foreign companies. The fund may invest in debt obligations issued by certain supranational entities, such as the World Bank. The portfolio managers focus on securities that they believe have favorable prospects for current income, whether denominated in the U.S. dollar or in other currencies. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. AIM V.I. GLOBAL GROWTH AND INCOME FUND The fund's investment objectives are long-term growth of capital together with current income. The fund seeks to meet its objectives by investing at least 65% of its total assets in a combination of blue chip equity securities and high-quality government bonds of U.S. and foreign issuers. "Blue chip" equity securities are those which (1) offered, during the issuer's most recent fiscal year, an above average dividend yield relative to the latest reported dividend yield on the Morgan Stanley Capital International World Index, and (2) are issued by a company with total equity market capitalization of at least $1 billion. High-quality government bonds are rated within one of the two highest ratings categories of Moody's Investors Service, Inc. or Standard & Poor's Ratings Services, or are deemed by the portfolio managers to be of comparable quality. The fund may invest up to 35% of its total assets in other equity securities, convertible securities and government and corporate debt securities that are investment grade, i.e., rated within one of the four highest ratings categories of Moody's or S&P. The fund may purchase debt obligations issued or guaranteed by the U.S. or foreign governments, including foreign states, provinces or municipalities, or their agencies, authorities or instrumentalities and debt obligations of supranational organizations, such as the World Bank. The fund will normally invest in securities of issuers in at least three countries, including the United States. However, the fund may not invest more than 40% of its assets in securities of issuers in any one country, other than the U.S. The fund may invest in the securities of issuers located in developing countries, i.e., those that are in the initial stages of their industrial cycles. The 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 portfolio managers allocate assets among securities of countries and in currency denominations where opportunities for meeting the fund's investment objectives are expected to be the most attractive. The portfolio managers consider whether to sell a particular security when opportunities for meeting the fund's investment objectives are no longer considered attractive. AIM V.I. GLOBAL UTILITIES FUND The fund's investment objectives are to achieve a high level of current income and secondarily, growth of capital, by investing primarily in the common and preferred stocks of public utility companies (either domestic or foreign). The fund seeks to meet these objectives by investing, normally, at least 65% of its total assets in securities of domestic and foreign public utility companies. Public utility companies include companies that provide electricity, natural gas, water and sanitary services to the public, telephone or telegraph companies, and other companies providing public communications services. The fund may also invest in developing utility technology companies and in holding companies that derive a substantial portion of their revenues from utility related activities. The fund may invest up to 80% of its total assets in foreign securities, including securities of issuers located in developing countries. Developing countries are those countries that are in the initial stages of their industrial cycles. The fund will normally invest in the securities of companies located in at least four different countries, including the United States. The fund may invest up to 25% of its total assets in convertible securities. The fund may also invest up to 25% of its total assets in non-convertible bonds. The fund may invest up to 10% of its total assets in lower-quality debt securities, i.e., "junk bonds." The portfolio managers focus on securities that have favorable prospects for high current income and growth of capital. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund is a non-diversified portfolio. With respect to 50% of its total assets, it is permitted to invest more than 5% of its assets in the securities of any one issuer. 2 6 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- In anticipation of or in response to adverse market conditions the fund may invest up to 100% of its total assets in securities of U.S. issuers. AIM V.I. GOVERNMENT SECURITIES FUND The fund's investment objective is to achieve a high level of current income consistent with reasonable concern for safety of principal by investing in debt securities issued, guaranteed or otherwise backed by the United States Government. The fund may invest in securities of all maturities issued or guaranteed by the U.S. Government or its agencies and instrumentalities, including: (1) U.S. Treasury obligations, and (2) obligations issued or guaranteed by U.S. Government agencies and instrumentalities and supported by (a) the full faith and credit of the U.S. Treasury, (b) the right of the issuer to borrow from the U.S. Treasury, or (c) the credit of the agency or instrumentality. The fund intends to maintain a dollar-weighted average portfolio maturity of between three and ten years. The fund may invest in high-coupon U.S. Government agency mortgage-backed securities, which consist of interests in underlying mortgages with maturities of up to thirty years. The fund may also invest up to 20% of its total assets in foreign securities. The portfolio managers focus on securities that they believe have favorable prospects for current income, consistent with their concern for safety of principal. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. AIM V.I. GROWTH FUND The fund's investment objective is to seek growth of capital primarily by investing in seasoned and better capitalized companies considered to have strong earnings momentum. The fund may also invest up to 20% of its total assets in foreign securities. The portfolio managers focus on companies that have experienced above-average growth in earnings and have excellent prospects for future growth. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund may engage in active and frequent trading of portfolio securities to achieve its investment 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. AIM V.I. GROWTH AND INCOME FUND The fund's primary investment objective is growth of capital with a secondary objective of current income. The fund seeks to meet its objectives by investing at least 65% of its total assets in securities of established companies that have long-term above-average growth in earnings and dividends, and growth companies that the portfolio managers believe have the potential for above-average growth in earnings and dividends. The portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. The fund may also invest up to 20% of its total assets in foreign securities. AIM V.I. HIGH YIELD FUND The fund's investment objective is to achieve a high level of current income. The fund's investment objective may be changed by the fund's Board of Directors without shareholder approval. The fund seeks to meet this objective by investing at least 65% of the value of its assets in publicly traded, lower-quality debt securities, i.e., "junk bonds." The fund will invest principally in junk bonds rated B or above by Moody's Investors Service, Inc. or Standard & Poor's Ratings Services or deemed by the portfolio managers to be of comparable quality. The fund will invest at least 80% of its total assets in debt securities, including convertible debt securities and/or cash or cash equivalents. The fund may also invest in preferred stock. The fund may invest up to 25% of its total assets in foreign securities. Although the portfolio managers focus on debt securities that they believe have favorable prospects for high current income, they also consider the possibility of growth of capital of the security. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund may engage in active and frequent trading of portfolio securities to achieve its investment 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. AIM V.I. INTERNATIONAL EQUITY FUND The fund's investment objective is to provide long-term growth of capital by investing in a diversified portfolio of international equity securities whose issuers are considered to have strong earnings momentum. The fund seeks to meet this objective by investing at least 70% of its total assets in marketable equity securities of foreign companies that are listed on a recognized foreign securities exchange or traded in a foreign over-the-counter market. The fund will normally invest in companies located in at least four countries outside of the United States, emphasizing investment in companies in the developed countries of Western Europe and the Pacific Basin. The fund may invest up to 20% of its total assets in securities of issuers located in developing countries, i.e., those that are in the initial stages of their industrial cycles. The fund may invest up to 20% of its total assets in securities exchangeable for or convertible into equity securities of foreign companies. The portfolio managers focus on companies that have experienced above-average, long-term growth in earnings and have strong prospects for future growth. In selecting countries in which the fund will invest, the portfolio managers also consider such factors as the prospect for relative economic growth among countries or regions, economic or political conditions, currency exchange fluctuations, tax considerations and the liquidity of a particular security. The portfolio managers con- 3 7 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- sider whether to sell a particular security when any of those factors materially changes. AIM V.I. MONEY MARKET FUND The fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity. The fund seeks to meet this objective by investing only in high-quality U.S. dollar-denominated short-term obligations, including: - - securities issued by the U.S. Government or its agencies - - foreign government obligations - - bankers' acceptances, certificates of deposit, and time deposits from U.S. or foreign banks - - repurchase agreements - - commercial paper - - taxable municipal securities - - master notes - - cash equivalents The fund may invest up to 50% of its total assets in U.S. dollar-denominated securities of foreign issuers. The fund may invest up to 100% of its total assets in obligations issued by banks. The portfolio managers focus on securities that they believe have favorable prospects for current income, consistent with their concerns for preservation of capital and liquidity. The portfolio managers usually hold portfolio securities to maturity, but may sell a particular security when they deem it advisable, such as when any of the factors above materially changes. In anticipation of or in response to adverse market conditions, for cash management purposes, or for defensive purposes, the fund may temporarily hold all or a portion of its assets in cash or shares of affiliated money market funds. As a result, the fund may not achieve its investment objective. AIM V.I. TELECOMMUNICATIONS FUND The fund's investment objective is long-term growth of capital. The fund seeks to meet this objective by investing primarily in equity securities of companies throughout the world engaged in the development, manufacture or sale of telecommunications services or equipment. The fund will invest, normally, at least 65% of its total assets in common and preferred stocks and warrants to acquire such stocks issued by telecommunications companies. The fund considers a "telecommunications company" to be one that (1) derives at least 50% of its revenues or earnings from telecommunications activities, or (2) devotes at least 50% of its assets to such activities, based on its most recent fiscal year. Such companies include those that develop, manufacture, or sell communications services and equipment, computer and electronic components and equipment, mobile communications, and broadcasting. The fund may invest up to 35% of its assets in debt securities issued by telecommunications companies and/or equity and debt securities of other companies the portfolio managers believe will benefit from developments in the telecommunications industry. The fund may also invest up to 5% of its total assets in lower-quality debt securities, i.e. "junk bonds." The fund will normally invest in the equity securities of companies located in at least three different countries, including the United States, and may invest a significant portion of its assets in the securities of U.S. issuers. However, the fund will not invest more than 40% of its total assets in the securities of issuers in any one country, other than the U.S. The fund may invest substantially in securities denominated in one or more currencies. The portfolio managers allocate the fund's assets among countries, sectors and in currency denominations that are expected to provide the best opportunities for long-term growth of capital. The portfolio managers consider whether to sell a particular security when any of those factors materially changes. The fund may engage in active and frequent trading of portfolio securities to achieve its investment 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. AIM V.I. VALUE FUND 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 fund also may invest in preferred stocks and debt instruments that have prospects for growth of capital. The fund also may invest up to 25% of its total assets in foreign securities. The portfolio managers focus on undervalued equity securities of (1) out-of-favor cyclical growth companies; (2) established growth companies that are undervalued compared to historical relative valuation parameters; (3) companies where there is early but tangible evidence of improving prospects that are not yet reflected in the price of the company's equity securities; and (4) companies whose equity securities are selling at prices that do not reflect the current market value of their assets and where there is reason to expect realization of this potential in the form of increased equity values. The portfolio managers consider whether to sell a particular security when they believe the company no longer fits into any of the above categories. ALL FUNDS (EXCEPT AIM V.I. MONEY MARKET FUND) In anticipation of or in response to adverse market conditions, for cash management purposes, or for defensive purposes, each fund may temporarily hold all or a portion of its assets in cash, money market instruments, shares of affiliated money market funds, bonds or other debt securities. As a result, each fund may not achieve its investment objectives. 4 8 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- PRINCIPAL RISKS OF INVESTING IN THE FUNDS - -------------------------------------------------------------------------------- AIM V.I. AGGRESSIVE GROWTH FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than common stocks of larger, more-established companies. Also, since common stocks of smaller companies may not be traded as often as common stocks of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price. AIM V.I. BALANCED FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from the fund may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Interest rate increases may cause the price of a debt security to decrease; the longer a debt security's duration, the more sensitive it is to this risk. The issuer of a security may default or otherwise be unable to honor a financial obligation. The values of convertible securities in which the fund invests may also be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest or dividends, their values may fall if interest rates rise. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund. AIM V.I. BLUE CHIP FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer of the stock, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. AIM V.I. CAPITAL APPRECIATION FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than common stocks of larger, more-established companies. Also, since common stocks of smaller companies may not be traded as often as common stocks of larger, more-established companies, it may be difficult or impossible for the fund to sell securities at a desirable price. AIM V.I. CAPITAL DEVELOPMENT FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. This is especially true with respect to common stocks of smaller companies, whose prices may go up and down more than common stock of larger, more-established companies. Also, since common stock of smaller companies may not be traded as often as common stock of larger, more-established companies, it may be difficult or impossible for the fund to sell securities in the fund at a desirable price. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. This is especially true with respect to equity securities of small- and medium-sized companies, whose prices may go up and down more than the prices of equity securities of larger, more established companies. Also, since equity securities of small- and medium-sized companies may not be traded as often as equity securities of larger, more established companies, it may be difficult or impossible for the fund to sell securities at a desired price. The prices of growth stocks in which the fund invests may rise and fall more than the prices of stocks generally. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that 5 9 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund. AIM V.I. DIVERSIFIED INCOME FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases may cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. Junk bonds are less sensitive to this risk than are higher-quality bonds. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The agency or instrumentality issuing such security may default or otherwise be unable to honor a financial obligation. Compared to higher-quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer because they are generally unsecured and may be subordinated to other creditors' claims. The value of junk bonds often fluctuates in response to company, political or economic developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times the bonds could be difficult to value or sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk. U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium, which means that a faster principal prepayment rate than expected will reduce both the market value of and income from such securities. The prices of equity securities fluctuates in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. AIM V.I. GLOBAL GROWTH AND INCOME FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases may cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. AIM V.I. GLOBAL UTILITIES FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from the fund may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Interest rate increases may cause the price of a debt security to decrease; the longer a debt security's duration, the more sensitive it is to this risk. The issuer of a security may default or otherwise be unable to honor a financial obligation. The value of the fund's shares is particularly vulnerable to factors affecting the utility company industry, such as substantial economic, operational or regulatory changes. Such changes may, among other things, increase compliance costs or the costs of doing business. In addition, increases in fuel, energy and other prices have historically limited the growth potential of utility companies. Because the fund focuses its investments in the public utility industry, the value of your shares may rise and fall more than the value of shares of a fund that invests more broadly. Because it is non-diversified, the fund may invest in fewer issuers than if it were a diversified fund. The value of the fund's shares may vary more widely, and the fund may be subject to greater investment and credit risk, than if the fund invested more broadly. AIM V.I. GOVERNMENT SECURITIES FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. The longer a debt security's duration, the more sensitive it is to this risk. The prices of high-coupon U.S. Government agency mortgage-backed securities fall more slowly when interest rates rise than do prices of other fixed-rate securities. Some of the securities purchased by the fund are not guaranteed by the U.S. Government. The agency or instrumentality issuing such security may default or otherwise be unable to honor a financial obligation. High-coupon U.S. Government agency mortgage-backed securities provide a higher coupon at the time of purchase than current prevailing market interest rates. The fund may purchase such securities at a premium. If the securities experience a faster principal prepayment rate than expected, both the market value of, and income from, such securities will decrease. 6 10 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GROWTH FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. AIM V.I. GROWTH AND INCOME FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. The values of the convertible securities in which the fund may invest also will be affected by market interest rates, the risk that the issuer may default on interest or principal payments and the value of the underlying common stock into which these securities may be converted. Specifically, since these types of convertible securities pay fixed interest and dividends, their values may fall if market interest rates rise and rise if market interest rates fall. Additionally, an issuer may have the right to buy back certain of the convertible securities at a time and at a price that is unfavorable to the fund. AIM V.I. HIGH YIELD FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. Debt securities are particularly vulnerable to credit risk and interest rate fluctuations. Interest rate increases can cause the price of a debt security to decrease. Junk bonds are less sensitive to this risk than are higher-quality bonds. Compared to higher-quality debt securities, junk bonds involve greater risk of default or price changes due to changes in the credit quality of the issuer because they are generally unsecured and may be subordinated to other creditors claims. The value of junk bonds often fluctuates in response to company, political or economic growth developments and can decline significantly over short periods of time or during periods of general or regional economic difficulty. During those times, the bonds could be difficult to value or to sell at a fair price. Credit ratings on junk bonds do not necessarily reflect their actual market risk. AIM V.I. INTERNATIONAL EQUITY FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. AIM V.I. MONEY MARKET FUND An investment in the fund is not a deposit of a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. Although the fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the fund. Additionally, the fund's yield will vary as the short-term securities in its portfolio mature and the proceeds are reinvested in securities with different interest rates. The following factors could reduce the fund's income and/or share price: - - interest rates could rise sharply, causing the value of the fund's securities, and share price, to drop - - any of the fund's holdings could have its credit rating downgraded or could default - - the risks generally associated with concentrating investments in the banking industry, such as interest rate risk, credit risk and regulatory developments relating to the banking and financial services industries - - the risks generally associated with U.S. dollar-denominated foreign investments, including political and economic upheaval, seizure or nationalization of deposits, imposition of taxes or other restrictions on the payment of principal and interest. AIM V.I. TELECOMMUNICATIONS FUND There is a risk that you could lose all or a portion of your investment in the fund. The value of your investment in the fund will go up and down with the prices of the common stocks in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer of the stock, the value of its assets, general economic conditions, interest rates, investor perceptions, and market liquidity. The value of the fund's shares is particularly vulnerable to factors affecting the telecommunications industry, such as substantial government regulation. Because the fund focuses its investments in the telecommunications industry, the value of your fund shares may rise and fall more than the value of shares of a fund that invests more broadly. 7 11 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. VALUE FUND There is a risk that you could lose all or a portion of your investment in the fund and that the income you may receive from your investment may vary. The value of your investment in the fund will go up and down with the prices of the securities in which the fund invests. The prices of equity securities change in response to many factors, including the historical and prospective earnings of the issuer, the value of its assets, general economic conditions, interest rates, investor perceptions and market liquidity. ALL FUNDS (EXCEPT AIM V.I. MONEY MARKET FUND) The prices of foreign securities may be further affected by other factors, including: - - Currency exchange rates--The dollar value of the fund's foreign investments will be affected by changes in the exchange rates between the dollar and the currencies in which those investments are traded. - - Political and economic conditions--The value of the fund's foreign investments may be adversely affected by political and social instability in their home countries and by changes in economic or taxation policies in those countries. - - Regulations--Foreign companies generally are subject to less stringent regulations, including financial and accounting controls, than are U.S. companies. As a result, there generally is less publicly available information about foreign companies than about U.S. companies. - - Markets--The securities markets of other countries are smaller than U.S. securities markets. As a result, many foreign securities may be less liquid and more volatile than U.S. securities. These factors may affect the prices of securities issued by foreign companies located in developing countries more than those in countries with mature economies. For example, many developing countries have, in the past, experienced high rates of inflation or sharply devaluated their currencies against the U.S. dollar, thereby causing the value of investments in companies located in those countries to decline. Transaction costs are often higher in developing countries and there may be delays in settlement procedures. ALL FUNDS If the seller of a repurchase agreement in which the fund invests defaults on its obligation or declares bankruptcy, the fund may experience delays in selling the securities underlying the repurchase agreement. As a result, the fund may incur losses arising from decline in the value of those securities, reduced levels of income and expenses of enforcing its rights. Some of the funds (except AIM V.I. Diversified Income Fund, AIM V.I. Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market Fund) may participate in the initial public offering (IPO) market. For AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I. Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. International Equity Fund and AIM V.I. Telecommunications Fund (funds that have a small asset base) any investment a fund may make in IPOs may significantly increase its total returns. As a fund's assets grow, the impact of IPO investments will decline, which may reduce its total returns. 8 12 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- PERFORMANCE INFORMATION - -------------------------------------------------------------------------------- The bar charts and tables shown below provide an indication of the risks of investing in each fund. A fund's past performance is not necessarily an indication of its future performance. The bar charts and performance tables shown below do not reflect charges at the separate account level. If they did, the performance shown would be lower. Total return information in the bar charts and tables below may be affected by special market factors, including investments by certain funds in initial public offerings, which may have a magnified impact on those funds that have a small asset base. There is no guarantee that, as those funds' assets grow, they will continue to experience substantially similar performance. SEC Rules do not allow us to provide a bar chart and performance table for funds that do not have at least a full calendar year of performance. AIM V.I. AGGRESSIVE GROWTH FUND ANNUAL TOTAL RETURNS The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1999 ....................................... 44.67%
During the period shown in the bar chart, the highest quarterly return was 29.55% (quarter ended December 31, 1999) and the lowest quarterly return was - -4.67% (quarter ended March 31, 1999). 9 13 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. BALANCED FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1999 ....................................... 19.31%
During the period shown in the bar chart, the highest quarterly return was 15.67% (quarter ended December 31, 1999) and the lowest quarterly return was - -2.38% (quarter ended September 30, 1999). AIM V.I. CAPITAL APPRECIATION FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... 2.50% 1995 ....................................... 35.69% 1996 ....................................... 17.58% 1997 ....................................... 13.50% 1998 ....................................... 19.30% 1999 ....................................... 44.61%
During the periods shown in the bar chart, the highest quarterly return was 35.78% (quarter ended December 31, 1999) and the lowest quarterly return was - -14.75% (quarter ended September 30, 1998). 10 14 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. CAPITAL DEVELOPMENT FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1999 ....................................... 29.10%
During the period shown in the bar chart, the highest quarterly return was 29.66% (quarter ended December 31, 1999) and the lowest quarterly return was - -7.60% (quarter ended January 31, 1999). AIM V.I. DIVERSIFIED INCOME FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... -5.07% 1995 ....................................... 19.02% 1996 ....................................... 10.19% 1997 ....................................... 9.39% 1998 ....................................... 3.58% 1999 ....................................... -1.92%
During the periods shown in the bar chart, the highest quarterly return was 5.54% (quarter ended June 30, 1995) and the lowest quarterly return was -3.16% (quarter ended March 31, 1994). 11 15 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GLOBAL GROWTH AND INCOME FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... -2.85% 1995 ....................................... 15.49% 1996 ....................................... 16.33% 1997 ....................................... 16.22% 1998 ....................................... 19.60% 1999 ....................................... -0.13%
During the periods shown in the bar chart, the highest quarterly return was 12.21% (quarter ended December 31, 1998) and the lowest quarterly return was - -7.64% (quarter ended September 30, 1998). Performance prior to October 15, 1999 was for a predecessor fund. AIM V.I. GLOBAL UTILITIES FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1995 ....................................... 26.74% 1996 ....................................... 12.07% 1997 ....................................... 21.63% 1998 ....................................... 16.49% 1999 ....................................... 33.56%
During the periods shown in the bar chart, the highest quarterly return was 25.88% (quarter ended December 31, 1999) and the lowest quarterly return was - -4.98% (quarter ended September 30, 1998). 12 16 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GOVERNMENT SECURITIES FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... -3.73% 1995 ....................................... 15.56% 1996 ....................................... 2.29% 1997 ....................................... 8.16% 1998 ....................................... 7.73% 1999 ....................................... -1.32%
During the periods shown in the bar chart, the highest quarterly return was 5.48% (quarter ended June 30, 1995) and the lowest quarterly return was -2.82% (quarter ended March 31, 1994). AIM V.I. GROWTH FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... -2.48% 1995 ....................................... 34.77% 1996 ....................................... 18.09% 1997 ....................................... 26.87% 1998 ....................................... 34.12% 1999 ....................................... 35.24%
During the periods shown in the bar chart, the highest quarterly return was 27.80% (quarter ended December 31, 1998) and the lowest quarterly return was - -11.71% (quarter ended September 30, 1998). 13 17 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GROWTH AND INCOME FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1995 ....................................... 33.86% 1996 ....................................... 19.95% 1997 ....................................... 25.72% 1998 ....................................... 27.68% 1999 ....................................... 34.25%
During the periods shown in the bar chart, the highest quarterly return was 26.48% (quarter ended December 31, 1998) and the lowest quarterly return was - -11.76% (quarter ended September 30, 1998). AIM V.I. HIGH YIELD FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1999 ....................................... 10.52%
During the period shown in the bar chart, the highest quarterly return was 5.06% (quarter ended December 31, 1999) and the lowest quarterly return was - -0.85% (quarter ended September 30, 1999). 14 18 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. INTERNATIONAL EQUITY FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... -1.61% 1995 ....................................... 17.24% 1996 ....................................... 20.05% 1997 ....................................... 6.94% 1998 ....................................... 15.49% 1999 ....................................... 55.04%
During the periods shown in the bar chart, the highest quarterly return was 41.88% (quarter ended December 31, 1999) and the lowest quarterly return was - -13.81% (quarter ended September 30, 1998). AIM V.I. MONEY MARKET FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... 3.64% 1995 ....................................... 5.70% 1996 ....................................... 4.97% 1997 ....................................... 5.14% 1998 ....................................... 5.06% 1999 ....................................... 4.66%
During the periods shown in the bar chart, the highest quarterly return was 1.45% (quarter ended September 30, 1995) and the lowest quarterly return was 0.60% (quarter ended March 31, 1994). 15 19 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. TELECOMMUNICATIONS FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... 7.15% 1995 ....................................... 23.66% 1996 ....................................... 19.34% 1997 ....................................... 14.56% 1998 ....................................... 22.11% 1999 ....................................... 106.52%
During the periods shown in the bar chart, the highest quarterly return was 63.10% (quarter ended December 31, 1999) and the lowest quarterly return was - -23.31% (quarter ended September 30, 1998). Performance prior to October 15, 1999 was for a predecessor fund. AIM V.I. VALUE FUND ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - The following bar chart shows changes in the performance of the fund's shares from year to year. [GRAPH]
Annual Year Ended Total December 31 Return - ----------- ------ 1994 ....................................... 4.04% 1995 ....................................... 36.25% 1996 ....................................... 15.02% 1997 ....................................... 23.69% 1998 ....................................... 32.41% 1999 ....................................... 29.90%
During the periods shown in the bar chart, the highest quarterly return was 27.04% (quarter ended December 31, 1998) and the lowest quarterly return was - -12.00% (quarter ended September 30, 1998). 16 20 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- PERFORMANCE TABLES - -------------------------------------------------------------------------------- AIM V.I. AGGRESSIVE GROWTH FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended INCEPTION SINCE December 31, 1999) 1 YEAR DATE INCEPTION - ------------------------------------------------------------------------------- AIM V.I. Aggressive Growth Fund 44.67% 24.07% 05/01/98 Russell 2000--Registered Trademark-- Index(1) 21.26% 4.01%(2) 04/30/98(2) - -------------------------------------------------------------------------------
(1) The Russell 2000--Registered Trademark-- Index is a widely recognized, unmanaged index of common stocks that measures the performance of the 2,000 smallest companies in the Russell 3000--Registered Trademark-- Index, which measures the performance of the 3,000 largest U.S. companies based on total market capitalization. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. BALANCED FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended INCEPTION SINCE December 31, 1999) 1 YEAR DATE INCEPTION - ------------------------------------------------------------------------------- AIM V.I. Balanced Fund 19.31% 19.62% 05/01/98 Standard & Poor's 500 Index(1) 21.03% 19.81% 04/30/98(2) - -------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. CAPITAL APPRECIATION FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Capital Appreciation Fund 44.61% 25.59% 22.33% 05/05/93 Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2) - -----------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. 17 21 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. CAPITAL DEVELOPMENT FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended INCEPTION SINCE December 31, 1999) 1 YEAR DATE INCEPTION - ------------------------------------------------------------------------------- AIM V.I. Capital Development Fund 29.10% 11.22% 05/01/98 Standard & Poor's 500 Index(1) 21.03% 19.81% 04/30/98(2) - -------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. DIVERSIFIED INCOME FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Diversified Income Fund -1.92% 7.83% 5.93% 05/05/93 Lehman Aggregate Bond Index(1) -0.82% 7.73% 6.00%(2) 04/30/93(2) - -----------------------------------------------------------------------------------------
(1) The Lehman Aggregate Bond Index is an unmanaged index generally considered representative of treasury issues, agency issues, corporate bond issues and mortgage-backed securities. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. GLOBAL GROWTH AND INCOME FUND The following performance table compares the fund's performance to that of a broad-based securities market index. Performance prior to October 15, 1999 was for a predecessor fund.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Global Growth and Income Fund -0.13% 13.28% 11.63% 02/10/93 MSCI World Index(1) 24.93% 19.76% 18.11%(2) 01/31/93 - -----------------------------------------------------------------------------------------
(1) MSCI World Index measures the performance of 1,578 securities listed on major world stock exchanges. (2) The average annual total return given is since the date closest to the inception date of the fund. 18 22 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GLOBAL UTILITIES FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Global Utilities Fund 33.56% 21.87% 18.45% 05/02/94 Lipper Utility Fund Index(1) 14.53% 18.83% 15.58%(2) 04/30/94(2) - -----------------------------------------------------------------------------------------
(1) Lipper Utility Fund Index measures the performance of the 30 largest utilities funds charted by Lipper Inc., an independent mutual funds performance monitor. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. GOVERNMENT SECURITIES FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Government Securities Fund -1.32% 6.33% 4.67% 05/05/93 Lehman Intermediate Government Bond Index(1) 0.49% 6.93% 5.41%(2) 04/30/93(2) - -----------------------------------------------------------------------------------------
(1) The Lehman Intermediate Government Bond Index is an unmanaged composite generally considered representative of intermediate publicly issued debt of U.S. Government agencies and quasi-federal corporations, and corporate debt guaranteed by the U.S. Government. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. GROWTH FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. Growth Fund 35.24% 29.64% 22.93% 05/05/93 Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2) - -----------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. 19 23 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GROWTH AND INCOME FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- 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) - -----------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. HIGH YIELD FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR INCEPTION DATE - ------------------------------------------------------------------------------- AIM V.I. High Yield Fund 10.52% 1.26% 05/01/98 Lehman High Yield Index(1) 2.39% 0.31%(2) 04/30/98(2) - -------------------------------------------------------------------------------
(1) The Lehman High Yield Index is a rules-based index that includes all fixed-income securities having a maximum quality rating of Ba1 (including defaulted issues), a minimum amount outstanding of $100 mm, and at least one year to maturity. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. INTERNATIONAL EQUITY FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - ----------------------------------------------------------------------------------------- AIM V.I. International Equity Fund 55.04% 21.93% 18.82% 05/05/93 Morgan Stanley Capital International EAFE Index(1) 26.96% 12.83% 12.01%(2) 04/30/93(2) - -----------------------------------------------------------------------------------------
(1) The Morgan Stanley Capital International Europe, Australasia and Far East Index measures performance of global stock markets in 20 developed countries. (2) The average annual total return given is since the date closest to the inception date of the fund. 20 24 AIM VARIABLE INSURANCE FUNDS, INC. AIM V.I. MONEY MARKET FUND The following performance table reflects the fund's performance over the periods indicated.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------------- AIM V.I. Money Market Fund 4.66% 5.10% 4.60% 05/05/93 - --------------------------------------------------------------------------------------
The AIM V.I. Money Market Fund's seven day yield on December 31, 1999 was 4.90%. For the current seven day yield, call (800) 347-4246. AIM V.I. TELECOMMUNICATIONS FUND The following performance table compares the fund's performance to that of a broad-based securities market index. Performance prior to October 15, 1999 was for a predecessor fund.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------------- AIM V.I. Telecommunications Fund 106.52% 33.65% 29.52% 10/18/93 The Standard & Poor's 500 Index(1) 21.03% 28.54% 22.89%(2) 10/31/93 - --------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. AIM V.I. VALUE FUND The following performance table compares the fund's performance to that of a broad-based securities market index.
AVERAGE ANNUAL TOTAL RETURNS - - - - - - - - - - - - - - - - (for the periods ended SINCE INCEPTION December 31, 1999) 1 YEAR 5 YEARS INCEPTION DATE - -------------------------------------------------------------------------------------- AIM V.I. Value Fund 29.90% 27.23% 23.07% 05/05/93 Standard & Poor's 500 Index(1) 21.03% 28.54% 22.37%(2) 04/30/93(2) - --------------------------------------------------------------------------------------
(1) The Standard & Poor's 500 Index is an unmanaged index of common stocks frequently used as a general measure of U.S. stock market performance. (2) The average annual total return given is since the date closest to the inception date of the fund. 21 25 AIM VARIABLE INSURANCE FUNDS, INC. Fund Management - -------------------------------------------------------------------------------- THE ADVISOR A I M Advisors, Inc. (the advisor) serves as each fund's investment advisor. The advisor is located at 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. The advisor supervises all aspects of each fund's operations and provides investment advisory services to the funds, including obtaining and evaluating economic, statistical and financial information to formulate and implement investment programs for the funds. The advisor has acted as an investment advisor since its organization in 1976. Today, the advisor, together with its subsidiaries, advises or manages over 120 investment portfolios, including the funds, encompassing a broad range of investment objectives. ADVISOR COMPENSATION During the fiscal year ended December 31, 1999, the advisor received compensation from the following funds as a percentage of each fund's average daily net assets as follows:
ADVISORY FUND FEE ---- -------- AIM V.I. Aggressive Growth Fund 0.09% AIM V.I. Balanced Fund 0.75% AIM V.I. Capital Appreciation Fund 0.62% AIM V.I. Capital Development Fund 0.00% AIM V.I. Diversified Income Fund 0.60% AIM V.I. Global Growth and Income Fund 1.00% AIM V.I. Global Utilities Fund 0.65% AIM V.I. Government Securities Fund 0.50% AIM V.I. Growth Fund 0.63% AIM V.I. Growth and Income Fund 0.61% AIM V.I. High Yield Fund 0.61% AIM V.I. International Equity Fund 0.75% AIM V.I. Money Market Fund 0.40% AIM V.I. Telecommunications Fund 1.00% AIM V.I. Value Fund 0.61%
The advisor is to receive a fee from AIM V.I. Blue Chip Fund calculated at the annual rate of 0.75% of the first $350 million of average daily net assets and 0.625% of average daily net assets over $350 million. The advisor is to receive a fee from AIM V.I. Dent Demographic Trends Fund calculated at the annual rate of 0.85% of the first $2 billion of average daily net assets and 0.80% of average daily net assets over $2 billion. PORTFOLIO MANAGERS The advisor uses a team approach to investment management. The individual members of the team who are primarily responsible for the day-to-day management of each fund's portfolio, all of whom are officers (except for the AIM V.I. Global Growth and Income Fund) of A I M Capital Management, Inc. a wholly owned subsidiary of the advisor, are: AIM V.I. AGGRESSIVE GROWTH FUND - - Ryan E. Crane, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1994. - - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1989. - - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1996. From 1994 to 1996, Mr. Scavone was Associate Portfolio Manager for Van Kampen American Capital Asset Management, Inc. - - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1990. AIM V.I. BALANCED FUND - - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1992. - - Claude C. Cody, IV, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1992. - - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was global fixed-income portfolio manager for Nicholas-Applegate Capital Management. From 1994 to 1997, he was international fixed-income trader and analyst for Strong Capital Management. - - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1992. - - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1989. - - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1991. AIM V.I. BLUE CHIP FUND - - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1995. From 1991 to 1995, she was Senior Financial Analyst for Shell Oil Co. Pension Trust. - - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1990. - - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1986. 22 26 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. CAPITAL APPRECIATION FUND - - David P. Barnard, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1982. - - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1989. - - Christopher P. Perras, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999 Mr. Perras was an equity analyst at Van Wagoner Capital Management. From 1995 to 1997 he was an Associate Portfolio Manager at Van Kampen American Capital Asset Management, Inc. - - Charles D. Scavone, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1996. From 1994 to 1996, Mr. Scavone was an Associate Portfolio Manager for Van Kampen American Capital Asset Management, Inc. - - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1990. AIM V.I. CAPITAL DEVELOPMENT FUND - - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1996. From 1981 to 1996, Mr. Larsen was, among other offices, Senior Vice President of John Hancock Advisers, Inc. and its predecessors. - - Paul J. Rasplicka, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND - - Edgar M. Larsen, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1996. From 1981 to 1996, he was, among other offices, Senior Vice President of John Hancock Advisers, Inc. and its predecessors. - - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1987. - - Derek H. Webb, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1992. AIM V.I. DIVERSIFIED INCOME FUND - - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1992. - - Jan H. Friedli, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1999. From 1997 to 1999, he was global fixed-income portfolio manager for Nicholas-Applegate Capital Management. From 1994 to 1997, he was international fixed-income trader and analyst for Strong Capital Management. - - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the fund since 1995 and has been associated with the advisor and/or its affiliates since 1992. - - Kevin E. Rogers, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1991. AIM V.I. GLOBAL GROWTH AND INCOME FUND - - Paul Griffiths, Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. - - Michael Lindsell, Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1992. - - Michael McDonagh, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1977. - - John Nadell, Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. AIM V.I. GLOBAL UTILITIES FUND - - Robert G. Alley, Senior Portfolio Manager, who has been responsible for the fund since 1994 and has been associated with the advisor and/or its affiliates since 1992. - - Claude C. Cody, IV, Senior Portfolio Manager, who has been responsible for the fund since 1994 and has been associated with the advisor and/or its affiliates since 1992. - - Carolyn L. Gibbs, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1992. - - Craig A. Smith, Senior Portfolio Manager, who has been responsible for the fund since 1996 and has been associated with the advisor and/or its affiliates since 1989. - - Meggan M. Walsh, Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1991. AIM V.I. GOVERNMENT SECURITIES FUND - - Laurie F. Bignac, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1992. 23 27 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- - - Scot W. Johnson, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1994. - - Karen Dunn Kelley, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1989. AIM V.I. GROWTH FUND - - David P. Barnard, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1982. - - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for Shell Oil Co. Pension Trust. - - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1986. AIM V.I. GROWTH AND INCOME FUND - - Monika H. Degan, Senior Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1995. From 1991 to 1995, Ms. Degan was a Senior Financial Analyst for Shell Oil Co. Pension Trust. - - Lanny H. Sachnowitz, Senior Portfolio Manager, who has been responsible for the fund since 1994, and has been associated with the advisor and/or its affiliates since 1987. AIM V.I. HIGH YIELD FUND - - John L. Pessarra, Senior Portfolio Manager, who has been responsible for the fund since 1998, and has been associated with the advisor and/or its affiliates since 1990. - - Kevin E. Rogers, Senior Portfolio Manager, who has been responsible for the fund since 1998, and has been associated with the advisor and/or its affiliates since 1991. AIM V.I. INTERNATIONAL EQUITY FUND - - A. Dale Griffin, III, Senior Portfolio Manager, who has been responsible for the fund since 1993 and has been associated with the advisor and/or its affiliates since 1989. - - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1996. From 1994 to 1996 he was an associate with JMB Realty. - - Clas G. Olsson, Senior Portfolio Manager, who has been responsible for the fund since 1997 and has been associated with the advisor and/or its affiliates since 1994. - - Barrett K. Sides, Portfolio Manager, who has been responsible for the fund since 1995 and has been associated with the advisor and/or its affiliates since 1990. AIM V.I. TELECOMMUNICATIONS FUND - - David P. Barnard, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1982. - - Claude C. Cody IV, Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1992. - - Jason T. Holzer, Portfolio Manager, who has been responsible for the fund since 2000 and has been associated with the advisor and/or its affiliates since 1996. From 1994 to 1996 he was an associate with JMB Realty. - - Robert M. Kippes, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1989. - - Jonathan C. Schoolar, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1986. - - Kenneth A. Zschappel, Senior Portfolio Manager, who has been responsible for the fund since 1999 and has been associated with the advisor and/or its affiliates since 1990. AIM V.I. VALUE FUND - - Joel E. Dobberpuhl, Senior Portfolio Manager, who has been responsible for the fund since 1993, and has been associated with the advisor and/or its affiliates since 1990. - - Evan G. Harrel, Senior Portfolio Manager, who has been responsible for the fund since 1998 and has been associated with the advisor and/or its affiliates since 1998. From 1994 to 1998, Mr. Harrel was Vice President and portfolio manager of Van Kampen American Capital Asset Management, Inc. and portfolio manager of various growth and equity funds. - - Robert A. Shelton, Portfolio Manager, who has been responsible for the fund since 1997 and has been associated with the advisor and/or its affiliates since 1995. From 1991 to 1995, Mr. Shelton was a financial analyst for CS First Boston. 24 28 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- OTHER INFORMATION - -------------------------------------------------------------------------------- PURCHASE AND REDEMPTION OF SHARES Each fund ordinarily effects orders to purchase and redeem shares at the fund's next computed net asset value after it receives an order. Life insurance companies participating in each fund serve as the fund's designee for receiving orders of separate accounts that invest in the fund. PRICING OF SHARES Each of the funds prices its shares based on its net asset value. The funds, except AIM V.I. Money Market Fund, value portfolio securities for which market quotations are readily available at market value. The funds value short-term investments maturing within 60 days at amortized cost, which approximates market value. AIM V.I. Money Market Fund values all of its securities based on the amortized cost method. The funds, except AIM V.I. Money Market Fund, value all other securities and assets at their fair value. Securities and other assets quoted in foreign currencies are valued in U.S. dollars based on the prevailing exchange rates on that day. In addition, if, between the time trading ends on a particular security and the close of the New York Stock Exchange (NYSE), events occur that materially affect the value of the security, the funds may value the security at its fair value as determined in good faith by or under the supervision of the Board of Directors. The effect of using fair value pricing is that a fund's net asset value will be subject to the judgment of the Board of Directors or its designee instead of being determined by the market. Because some of the funds may invest in securities that are primarily listed on foreign exchanges, the value of those funds' shares may change on days when the separate account will not be able to purchase or redeem shares. The fund determines the net asset value of its shares as of the close of the NYSE on each day the NYSE is open for business. TAXES The amount, timing and character of distributions to the separate account may be affected by special tax rules applicable to certain investments purchased by the funds. Holders of variable contracts should refer to the prospectus for their contracts for information regarding the tax consequences of owning such contracts and should consult their tax advisers before investing. DIVIDENDS AND DISTRIBUTIONS DIVIDENDS Each fund other than AIM V.I. Money Market Fund generally declares and pays dividends, if any, annually to separate accounts of participating life insurance companies. AIM V.I. Money Market Fund generally declares and pays dividends, if any, daily. All of the fund's distributions will consist primarily of capital gains, except for AIM V.I. Diversified Income Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market Fund which consist primarily of ordinary income. CAPITAL GAINS DISTRIBUTIONS Each fund other than AIM V.I. Money Market Fund generally distributes long-term and short-term capital gains (including any net gains from foreign currency transactions), if any, annually to separate accounts of participating life insurance companies. AIM V.I. Money Market Fund may distribute net realized short-term gains, if any, more frequently. At the election of participating life insurance companies, dividends and distributions are automatically reinvested at net asset value in shares of that fund. FUTURE FUND CLOSURE Due to the sometime limited availability of common stocks of small-cap companies that meet the investment criteria for AIM V.I. Aggressive Growth Fund, the fund may periodically suspend or limit the offering of its shares and it will be closed to new participants when fund assets reach $200 million. During closed periods, the fund will accept additional investments from existing participants. SUBMISSION OF MATTERS TO SHAREHOLDERS At a meeting held on February 3, 2000, the Board of Directors of AIM Variable Insurance Funds, Inc. (the company), on behalf of the funds, voted to request shareholders to approve the following items that will affect the funds: - - Elect ten directors, each of whom will serve until his or her successor is elected and qualified; - - An Agreement and Plan of Reorganization which provides for the reorganization of the company, which is currently a Maryland corporation, as a Delaware business trust; - - A new advisory agreement between the company and the advisor. The principal changes to the advisory agreement are (i) the deletion of references to the provision of administrative services, and (ii) the clarification of provisions relating to delegations of responsibilities and the non-exclusive nature of the advisor's services. The revised advisory agreement does not change the fees paid by the funds (except that the agreement permits the funds to pay a fee to the advisor in connection with any new securities lending program implemented in the future); - - A new sub-advisory agreement for the AIM V.I. Global Growth and Income Fund between the advisor and INVESCO Asset Management Limited; - - Changing the funds' fundamental investment restrictions. The proposed revisions to the funds' fundamental investment 25 29 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- restrictions are described in a supplement to the funds' statement of additional information; and - - Changing the funds' investment objectives and making them non-fundamental. For AIM V.I. Capital Appreciation Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM V.I. International Equity Fund and AIM V.I. Value Fund, the investment objective of the funds would be changed by deleting references to the types of securities that the funds will purchase to achieve their objective. Pursuant to this proposal, these funds' investment objectives would read: -- AIM V.I. Capital Appreciation Fund: The fund's investment objective is growth of capital. -- AIM V.I. Government Securities Fund: The fund's investment objective is to achieve a high level of current income consistent with a reasonable concern for safety of principal. -- AIM V.I. Growth Fund: The fund's investment objective is to achieve growth of capital. -- AIM V.I. International Equity Fund: The fund's investment objective is to achieve long-term growth of capital. -- AIM V.I. Value Fund: The fund's investment objective is to achieve long-term growth of capital. Income is a secondary objective. The investment objective of the AIM V.I. Global Utilities Fund would be changed so that it would read: "The fund's investment objective is to achieve a high total return." If the investment objective of each fund becomes non-fundamental, it can be changed in the future by the Board of Directors of the company without approval by shareholders. o Ratify the selection of Tait, Weller & Baker as independent accountants. The Board of Directors of the company has called a meeting of the fund's shareholders to be held on or about April 10, 2000 to vote on these proposals. Only shareholders of record as of January 20, 2000 are entitled to vote at the meeting. Proposals that are approved are expected to become effective on or about April 17, 2000. 26 30 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- FINANCIAL HIGHLIGHTS - -------------------------------------------------------------------------------- The financial highlights table is intended to help you understand each fund's financial performance. Certain information reflects financial results for a single fund share. The total returns in the table represent the rate that an investor would have earned (or lost) on an investment in each fund (assuming reinvestment of all dividends and distributions). The table shows the financial highlights for a share of each fund outstanding during each of the fiscal years (or periods) indicated. This information has been audited by Tait, Weller & Baker, whose report, along with the fund's financial statements, is included in each fund's annual report, which is available upon request. Total return information in the following tables may be affected by special market factors, including investments by certain funds in initial public offerings, which may have a magnified impact on those funds that have a small asset base. There is no guarantee that, as those funds' assets grow, they will continue to experience substantially similar performance. AIM V.I. AGGRESSIVE GROWTH FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD MAY 1, YEAR ENDED THROUGH DECEMBER 31, 1999(A) DECEMBER 31, 1998 - ------------------------------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------------------------------
(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. 27 31 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. BALANCED FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD MAY 1, YEAR ENDED THROUGH DECEMBER 31, 1999(a) DECEMBER 31, 1998 - ------------------------------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------------------------------
(a) Calculated using average shares outstanding. (b) Total return is not annualized for periods less than one year. (c) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements were 1.31% and 2.83% (annualized) for 1999 and 1998, respectively. (d) Ratios are based on average net assets of $28,037,647. (e) Annualized. (f) After fee waivers and/or expense reimbursements. Ratio of net investment income to average net assets prior to fee waivers and/or expense reimbursement were 2.56% and 2.07% (annualized) for 1999 and 1998, respectively. AIM V.I. BLUE CHIP FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD DECEMBER 29, THROUGH DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------- Net asset value, beginning of period $10.00 Income from investment operations: Net investment income 0.00 Less distributions: Dividends from net investment income -- Net asset value, end of period $10.00 Total return(a) 0.00% - ------------------------------------------------------------------------------------------- Ratios/supplemental data: - ------------------------------------------------------------------------------------------- Net assets, end of period (000s omitted) $1,000 Ratio of expenses to average net assets(b): With expense waivers and reimbursement 1.30% Without expense waivers and reimbursement 12.49% - ------------------------------------------------------------------------------------------- Ratio of net investment income (loss) to average net assets(b): - ------------------------------------------------------------------------------------------- With expense waivers and reimbursement 3.07% Without expense waivers and reimbursement (8.12)% Portfolio turnover rate -- - -------------------------------------------------------------------------------------------
(a) Total returns are not annualized for periods less than one year. (d) Ratios are annualized and based on average net assets of $666,531. 28 32 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. CAPITAL APPRECIATION FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999 1998 1997 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------------------------------------------------
(a) Total returns are not annualized for periods less than one year. (b) Ratios are based on average net assets of $784,307,675. (c) Annualized. AIM V.I. CAPITAL DEVELOPMENT FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD MAY 1, YEAR ENDED THROUGH DECEMBER 31, 1999(a) DECEMBER 31, 1998(a) - ------------------------------------------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------------------------------------------
(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. 29 33 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. DENT DEMOGRAPHIC TRENDS FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD DECEMBER 29 THROUGH DECEMBER 31, 1999 - ------------------------------------------------------------------------------------------- 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 -- - -------------------------------------------------------------------------------------------
(a) Total returns are not annualized for periods less than one year. (b) Ratios are annualized and based on average net assets of $666,528. AIM V.I. DIVERSIFIED INCOME FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999 1998 1997 1996 1995 1995 - -------------------------------------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------------------------------------
(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. 30 34 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GLOBAL GROWTH AND INCOME FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995 --------------------------------------------------- Net asset value, beginning of period $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99 Income from investment operations: Net investment income 0.57 0.53 0.41 0.53 0.52 Net gains (losses) on securities (both realized and unrealized) (1.29) 3.08 2.23 1.81 1.46 Total from investment operations (0.72) 3.61 2.64 2.34 1.98 Less distributions: Dividends from net investment income (0.61) (0.44) (0.51) (0.35) (0.40) Distributions from net realized capital gains (6.65) (0.26) (0.04) (0.05) -- Total distributions (7.26) (0.70) (0.55) (0.40) (0.40) Net asset value, end of period $ 13.53 $ 21.51 $ 18.60 $ 16.51 $ 14.57 Total return (0.13)% 19.60% 16.22% 16.33% 15.49% - ------------------------------------------------------------------------------------------------------------ Ratios/supplemental data: - ------------------------------------------------------------------------------------------------------------ Net assets, end of period (000s omitted) $30,756 $55,580 $50,356 $36,433 $30,565 Ratio of expenses to average net assets including interest expense: With reimbursement 1.34%(a) 2.53% 1.13% 1.20% 1.23% Without reimbursement 1.37%(a) 2.53% 1.27% 1.30% 1.44% Ratio of expenses to average interests excluding interest expense: With reimbursement 1.33%(a) 2.49% 1.13% 1.20% 1.23% Without reimbursement 1.36%(a) 2.49% 1.27% 1.30% 1.44% Ratio of net investment income to average net assets: With reimbursement 2.32%(a) 1.22% 2.86% 3.58% 3.87% Without reimbursement 2.29%(a) 1.22% 2.72% 3.48% 3.66% Ratio of interest expense to average net assets 0.01%(a) 0.04% -- -- -- Portfolio turnover rate 91% 72% 60% 57% 73% - ----------------------------------------------------------------------------------------------------------------
(a) Ratios are based on average net assets of $43,643,834. AIM V.I. GLOBAL UTILITIES FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998 1997 1996 1995 1995 - --------------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 17.36 $ 15.26 $ 12.55 $ 11.64 $ 9.69 $10.00 Income from investment operations: Net investment income 0.32 0.35 0.32 0.40 0.29 0.27 Net gains (losses) on securities (both realized and unrealized) 5.49 2.15 2.40 0.99 1.98 (0.33) Total from investment operations 5.81 2.50 2.72 1.39 2.27 (0.06) Less distributions: Dividends from net investment income (0.37) (0.28) -- (0.41) (0.31) (0.25) Distributions from net realized gains -- (0.12) (0.01) (0.07) (0.01) -- Total distributions (0.37) (0.40) (0.01) (0.48) (0.32) (0.25) Net asset value, end of period $ 22.80 $ 17.36 $ 15.26 $ 12.55 $11.64 $ 9.69 Total return(b) 33.56% 16.49% 21.63% 12.07% 23.73% (0.56)% - --------------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: - --------------------------------------------------------------------------------------------------------------------- Net assets, end of period (000s omitted) $39,772 $28,134 $22,079 $13,576 $8,394 $2,958 Ratio of expenses to average net assets 1.14%(c) 1.11% 1.28% 1.40%(d) 1.47%(d)(e) 1.31%(e)(f) Ratio of investment income to average net assets 1.72%(c) 2.46% 2.81% 3.56%(d) 3.76%(d)(e) 4.39%(e)(f) Portfolio turnover rate 45% 32% 28% 47% 58% 69% - ---------------------------------------------------------------------------------------------------------------------
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $31,098,057. (d) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.55% and 3.42% for 1996 and 2.44% (annualized) and 2.79% (annualized) for 1995. (e) Annualized. (f) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 2.80% (annualized) and 2.90% (annualized), respectively. 31 35 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GOVERNMENT SECURITIES FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998(a) 1997 1996 1995 1995 - --------------------------------------------------------------------------------------------------------------------- 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% - ----------------------------------------------------------------------------------------------------------------------
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $63,119,520. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.10% for January 1995. (f) After fee waivers and/or expense reimbursements. Ratio of net investment income to average net assets prior to fee waivers and/or expense reimbursements was 5.35% for January 1995. AIM V.I. GROWTH FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998 1997 1996 1995 1995 - -------------------------------------------------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------------------------------------------------
(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. 32 36 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. GROWTH AND INCOME FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998(a) 1997 1996 1995 1995 - -------------------------------------------------------------------------------------------------------------------------------- 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% - --------------------------------------------------------------------------------------------------------------------------------
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $1,718,996,207. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.72% (annualized) and 1.30% (annualized), respectively. AIM V.I. HIGH YIELD - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOR THE PERIOD MAY 1, YEAR ENDED THROUGH DECEMBER 31, 1999(a) DECEMBER 31, 1998 - ------------------------------------------------------------------------------------------------------- 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% - -------------------------------------------------------------------------------------------------------
(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. 33 37 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. INTERNATIONAL EQUITY FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998 1997 1996 1995 1995 - ----------------------------------------------------------------------------------------------------------------- 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 $ 65,738 $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% - -----------------------------------------------------------------------------------------------------------------
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $277,307,465. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.28% and 0.59%, respectively. AIM V.I. MONEY MARKET FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999 1998 1997 1996 1995 1995 - ---------------------------------------------------------------------------------------------------------------- Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Income from investment operations: Net investment income 0.05 0.05 0.05 0.05 0.05 0.04 Less distributions: Dividends from net investment income (0.05) (0.05) (0.05) (0.05) (0.05) (0.04) Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00 Total return 4.66% 5.06% 5.14% 4.97% 5.69%(a) 3.98% - ---------------------------------------------------------------------------------------------------------------- Ratios/supplemental data: - ---------------------------------------------------------------------------------------------------------------- Net assets, end of period (000s omitted) $95,152 $64,090 $58,635 $63,529 $65,506 $31,017 Ratio of expenses to average net assets 0.60%(a) 0.58% 0.59% 0.55% 0.53%(b) 0.63%(c) Ratio of net investment income to average net assets 4.59%(a) 4.94% 5.01% 4.84% 5.40%(b) 4.14%(c) - ----------------------------------------------------------------------------------------------------------------
(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. 34 38 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- AIM V.I. TELECOMMUNICATIONS FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED DECEMBER 31, 1999 1998 1997 1996 1995 - --------------------------------------------------------------------------------------------------------- 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% - ---------------------------------------------------------------------------------------------------------
(a) Ratios are based on average net assets of $75,606,845. AIM V.I. VALUE FUND - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
YEAR ENDED YEAR ENDED DECEMBER 31, JANUARY 31, 1999(a) 1998 1997 1996 1995 1995 - ------------------------------------------------------------------------------------------------------------------------------ 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% - ------------------------------------------------------------------------------------------------------------------------------
(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. 35 39 ---------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. ---------------------------------- OBTAINING ADDITIONAL INFORMATION - -------------------------------------------------------------------------------- More information may be obtained free of charge upon request. The Statement of Additional Information (SAI), a current version of which is on file with the Securities and Exchange Commission (SEC), contains more details about each fund and is incorporated by reference into the prospectus (is legally a part of this prospectus). Annual and semiannual reports to shareholders contain additional information about each fund's investments. The funds' annual report also discusses the market conditions and investment strategies that significantly affected each fund's performance during its last fiscal year. If you wish to obtain free copies of the funds' current SAI, please send a written request to A I M Distributors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173 or call (800) 410-4246. You also can review and obtain copies of the funds' SAI, reports and other information at the SEC's Public Reference Room in Washington, DC; on the EDGAR database on the SEC's Internet website (http://www.sec.gov); or, after paying a duplication fee, by sending a letter to the SEC's Public Reference Section, Washington, DC 20549-0102 or by sending an electronic mail request to publicinfo@sec.gov. Please call the SEC at 1-202-942-8090 for information about the Public Reference Room. ------------------------------------- AIM Variable Insurance Funds, Inc. SEC 1940 Act file number: 811-7452 ------------------------------------- [AIM LOGO APPEARS HERE] www.aimfunds.com SPVL-PRO-1 INVEST WITH DISCIPLINE --Registered Trademark-- 40 STATEMENT OF ADDITIONAL INFORMATION AIM VARIABLE INSURANCE FUNDS, INC. 11 GREENWAY PLAZA SUITE 100 HOUSTON, TX 77046-1173 (713) 626-1919 AIM V.I. AGGRESSIVE GROWTH FUND AIM V.I. BALANCED FUND AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. CAPITAL DEVELOPMENT FUND AIM V.I. DENT DEMOGRAPHIC TRENDS FUND AIM V.I. DIVERSIFIED INCOME FUND AIM V.I. GLOBAL GROWTH AND INCOME FUND AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GOVERNMENT SECURITIES FUND AIM V.I. GROWTH AND INCOME FUND AIM V.I. GROWTH FUND AIM V.I. HIGH YIELD FUND AIM V.I. INTERNATIONAL EQUITY FUND AIM V.I. MONEY MARKET FUND AIM V.I. TELECOMMUNICATIONS FUND AIM V.I. VALUE FUND THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A PROSPECTUS. IT SHOULD BE READ IN CONJUNCTION WITH THE PROSPECTUS, WHICH MAY BE OBTAINED FROM AUTHORIZED DEALERS OR BY WRITING A I M DISTRIBUTORS, INC., P. O. BOX 4739, HOUSTON, TX 77210-4739 OR BY CALLING (713) 626-1919 (HOUSTON RESIDENTS) OR (800) 410-4246 (ALL OTHERS). ---------- STATEMENT OF ADDITIONAL INFORMATION DATED: FEBRUARY 16, 2000, RELATING TO PROSPECTUS DATED: FEBRUARY 16, 2000 41 TABLE OF CONTENTS
PAGE INTRODUCTION .............................................................. 1 Submission of Matters to Shareholders ................................... 1 GENERAL INFORMATION ABOUT THE FUNDS ....................................... 3 The Company and Its Shares .............................................. 3 PERFORMANCE ............................................................... 4 Total Return Calculations ............................................... 4 Historical Portfolio Results ............................................ 4 Yield Information ....................................................... 6 PORTFOLIO TRANSACTIONS AND BROKERAGE ...................................... 6 General Brokerage Policy ................................................ 6 Allocation of IPO Securities Transactions ............................... 8 Section 28(e) Standards ................................................. 9 Portfolio Turnover ...................................................... 10 Brokerage Commissions Paid .............................................. 10 INVESTMENT STRATEGIES AND RISKS ........................................... 11 Aggressive Growth Fund .................................................. 11 Balanced Fund ........................................................... 12 Blue Chip Fund .......................................................... 12 Capital Appreciation Fund ............................................... 13 Capital Development Fund ................................................ 14 Dent Demographic Trends Fund ............................................ 14 Diversified Income Fund ................................................. 14 Global Growth and Income Fund ........................................... 15 Global Utilities Fund ................................................... 16 Government Securities Fund .............................................. 16 Growth Fund ............................................................. 17 Growth and Income Fund .................................................. 17 High Yield Fund ......................................................... 17 International Equity Fund ............................................... 18 Money Market Fund ....................................................... 18 Telecommunications Fund ................................................. 19 Value Fund .............................................................. 20 CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES .............................. 21 Money Market Obligations ................................................ 21 Repurchase Agreements ................................................... 22 U.S. Government Agency Mortgage-Backed Securities ....................... 22 Convertible Securities .................................................. 23 Real Estate Investment Trusts ("REITs").................................. 23 Foreign Securities ...................................................... 23 Foreign Exchange Transactions ........................................... 25 ADRs and EDRs ........................................................... 25 Lending of Portfolio Securities ......................................... 25 Reverse Repurchase Agreements ........................................... 26 Delayed Delivery Agreements and When-Issued Securities .................. 26 Dollar Roll Transactions ................................................ 27
i 42 Borrowing ............................................................... 27 Illiquid Securities ..................................................... 28 Special Situations ...................................................... 28 Warrants ................................................................ 28 Short Sales ............................................................. 28 Rule 144A Securities .................................................... 28 Equity-Linked Derivatives ............................................... 29 Investment in Other Investment Companies ................................ 29 Temporary Defensive Investments ......................................... 29 Asset Allocation Among Countries ........................................ 30 Utilities Industry ...................................................... 30 OPTIONS, FUTURES AND CURRENCY STRATEGIES .................................. 31 Introduction ............................................................ 31 General Risks of Options, Futures and Currency Strategies ............... 31 Cover ................................................................... 31 Writing Call Options .................................................... 32 Writing Put Options ..................................................... 32 Purchasing Put Options .................................................. 33 Purchasing Call Options ................................................. 33 Over-The-Counter Options ................................................ 33 Index Options ........................................................... 34 Limitations on Options .................................................. 34 Interest Rate, Currency and Stock Index Futures Contracts ............... 34 Options on Futures Contracts ............................................ 35 Forward Contracts ....................................................... 35 Limitations on Use of Futures, Options on Futures and Certain Options on Currencies ......................................... 36 RISK FACTORS .............................................................. 36 Small Capitalization Companies .......................................... 36 Non-Investment Grade Debt Securities .................................... 36 Foreign Securities ...................................................... 37 Non-diversified Portfolio (Global Utilities Fund Only) .................. 38 INVESTMENT RESTRICTIONS ................................................... 38 Fundamental Restrictions ................................................ 38 Non-fundamental Restrictions ............................................ 39 MANAGEMENT ................................................................ 39 Directors and Officers .................................................. 39 Remuneration of Directors ............................................. 43 AIM Funds Retirement Plan for Eligible Directors/Trustees ............. 44 Deferred Compensation Agreements ...................................... 45 Investment Advisory, Sub-Advisory and Administrative Services Agreements ............................................................ 45 The Distribution Agreement .............................................. 51 DETERMINATION OF NET ASSET VALUE .......................................... 51 PURCHASE AND REDEMPTION OF SHARES ......................................... 53 DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS .................................. 54 MISCELLANEOUS INFORMATION ................................................. 56 Organization of the Company ............................................. 56 Audit Reports ........................................................... 57 Legal Matters ........................................................... 57
ii 43 Custodian and Transfer Agent ............................................ 57 Principal Holders of Securities ......................................... 57 Other Information ....................................................... 62 APPENDIX A ................................................................ A-1 APPENDIX B ................................................................ B-1 APPENDIX C ................................................................ C-1 FINANCIAL STATEMENTS ...................................................... FS
iii 44 INTRODUCTION AIM Variable Insurance Funds, Inc. (the "Company") is a mutual fund. The rules and regulations of the United States Securities and Exchange Commission (the "SEC") require all mutual funds to furnish prospective investors certain information concerning the activities of the fund being considered for investment. This information is included in Prospectuses dated February 16, 2000 (referred to collectively as the "Prospectuses" and separately as a "Prospectus"), which relate to one or more of the seventeen series portfolios of the Company (referred to collectively as the "Funds" and separately as a "Fund"). One or more of the Funds may not be available under a particular variable annuity contract or variable life insurance policy. Accordingly, this Statement of Additional Information may contain information that is not relevant to the investment options under such a contract or policy. Copies of each Prospectus available under a contract or policy and additional copies of this Statement of Additional Information may be obtained without charge by contacting the principal distributor of each Fund's shares, A I M Distributors, Inc. ("AIM Distributors"), 11 Greenway Plaza, Suite 100, Houston, TX 77046-1173 or by calling (800) 410-4246. Investors must receive a Prospectus before they invest. To the extent that this Statement of Additional Information contains information concerning a Fund that is not available under a contract or policy, the Statement of Additional Information does not constitute the offer of the shares of that Fund. This Statement of Additional Information is intended to furnish prospective investors with additional information concerning the Funds. Some of the information required to be in this Statement of Additional Information is also included in the Funds' current Prospectus and, in order to avoid repetition, reference will be made to sections of the Prospectus. Additionally, the Prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement filed with the SEC. Copies of the Registration Statement, including items omitted from the Prospectus and this Statement of Additional Information, may be obtained from the SEC by paying the charges prescribed under its rules and regulations. SUBMISSION OF MATTERS TO SHAREHOLDERS At a meeting held on February 3, 2000, the Board of Directors of the Company, on behalf of the Funds, voted to request shareholder approval to amend the Funds' fundamental investment restrictions. The Board of Directors has called a meeting of the Funds' shareholders to be held on or about April 10, 2000. Only shareholders of record as of January 20, 2000 are entitled to vote at the meeting. Proposals that are approved are expected to become effective on or about April 17, 2000. If shareholders approve the proposal to amend the Funds' fundamental investment restrictions, each of AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth and Income Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund, AIM V.I. Telecommunications Fund and AIM V.I. Value Fund, will operate under the following fundamental investment restrictions: Each Fund is subject to the following investment restrictions, which may be changed only by a vote of a majority of such Fund's outstanding shares, except that AIM V.I. Global Utilities Fund is not subject to restrictions (a) or (d): (a) the Fund is a "diversified company" as defined in the 1940 Act. The Fund will not purchase the securities of any issuer if, as a result, the Fund would fail to be a diversified company within the meaning of the 1940 Act, and the rules and regulations promulgated thereunder, as such statute, rules and regulations are amended from time to time or are interpreted from time to time by the SEC staff (collectively, the 1940 Act laws and interpretations) or except to the extent that the Fund may be permitted to do so by exemptive order or similar relief (collectively, with the 1940 Act laws and interpretations, the 1940 Act laws, interpretations and exemptions). In complying with this restriction, however, the Fund may purchase securities of other investment companies to the extent permitted by the 1940 Act laws, interpretations and exemptions. (b) the Fund may not borrow money or issue senior securities, except as permitted by the 1940 Act laws, interpretations and exemptions. 1 45 (c) the Fund may not underwrite the securities of other issuers. This restriction does not prevent the Fund from engaging in transactions involving the acquisition, disposition or resale of its portfolio securities, regardless of whether the Fund may be considered to be an underwriter under the Securities Act of 1933. (d) the Fund will not make investments that will result in the concentration (as that term may be defined or interpreted by the 1940 Act laws, interpretations and exemptions) of its investments in the securities of issuers primarily engaged in the same industry. This restriction does not limit the Fund's investments in (i) obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities, (ii) tax-exempt obligations issued by governments or political subdivisions of governments, or (iii) for AIM V.I. Money Market Fund, bank instruments. In complying with this restriction, the Fund will not consider a bank-issued guaranty or financial guaranty insurance as a separate security. (e) the Fund may not purchase real estate or sell real estate unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from investing in issuers that invest, deal, or otherwise engage in transactions in real estate or interests therein, or investing in securities that are secured by real estate or interests therein. (f) the Fund may not purchase physical commodities or sell physical commodities unless acquired as a result of ownership of securities or other instruments. This restriction does not prevent the Fund from engaging in transactions involving futures contracts and options thereon or investing in securities that are secured by physical commodities. (g) the Fund may not make personal loans or loans of its assets to persons who control or are under common control of the Fund, except to the extent permitted by 1940 Act laws, interpretations and exemptions. This restriction does not prevent the Fund from, among other things, purchasing debt obligations, entering into repurchase agreements, loaning its assets to broker-dealers or institutional investors, or investing in loans, including assignments and participation interests. (h) the Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and restrictions as the Fund. AIM V.I. Global Utilities Fund will concentrate (as such term may be defined or interpreted by the 1940 Act laws, interpretations and exemptions) its investments in the securities of domestic and foreign public utility companies. The investment restrictions set forth above provide the Funds with the ability to operate under new interpretations of the 1940 Act or pursuant to exemptive relief from the SEC without receiving prior shareholder approval of the change. Even though the Funds have this flexibility, the Board of Directors of the Company has adopted internal guidelines for each Fund relating to certain of these restrictions which the adviser must follow in managing the Funds. Any changes to these guidelines, which are set forth below, require the approval of the Board of Directors. 1. In complying with the fundamental restriction regarding issuer diversification, the Fund will not, with respect to 75% of its total assets (and for AIM V.I. Money Market Fund, with respect to 100% of its total assets), purchase the securities of any issuer (other than securities issued or guaranteed by the U.S. Government or any of its agencies or instrumentalities), if, as a result, (i) more than 5% of the fund's total assets would be invested in the securities of that issuer, except as permitted by Rule 2a-7 under the 1940 Act, or (ii) the Fund would hold more than 10% of the outstanding voting securities of that issuer. The Fund may (i) purchase securities of other investment companies as permitted by Section 12(d)(1) of the 1940 Act and (ii) invest its assets in securities of other money market funds and lend money to other investment companies and their series portfolios that have AIM as an investment adviser, subject to the terms and conditions of any exemptive orders issued by the SEC. 2. In complying with the fundamental restrictions regarding borrowing money and issuing senior securities, the Fund may borrow money in an amount not exceeding 33 1/3% of its total assets (including the amount borrowed) less liabilities (other than borrowings). The Fund may borrow from 2 46 banks, broker/dealers or other investment companies or their series portfolios that have AIM or an affiliate of AIM as an investment advisor (an "AIM Fund"). The Fund may not borrow for leveraging, but may borrow for temporary or emergency purposes, in anticipation of or in response to adverse market conditions, or for cash management purposes. The Fund may not purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets. 3. In complying with the fundamental restriction regarding industry concentration, the Fund may invest up to 25% of its total assets in the securities of issuers whose principal business activities are in the same industry (this guideline does not apply to AIM V.I. Global Utilities Fund). 4. In complying with the fundamental restriction with regard to making loans, the Fund may lend up to 33 1/3% of its total assets and may lend money to another AIM Fund, on such terms and conditions as the SEC may require in an exemptive order. 5. Notwithstanding the fundamental restriction on investing all of the Fund's assets in an open-end fund, the Fund may not invest all of its assets in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and limitations as the Fund. If a percentage restriction is adhered to at the time of investment, a later change in percentage resulting from changes in values of assets will not be considered a violation of the restriction. GENERAL INFORMATION ABOUT THE FUNDS THE COMPANY AND ITS SHARES The Company was organized on January 22, 1993, as a Maryland corporation, and is registered with the SEC as an open-end, series, management investment company. The Company currently consists of seventeen separate Funds as follows: the AIM V.I. Aggressive Growth Fund ("Aggressive Growth Fund"), the AIM V.I. Balanced Fund ("Balanced Fund"), the AIM V.I. Blue Chip Fund ("Blue Chip Fund"), the AIM V.I. Capital Appreciation Fund ("Capital Appreciation Fund"), the AIM V.I. Capital Development Fund ("Capital Development Fund"), the AIM V.I. Dent Demographic Trends Fund ("Dent Demographic Trends Fund"), the AIM V.I. Diversified Income Fund ("Diversified Income Fund"), the AIM V.I. Global Growth and Income Fund ("Global Growth and Income Fund"), the AIM V.I. Global Utilities Fund ("Global Utilities Fund") (formerly known as the AIM V.I. Utilities Fund), the AIM V.I. Government Securities Fund ("Government Fund"), the AIM V.I. Growth Fund ("Growth Fund"), the AIM V.I. Growth and Income Fund ("Growth and Income Fund"), the AIM V.I. High Yield Fund ("High Yield Fund"), the AIM V.I. International Equity Fund ("International Fund"), the AIM V.I. Telecommunications Fund ("Telecommunications Fund"), the AIM V.I. Money Market Fund ("Money Market Fund"), the AIM V.I. Value Fund ("Value Fund"). Each Fund, with the exception of the Global Utilities Fund, is a "diversified management company" as defined in the Investment Company Act of 1940, as amended (the "1940 Act"). Each share of a Fund is entitled to one vote, to participate equally in dividends and distributions declared by the Board of Directors with respect to the Fund and, upon liquidation of the Fund, to participate in its proportionate share of the net assets allocable to the Fund remaining after satisfaction of outstanding liabilities of the Fund. Fund shares are fully paid, non-assessable and fully transferable when issued and have no preemptive, conversion or exchange rights. Fractional shares have proportionately the same rights, including voting rights, as are provided for a full share. Shareholders of the Funds do not have cumulative voting rights, and therefore the holders of more than 50% of the outstanding shares of all Funds voting together for election of directors may elect all of the members of the Board of Directors of the Company. In such event, the remaining holders cannot elect any directors of the Company. 3 47 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:
Year Ended Since December 31, 1999 Inception ----------------- -------------------------------- Average One Five Inception Annual Cumulative Year Year Date Return Return -------- ---- --------- ------- ---------- AIM V.I. Aggressive Growth Fund 44.67% N/A 05/01/98 24.07% 43.31% AIM V.I. Balanced Fund 19.31% N/A 05/01/98 19.62% 34.84% AIM V.I. Blue Chip N/A N/A 12/29/99 N/A 0% AIM V.I. Capital Appreciation Fund 44.61% 25.59% 05/05/93 22.33% 282.65% AIM V.I. Capital Development Fund 29.10% N/A 05/01/98 11.22% 19.41% AIM V.I. Dent Demographic Trends Fund N/A N/A 12/29/99 N/A 0% AIM V.I. Diversified Income Fund -1.92% 7.83% 05/05/93 5.93% 46.74% AIM V.I. Global Growth and Income Fund -0.13% 13.28% 02/10/93 11.63% 113.34% AIM V.I. Global Utilities Fund 33.56% 21.87% 05/02/94 18.45% 160.94% AIM V.I. Government Securities Fund -1.32% 6.33% 05/05/93 4.67% 35.50% AIM V.I. Growth Fund 35.24% 29.64% 05/05/93 22.93% 295.21% AIM V.I. Growth and Income Fund 34.25% 28.18% 05/02/94 24.49% 245.97% AIM V.I. High Yield Fund 10.52% N/A 05/01/98 1.26% 2.12% AIM V.I. International Equity Fund 55.04% 21.93% 05/05/93 18.82% 215.25% AIM V.I. Money Market Fund 4.66% 5.10% 05/05/93 4.60% 34.90% AIM V.I. Telecommunications Fund 106.52% 33.65% 10/18/93 29.52% 397.56% AIM V.I. Value Fund 29.90% 27.23% 05/05/93 23.07% 298.25%
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 4 48 data may be prepared by Lipper Inc., Morningstar, Inc. and other independent services which monitor the performance of mutual funds. The Funds may also advertise mutual fund performance rankings which have been assigned to each respective Fund by such monitoring services. Each Fund's performance may also be compared in advertising to the performance of comparative benchmarks such as the Consumer Price Index ("CPI"), the Standard & Poor's ("S&P") 500 Stock Index, and fixed-price investments such as bank certificates of deposit and/or savings accounts. The International Fund's performance may also be compared in advertising to performance of comparative benchmarks such as The Financial Times-Actuaries World Indices (a wide range of comprehensive measures of stock price performance for the major stock markets and regional areas), Morgan Stanley Capital International Indices (including the EAFE Index) Pacific Basin Index and Pacific Ex Japan Index (a widely recognized series of indices in international market performance), and indices of stocks comparable to those in which the Fund invests. Each Fund's advertising may from time to time include historical discussions of general economic conditions such as inflation rates and changes in the stock market, foreign and domestic interest rates and foreign and domestic political circumstances and events. From time to time, Dent Demographic Trends Fund sales literature and/or advertisements may quote (i) Harry S. Dent, Jr.'s theories on why the coming decade may offer unprecedented opportunities for investors, including his opinions on the stock market outlook and where growth may be strongest; (ii) Harry S. Dent, Jr.'s opinions and theories from his books and publications, including, but not limited to, Job Shock, The Great Boom Ahead and The Roaring 2000s, including his beliefs that (a) people's spending patterns may help predict the stock market, (b) the stock market has tended to perform best when a generation has reached its peak spending years from ages 45-50, and (c) as more and more baby boomers reach their peak spending age, they could propel stock prices up for the next decade; and (iii) Harry S. Dent, Jr.'s S-curve analysis, a forecasting tool used to analyze products that show remarkable growth. In addition, each Fund's long-term performance may be described in advertising in relation to historical, political and/or economic events. From time to time, A I M Advisors, Inc. ("AIM") or its affiliates may waive all or a portion of their fees and/or assume certain expenses of any Fund. Voluntary fee waivers or reductions or commitments to assume expenses may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions or commitments to assume expenses, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions or reimbursement of expenses set forth in the Fee Table in a Prospectus may not be terminated or amended to the Funds' detriment during the period stated in the agreement between AIM and the Fund. Fee waivers or reductions or commitments to reduce expenses will have the effect of increasing that Fund's yield and total return. The performance of each Fund will vary from time to time and past results are not necessarily indicative of future results. A Fund's performance is a function of its portfolio management in selecting the type and quality of portfolio securities and is affected by operating expenses of the Fund and market conditions. A shareholder's investment in a Fund is not insured or guaranteed. These factors should be carefully considered by the investor before making an investment in any Fund. Some of the Funds (except AIM V.I. Diversified Income Fund, AIM V.I. Government Securities Fund, AIM V.I. High Yield Fund and AIM V.I. Money Market Fund) may participate in the initial public offering ("IPO") market. For AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I. Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. International Equity Fund and AIM V.I. Telecommunications Fund (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 the Fund's assets grow, they 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 5 49 information about mutual funds, variable annuities, variable life insurance, dollar-cost averaging, stocks, bonds, money markets, certificates of deposit, retirement, retirement plans, asset allocation, tax-free investing, college planning and inflation. YIELD INFORMATION Quotations of yield on the Money Market Fund may appear from time to time in the financial press and in advertisements. The Money Market Fund's yield is its investment income, less expenses, expressed as a percentage of assets on an annualized basis for an identified period, usually seven days. The yield is expressed as a simple annualized yield and as a compounded effective yield. The yield does not reflect the fees and charges imposed on the assets of the insurance company separate account. The standard formulas prescribed by the SEC for calculating yield and effective yield for the Money Market Fund are described below: The simple annualized yield is computed by determining the net change (exclusive of realized gains and losses from the sale of securities, unrealized appreciation and depreciation, and income other than investment income) in the value of a hypothetical pre-existing account having a balance of one share at the beginning of the period, dividing the net change in account value by the value of the account at the beginning of the period, and annualizing the resulting quotient (base period return) on a 365-day basis. The net change in account value reflects the value of additional shares purchased with dividends from the original shares in the account during the period, dividends declared on such additional shares during the period, and expenses accrued during the period. The compounded effective yield is computed by determining the unannualized base period return, adding one to the base period return, raising the sum to a power equal to 365 divided by the number of days in the period, and subtracting one from the result. Historical yields are not necessarily indicative of future yields. Rates of return will vary as interest rates and other conditions affecting money market instruments change. Yields also depend on the quality, length of maturity and type of instruments in the Fund's portfolio and the Fund's operating expenses. Quotations of yield will be accompanied by information concerning the average weighted maturity of the Fund. Comparison of the quoted yields of various investments is valid only if yields are calculated in the same manner and for identical limited periods. When comparing the yield for a Fund with yields quoted with respect to other investments, shareholders should consider (a) possible differences in time periods, (b) the effect of the methods used to calculate quoted yields, (c) the quality and average-weighted maturity of portfolio investments, expenses, convenience, liquidity and other important factors, and (d) the taxable or tax-exempt character of all or part of dividends received. The simple annualized yield and compounded effective yield for the Money Market Fund for the 7 days ended December 31, 1999 were 4.90% and 5.02%, respectively. PORTFOLIO TRANSACTIONS AND BROKERAGE GENERAL BROKERAGE POLICY Subject to policies established by the Board of Directors of the Company, AIM is responsible for decisions to buy and sell securities for each Fund, for the selection of broker-dealers, for the execution of the Fund's investment portfolio transactions, for the allocation of brokerage fees in connection with such transactions and, where applicable, for the negotiation of commissions and spreads on transactions. AIM's primary consideration in effecting a security transaction is to obtain the best net price and the most favorable execution of the order. While AIM generally seeks reasonably competitive commission rates, each Fund does not necessarily pay the lowest commission or spread available. Purchases and sales of portfolio securities for the Diversified Income Fund, the Money Market Fund and the Government Fund are generally transacted with the issuer or a primary market maker. In addition, 6 50 a portion of the securities in which the Funds invest may be traded in over-the-counter ("OTC") markets. In such transactions, the Fund deals directly with the dealers who make markets in the securities involved, except in those circumstances where better prices and executions are available elsewhere. Portfolio transactions placed through dealers serving as primary market makers are effected at net prices, without commissions as such, but which include compensation to the dealer in the form of mark up or mark down. Traditionally, commission rates have not been negotiated on stock markets outside the United States. In recent years, however, an increasing number of overseas stock markets have adopted a system of negotiated rates, although a number of markets continue to be subject to an established schedule of minimum commission rates. Foreign equity securities may be held by a Fund in the form of American Depositary Receipts ("ADRs") or European Depositary Receipts ("EDRs"), or other securities representing underlying securities of foreign issuers, or securities convertible into foreign equity securities. These securities may not necessarily be denominated in the same currency as the securities into which they may be converted. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. Generally, ADRs, in registered form, are designed for use in the United States securities markets, and EDRs, in bearer form, are designed for use in European securities markets. ADRs and EDRs may be listed on stock exchanges, or traded in OTC markets in the United States or Europe, as the case may be. ADRs, like other securities traded in the United States, will be subject to negotiated commission rates. The Funds are not under any obligation to deal with any broker or group of brokers in the execution of transactions in portfolio securities. Brokers who provide supplemental investment research to AIM may receive orders for transactions by a Fund. Information so received will be in addition to and not in lieu of the services required to be performed by AIM under its agreements with the Fund, and the expenses of AIM will not necessarily be reduced as a result of the receipt of such supplemental information. Certain research services furnished by broker-dealers may be useful to AIM in connection with its services to other advisory clients, including the other mutual funds advised by AIM (collectively with the Funds, the "AIM Funds"). Also, a Fund may pay a higher price for securities or higher commissions in recognition of research services furnished by broker-dealers. AIM may from time to time determine target levels of commission business for AIM to transact with various brokers on behalf of its clients (including the Funds) over a certain time period. The target levels will be determined based upon the following factors, among others: (1) the execution services provided by the broker; (2) the research services provided by the broker; and (3) the broker's attitude toward an interest in mutual funds in general and in the Funds and the other AIM Funds in particular, including sales of the Funds and of the other AIM Funds. No specific formula will be used in connection with any of the foregoing considerations in determining the target levels. However, if a broker has indicated a certain level of desired commissions in return for certain research services provided by the broker, this factor will be taken into consideration by AIM. Subject to the overall objective of obtaining best price and execution for the Funds, AIM may also consider sales of shares by broker-dealers of each Fund and of the other AIM Funds as well as sales of variable annuity contracts ("Contracts") and variable life insurance policies ("Policies") funded through the Funds ("selling dealers"), as a factor in the selection of broker-dealers to execute portfolio transactions for a Fund. Such portfolio transactions may be executed directly by selling dealers or by other broker-dealers with which selling dealers have clearing arrangements. AIM and its affiliates manage several other investment accounts, some of which may have investment objectives similar to those of the Funds. It is possible that, at times, identical securities will be appropriate for investment by one or more of such investment accounts. The position of each account, however, in the securities of the same issue may vary and the length of time that each account may choose to hold its 7 51 investment in the securities of the same issue may likewise vary. The timing and amount of purchases by each account will also be determined by its cash position. If the purchase or sale of securities is consistent with the investment policies of a Fund(s) and one or more of these accounts is considered at or about the same time, AIM will fairly allocate transactions in such securities among the Fund(s) and these accounts. AIM may combine such transactions, in accordance with applicable laws and regulations, in order to obtain the best net price and most favorable execution. Simultaneous transactions could, however, adversely affect the ability of a Fund to obtain or dispose of the full amount of a security which it seeks to purchase or sell. These combined transactions, and related brokerage charges, will be allocated among the Fund(s) and such accounts in a manner consistent with guidelines and procedures approved by the Company's Board of Directors that are designed to achieve an equitable manner of allocation. In some cases the procedure for allocating portfolio transactions among the various investment accounts advised by AIM could have an adverse effect on the price or amount of securities available to a Fund. In making such allocations, the main factors considered by AIM are the respective investment objectives and policies of its advisory clients, the relative size of portfolio holdings of the same or comparable securities, the availability of cash for investment, the size of investment commitments generally held and the judgments of the persons responsible for recommending the investment. From time to time, an identical security may be sold by an AIM Fund or another investment account advised by AIM or A I M Capital Management, Inc. ("AIM Capital") and simultaneously purchased by another investment account advised by AIM or AIM Capital, when such transactions comply with applicable rules and regulations and are deemed consistent with the investment objective(s) and policies of the investment accounts advised by AIM or AIM Capital. Procedures pursuant to Rule 17a-7 under the 1940 Act regarding transactions between investment accounts advised by AIM or AIM Capital have been adopted by the Boards of Directors/Trustees of the various AIM Funds, including the Company. Although such transactions may result in custodian, tax or other related expenses, no brokerage commissions or other direct transaction costs are generated by transactions among the investment accounts advised by AIM or AIM Capital. ALLOCATION OF IPO SECURITIES TRANSACTIONS From time to time, certain of the AIM Funds or accounts may become interested in participating in security distributions that are available in an IPO, and occasions may arise when purchases of such securities by one AIM Fund or account may also be considered for purchase by one or more other AIM Funds or accounts. In such cases, it shall be AIM's practice to specifically combine or otherwise bunch indications of interest for IPO securities for all AIM Funds and accounts participating in purchase transactions for that security, and to allocate such transactions in accordance with the following procedures: AIM will determine the eligibility of each AIM Fund or account that seeks to participate in a particular IPO by reviewing a number of factors, including suitability of the investment with the AIM Fund's or account's investment objective, policies and strategies, the liquidity of the AIM Fund or account if such investment is purchased, and whether the portfolio manager intends to hold the security as a long-term investment. The allocation of limited supply securities issued in IPOs will be made to eligible AIM Funds and accounts in a manner designed to be fair and equitable for the eligible AIM Funds and accounts, and so that there is equal allocation of IPOs over the longer term. Where multiple funds or accounts are eligible, rotational participation may occur, based on the extent to which an AIM Fund or account has participated in previous IPOs as well as the size of the AIM Fund or account. Each eligible AIM Fund or account with an asset level of less than $500 million will be placed on one of three tiers, depending upon its asset level. The AIM Funds and accounts in the tier containing funds with the smallest asset levels will participate first, each receiving a 40 basis point allocation (rounded to the nearest share round lot that approximates 40 basis points) (the "Allocation"), based on that AIM Fund's or account's net assets. This process continues until all of the AIM Funds and accounts in the three tiers receive their Allocations, or until the shares are all allocated. Should securities remain after this process, eligible AIM Funds and accounts will receive their Allocations on a straight pro rata basis. For the tier of AIM Funds or accounts not receiving a full Allocation, the Allocation may be made only to certain AIM Funds or accounts so that each may receive close to or exactly 40 basis points. Any AIM Funds or accounts with substantially identical investment objectives and policies will participate in syndicates in amounts that are substantially proportionate to each other. In these cases, the net assets of the largest AIM Fund will be used to determine in which tier, as described in the paragraph above, such group 8 52 of AIM Funds or accounts will be placed. The price per share of securities purchased in such syndicate transactions will be the same for each AIM Fund or account. SECTION 28(e) STANDARDS As permitted by Section 28(e) of the Securities Exchange Act of 1934, AIM may cause a Fund to pay a broker that provides brokerage and research services to AIM an amount of commission for effecting a securities transaction for the Fund in excess of the commission another broker would have charged for effecting that transaction. To obtain the benefit of Section 28(e), AIM must make a good faith determination that the commissions paid are "reasonable in relation to the value of the brokerage and research services provided . . . viewed in terms of either that particular transaction or [its] overall responsibilities with respect to the accounts as to which [it] exercises investment discretion" and that the services provided by a broker provide AIM with lawful and appropriate assistance in the performance of its investment decision-making responsibilities. Accordingly, the price to a Fund in any transaction may be less favorable than that available from another broker-dealer if the difference is reasonably justified by other aspects of the portfolio execution services offered. Broker-dealers utilized by AIM may furnish statistical, research and other information or services which are deemed by AIM to be beneficial to the Funds' investment programs. Research services received from brokers supplement AIM's own research (and the research of sub-advisors to other clients of AIM) and may include the following types of information: statistical and background information on industry groups and individual companies; forecasts and interpretations with respect to U.S. and foreign economies, securities markets, specific industry groups and individual companies; information on political developments; portfolio management strategies; performance information on securities and information concerning prices of securities; and information supplied by specialized services to AIM and to the Company's directors with respect to the performance, investment activities and fees and expenses of other mutual funds. Such information may be communicated electronically, orally, in written form or on computer software. Research services may also include the providing of equipment used to communicate research information, the arranging of meetings with management of companies and the providing of access to consultants who supply research information. The outside research assistance is useful to AIM since the brokers utilized by AIM as a group tend to follow a broader universe of securities and other matters than AIM's staff can follow. In addition, this research provides AIM with a diverse perspective on financial markets. Research services which are provided to AIM by brokers are available for the benefit of all accounts managed or advised by AIM (or by sub-advisors to accounts managed or advised by AIM). In some cases, the research services are available only from the broker providing such services. In other cases, the research services may be obtainable from alternative sources in return for cash payments. AIM is of the opinion that because the broker research supplements rather than replaces its research, the receipt of such research does not tend to decrease its expenses, but tends to improve the quality of its investment advice. However, to the extent that AIM would have purchased any such research services had such services not been provided by brokers, the expenses of such services to AIM could be considered to have been reduced accordingly. For the fiscal year ended December 31, 1999, certain Funds paid brokerage commissions to certain brokers for research services. The amount of such transactions and related commissions paid by each Fund were as follows: 9 53
Commissions Transactions ------------ ------------ AIM V. I. Aggressive Growth Fund $ 2,352 $ 1,602,079 AIM V. I. Balanced Fund $ 1,690 $ 1,424,718 AIM V. I. Capital Appreciation Fund $ 125,531 $104,465,850 AIM V. I. Capital Development Fund $ 2,132 $ 1,042,603 AIM V. I. Diversified Income Fund $ 416 $ 224,341 AIM V. I. Global Utilities Fund $ 1,794 $ 1,016,887 AIM V. I. Growth Fund $ 99,052 $103,527,973 AIM V. I. Growth and Income Fund $ 342,607 $351,987,293 AIM V. I. International Equity Fund $ 16,910 $ 9,546,491 AIM V. I. Telecommunications Fund $ 18,478 $ 21,790,567 AIM V. I. Value Fund $ 244,625 $266,257,808
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.
BANK ONE CIBC GOLDMAN FUNDS CAPITAL MARKETS, INC. OPPENHEIMER CORP. SACHS ----- --------------------- ----------------- ------------ AIM V.I. Blue Chip Fund $230,000 $ 230,000 $ -0- AIM V.I. Dent Demographic Trends Fund $230,000 $ 230,000 $ -0- AIM V.I. Money Market Fund $ -0- $14,862,435 $3,500,000
The following information regarding securities acquired by the Funds of their regular brokers, as defined in Rule 10b-1 under the 1940 Act, is as of December 31, 1999. The Balanced Fund and the Growth and Income Fund each held an amount of common stock issued by Merrill Lynch & Co. having a market value of $200,400 and $12,525,000, respectively. The Balanced Fund, the Capital Appreciation Fund and the Growth and Income Fund each held an amount of common stock issued by Goldman Sachs having a market value of $61,222, $9,418,750 and $21,192,188, respectively. The Balanced Fund, the Growth Fund, the Growth and Income Fund and the Value Fund each held an amount of common stock issued by Morgan Stanley Dean Witter having a market value of $314,050, $7,851,250, $72,674,025 and $57,556,800. PORTFOLIO TURNOVER The portfolio turnover rate of each Fund is shown under "Financial Highlights" in the Prospectus. In any particular year, however, market conditions could result in portfolio activity at a rate greater or lesser than anticipated. The estimated portfolio turnover rate for the Blue Chip Fund, Dent Demographic Trends Fund, Global Growth and Income Fund and Telecommunications Fund is less than 100%. Higher portfolio turnover increases transaction costs to the Fund. BROKERAGE COMMISSIONS PAID Brokerage commissions paid by each of the Funds (except the AIM V.I. Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) listed below were as follows for the fiscal years ended December 31, 1999, December 31, 1998 and December 31, 1997. The significant change in commissions paid from year to year for AIM V.I. Capital Appreciation Fund and AIM V.I. Growth and Income Fund is due to the increase in asset level. 10 54
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Aggressive Growth Fund $ 12,853 $ 2,983* $ N/A AIM V.I. Balanced Fund $ 18,419 $ 2,241* $ N/A AIM V.I. Capital Appreciation Fund $1,028,908 $1,017,185 $ 644,279 AIM V.I. Capital Development Fund $ 14,060 $ 3,748* $ N/A AIM V.I. Diversified Income Fund $ 1,626 $ 282 $ 2,818 AIM V.I. Global Growth and Income Fund $ 96,559 $ 19,966 $ 42,783 AIM V.I. Global Utilities Fund $ 21,661 $ 18,422 $ 12,208 AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- AIM V.I. Growth Fund $ 940,142 $ 876,546 $ 621,467 AIM V.I. Growth and Income Fund $2,951,259 $2,834,451 $1,190,597 AIM V.I. High Yield Fund $ -0- $ -0-* $ N/A AIM V.I. International Equity Fund $1,061,593 $ 814,499 $ 605,318 AIM V.I. Money Market Fund $ -0- $ -0- $ -0- AIM V.I. Telecommunications Fund $ 131,019 $ 120,189 $ 123,863 AIM V.I. Value Fund $1,978,681 $1,920,264 $1,503,734
* Commissions paid are for the period May 1,1998 (date operations commenced) through December 31, 1998. INVESTMENT STRATEGIES AND RISKS Information concerning each Fund's fundamental investment objective is set forth in the Prospectus under the heading "Investment Objectives and Strategies." There can be no assurance that any Fund will achieve its objective. The principal features of each Fund's investment program and the primary risks associated with that investment program are discussed in the Prospectus under the following headings: "Investment Objectives and Strategies" and "Principal Risks of Investing in the Funds". The following discussion of investment policies supplements the discussion of the investment strategies and risks set forth in the Prospectus. Set forth in this section is a description of each Fund's investment policies, strategies and practices. The investment objective(s) of each Fund, except the High Yield Fund and Dent Demographic Trends Fund, are deemed to be fundamental policies and, therefore, unless permitted by law, may not be changed without the approval of a majority of that Fund's outstanding shares (within the meaning of the 1940 Act). The Board of Directors on behalf of the High Yield Fund or Dent Demographic Trends Fund is permitted to change the investment objective of that Fund without shareholder approval. Each Fund's investment policies, strategies and practices are not fundamental. The Board of Directors of the Company reserves the right to change any of these non-fundamental investment policies, strategies or practices without shareholder approval. However, shareholders will be notified before any material change in the investment policies become effective. Each Fund has adopted investment restrictions, some of which are fundamental and cannot be changed without shareholder approval. See "Investment Restrictions" in this Statement of Additional Information. Individuals considering the purchase of shares of any Fund should recognize that there are risks in the ownership of any security. AGGRESSIVE GROWTH FUND The Fund's investment objective is to achieve long-term growth of capital. The Fund will invest primarily in common stocks, convertible bonds, convertible preferred stocks and warrants of companies which, in the opinion of the Fund's investment advisor, are expected to achieve earnings growth over time at a rate in excess of 15% per year. Many of these companies are in the small to medium-sized category (i.e., companies with a market capitalization within the range of small cap stocks in the Russell 2000 Index.) Management of the Fund will be particularly interested in companies that are likely to benefit from new or innovative products, services or processes that should enhance such companies' prospects for future growth in earnings. As a result of this policy, the market prices of many of the securities purchased and held by the Fund may fluctuate widely. Any income received from securities held by the Fund will be incidental, and an 11 55 investor should not consider a purchase of shares of the Fund as equivalent to a complete investment program. The Fund's portfolio is primarily comprised of securities of two basic categories: (a) "core" companies, which Fund management considers to have experienced above-average and consistent long-term growth in earnings and to have excellent prospects for outstanding future growth, and (b) "earnings acceleration" companies which Fund management believes are currently enjoying dramatic increase in profits. The Fund's strategy does not preclude investment in large, seasoned companies which in the judgement of AIM possess superior potential returns similar to companies with formative growth profiles. The Fund will also invest in established smaller companies (under $500 million in market capitalization) which offer exceptional value based upon substantially above average earnings growth potential relative to market value. The Fund may invest in non-equity securities, such as corporate bonds or U.S. Government obligations during periods when, in the opinion of AIM, prevailing market, financial, or economic conditions warrant, as well as when such holdings are advisable in light of a change in circumstances of a particular company or within a particular industry. BALANCED FUND The Fund's objective is to achieve as high a total return as possible, consistent with preservation of capital. The Fund seeks to achieve its objective by investing in a broadly diversified portfolio of high-yielding securities, including common stocks, preferred stocks, convertible securities and bonds. Although equity securities will be purchased primarily for capital appreciation and fixed income securities will be purchased primarily for income purposes, income and capital appreciation potential will be considered in connection with all investments. The Fund normally will have a minimum of 30% and a maximum of 70% of its total assets invested in equity securities and a minimum of 30% and a maximum of 70% of its total assets invested in (non-convertible) fixed income securities. Most of such fixed income securities will be rated Baa or better by Moody's Investors Service, Inc. ("Moody's") or BBB or better by Standard & Poor's Rating Services ("S&P") or, in unrated, deemed to be of comparable quality by AIM, although the Fund may invest to a limited extent in lower-rated securities. (For a description of the various rating categories, see Appendix A to this Statement of Additional Information.) The fixed income securities in which the Fund invests may include U.S. Government obligations, mortgage-backed securities, asset-backed securities, bank obligations, corporate debt obligations and unrated obligations, including those of foreign issuers. The Fund may, in pursuit of its objective, invest up to 10% of its total assets in debt securities rated lower than Baa by Moody's or BBB by S&P, which are commonly known as "junk bonds." See "Risk Factors -- Non-Investment Grade Debt Securities" for more information concerning the risk factors associated with investing in such securities. The Fund may also invest up to 25% of its total assets in convertible securities. Compliance with all of the above percentage requirements may limit the ability of the Fund to maximize total return. The actual percentage of the assets invested in equity and fixed income securities will vary from time to time, depending on the judgment of AIM as to general market and economic conditions and trends, yields and interest rates and changes in fiscal and monetary policies. BLUE CHIP FUND The Fund's primary investment objective is to provide long-term growth of capital. Current income is a secondary objective. It is anticipated that the major portion of the Fund's portfolio will ordinarily be invested in common stocks, convertible securities and bonds of blue chip companies (i.e., companies with leading market positions and which possess strong financial characteristics, as described below). There can, of course, be no assurance that the Fund will in fact achieve its objectives since all investments are inherently subject to market risks. The Fund will invest primarily (at least 65% of its total assets) in the common stocks of blue chip companies as determined by AIM. These companies will have the potential for above-average growth in earnings or be well-established in their respective industries. The Fund will generally invest in large and medium sized companies (i.e., companies which fall in the largest 85% of market capitalization of publicly traded companies listed in the United States) which possess the following characteristics: 12 56 o Market Characteristics Blue chip companies are those which occupy (or in AIM's judgment have the potential to occupy) leading market positions that are expected to be maintained or enhanced over time. Strong market positions, particularly in growing industries, can give a company pricing flexibility as well as the potential for strong unit sales. These factors can in turn lead to higher earnings growth and greater share price appreciation. Market leaders can be identified within an industry as those companies which have: - superior growth prospects compared with other companies in the same industry; - possession of proprietary technology with the potential to bring about major changes within an industry; and/or - leading sales within an industry, or the potential to become a market leader. o Financial Characteristics Blue chip companies possess at least one of the following attributes: - faster earnings growth than its competitors and the market in general; - higher profit margins relative to its competitors; - strong cash flow relative to its competitors; and/or - a balance sheet with relatively low debt and a high return on equity relative to its competitors. The Fund will diversify among industries and therefore will not invest 25% or more of its total assets in any one industry. When AIM believes securities other than common stocks offer opportunity for long-term growth of capital and income, the Fund may invest in United States government securities, corporate bonds and debentures and convertible preferred stocks and debt securities. The Fund will invest only in debt securities (other than convertible debt securities) which are rated at "Investment Grade" by either S&P or Moody's. Debt securities in the lowest investment grade (e.g., rated BBB by S&P or Baa by Moody's) have speculative characteristics and changes in economic conditions and other circumstances are more likely to lead to a weakened capacity on the part of the issuer to make principal and interest payments than is the case with higher grade bonds. The Fund will limit its investments in convertible securities to those in which the underlying common stock is a suitable investment for the Fund without regard to debt rating category, but will not invest more than 10% of its total assets in convertible securities. The Fund may invest in United States government securities and corporate bonds and debentures when AIM believes interest rates on such investments may decline thereby potentially increasing the market value of such securities or to meet the additional investment objective of producing current income. Under normal market conditions, the Fund expects at all times to have at least 65% of its total assets invested in securities which AIM believes offer opportunity for long-term growth of capital or income. The Fund may invest up to 25% of total assets in securities of issuers domiciled in foreign countries. For the risks involved in investing in foreign securities, see "Risk Factors - Foreign Securities" in this Statement of Additional Information. CAPITAL APPRECIATION FUND The Fund's investment objective is growth of capital through investment in common stocks, with emphasis on medium- and small-sized growth companies. AIM will be particularly interested in companies that are likely to benefit from new or innovative products, services or processes that should enhance such 13 57 companies' prospects for future growth in earnings. As a result of this policy, the market prices of many of the securities purchased and held by the Fund may fluctuate widely. Any income received from securities held by the Fund will be incidental, and an investor should not consider a purchase of shares of the Fund as equivalent to a complete investment program. The Capital Appreciation Fund's portfolio is primarily comprised of securities of two basic categories of companies: (1) "core" companies, which AIM considers to have experienced above-average and consistent long-term growth in earnings with excellent prospects for outstanding future growth, and (2) "earnings acceleration" companies which AIM believes are currently enjoying a dramatic increase in profits. CAPITAL DEVELOPMENT FUND The Fund's investment objective is long-term growth of capital. Production of income is incidental to this objective. The Fund's principal investments are in common stocks, convertible securities and bonds. There can, of course, be no assurance that the Fund will in fact achieve its objective since all investments are inherently subject to market risks. The Fund will invest primarily in securities of small and medium-sized companies (i.e., companies which fall in the smallest 85% by market capitalization of publicly traded companies in the United States). Among factors that AIM may consider when selecting investments in a company for the Fund are (i) the growth prospects for a company's products, (ii) the economic outlook for its industry, (iii) a company's new product development, (iv) its operating management capabilities, (v) the relationship between the price of the security and its estimated fundamental value, (vi) relevant market, economic and political environments and (vii) financial characteristics such as balance sheet analysis and return on assets. The Fund may invest in issuers making initial public offerings of their securities if AIM determines that the issuer has good prospects for growth. DENT DEMOGRAPHIC TRENDS FUND The Fund's investment objective is long-term growth of capital. The Fund will seek to achieve its investment objective by investing in companies that are likely to benefit from demographic, economic and lifestyle trends, as suggested by Harry S. Dent Jr.'s research. Dent is an internationally known strategic consultant and best-selling author who provides the Fund's portfolio managers with macroeconomic and sector research, along with investment and market capitalization recommendations. The Fund's portfolio managers then focus on companies that have historically experienced or are deemed to have the potential for above-average, long-term growth in revenues and earnings. The Fund makes use of a unique investment style that blends AIM's earnings momentum approach with proprietary guidance from Dent. The Fund's portfolio managers will not hesitate to sell stocks that experience decelerated earnings and negative earnings revisions. They actively monitor valuation targets and may reduce positions that they believe have become too heavily weighted in the Fund's portfolio. The Fund is not limited exclusively to small-, mid- or large-cap stocks, which may help minimize the risks associated with sector investing. Demographic, economic and lifestyle trends may occur in different phases around the world. The Fund is positioned to potentially take advantage of these differing phases by investing in both domestic and foreign stock issuers. DIVERSIFIED INCOME FUND The Fund's investment objective is to seek to achieve a high level of current income. The Fund will seek to achieve its investment objective by investing primarily in: (i) domestic and foreign corporate debt securities, (ii) U.S. Government securities, including U.S. Government Agency Mortgage-Backed Securities, 14 58 (iii) foreign government securities and (iv) lower-rated or unrated high yield debt securities (commonly known as "junk bonds") of U.S. and foreign companies. Under normal circumstances, the Fund's assets will be invested in each of these four sectors. The Fund may invest up to 10% of its total assets in common stocks, preferred stocks, similar equity securities and convertible securities of U.S. and foreign companies. The Fund does not intend to invest more than 50% of its total assets in lower-rated or unrated high yield securities or more than 50% of its total assets in foreign debt securities. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Statement of Additional Information. For a description of U.S. Government Agency Mortgage-Backed Securities, see Appendix B to this Statement of Additional Information.) However, the Fund may from time to time invest up to 100% of its total assets in U.S. Government securities and, as a defensive measure, may invest up to 100% of its total assets in money market securities. For a discussion of the investment risks associated with investments in high yield securities and foreign securities, see "Risk Factors" in this Statement of Additional Information. GLOBAL GROWTH AND INCOME FUND The Fund's investment objective is long-term growth of capital together with current income. In seeking those objectives, the Fund normally invests at least 65% of its total assets in a combination of blue-chip equity securities and high quality government bonds. The Fund considers an equity security to be "blue chip" if: (i) during the issuer's most recent fiscal year the security offered an above average dividend yield relative to the latest reported dividend yield on the Morgan Stanley Capital International World Index; and (ii) the total equity market capitalization of the issuer is at least $1 billion. Government bonds are deemed to be high quality if at the time of the Fund's investment they are rated within one of the two highest ratings categories of Moody's Investors Services, Inc. ("Moody's") or Standard & Poor's, a division of The McGraw-Hill Companies, Inc. ("S&P"), i.e., rated Aaa or Aa by Moody's or AAA or AA by S&P (or a comparable rating of any other nationally recognized statistical rating organizations "NRSROs") or, if unrated, are determined by AIM and INVESCO Asset Management Limited ("INVESCO") to be of comparable quality. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Statement of Additional Information.) Up to 35% of the Fund's assets may be invested in other equity securities, convertible securities and investment grade government and corporate debt obligations which AIM/INVESCO believes will assist the Fund in achieving its objectives. Equity securities that the Fund may purchase include common stocks, preferred stocks, and warrants to acquire such stocks and other equity securities. Government bonds that the Fund may purchase include debt obligations issued or guaranteed by the U.S. or foreign governments (including foreign states, provinces or municipalities) or their agencies, authorities or instrumentalities and debt obligations of supranational entities organized or supported by several national governments, such as the World Bank and the Asian Development Bank. The debt obligations held by the Fund may include debt obligations convertible into equity securities or having attached warrants or rights to purchase equity securities. Under normal market conditions, the Fund invests in the securities of issuers located in at least three different countries. Investments in securities of issuers in any one country other than the United States, will represent no more than 40% of the Fund's total assets. The Fund may purchase securities of an issuer located in one country but denominated in the currency of another country (or a multinational currency unit). AIM/INVESCO allocates the Fund's assets among securities of issuers located in countries where opportunities for meeting the Fund's investment objectives are expected to be the most attractive. The relative proportions of equity and debt securities held by the Fund at any one time will vary, and will depend upon AIM/INVESCO's assessment of global political and economic conditions and the relative strengths and weaknesses of the world equity and debt markets. To enable the Fund to respond to general economic changes and market conditions around the world, the Fund is authorized to invest up to 100% of its assets in either equity securities or debt securities. 15 59 GLOBAL UTILITIES FUND The Fund's investment objective is to achieve a high level of current income and secondarily, growth of capital, by investing primarily in the common and preferred stocks of public utility companies (either domestic or foreign). Under normal circumstances, at least 65% of the Fund's total assets will be invested in securities of public utility companies (either domestic or foreign). Public utility companies include companies that provide electricity, natural gas or water and other sanitary services to the public, and telephone or telegraph companies and other companies providing public communications services. The Fund may also invest in developing utility technology companies and in holding companies which derive a substantial portion of their revenues from utility-related activities. Generally, a holding company will be considered to derive a substantial portion of its revenues from utility-related activities if such activities account for at least 40% of its revenues. The Fund may invest up to 25% of its total assets in convertible securities. When AIM deems it appropriate, the Fund may also purchase the bonds of such companies. Investments in non-convertible bonds, however, will not exceed 25% of the Fund's total assets. The Fund may invest up to 10% of its total assets in lower-rated or unrated high yield securities. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Statement of Additional Information.) During the fiscal year ended December 31, 1999, the Fund invested less than 5% of its net assets in below investment grade debt securities. The Fund may also invest up to 80% of its total assets in securities of foreign companies, including investments in American Depositary Receipts ("ADRs"), European Depositary Receipts ("EDRs") and underlying securities of foreign issuers. For a discussion of the investment risks associated with investments in non-investment grade debt securities and foreign securities, see "Risk Factors" in this Statement of Additional Information. A portfolio of utility company securities is subject to a different degree of volatility than a more broadly diversified portfolio. Economic, operational or regulatory changes that affect utility companies will have a material impact upon the value of the securities that the Fund owns. Events, such as changing weather patterns, emergencies involving nuclear power plants, or rapidly changing fuel prices that have no direct connection with companies whose securities are owned by the Fund may affect the prices of those securities. Moreover, a portfolio of utilities industry securities is subject to the risks unique to that industry, such as inflationary or other increases in fuel and operating expenses, possible increases in the interest costs of loans needed for capital construction programs, compliance with environmental regulations, possible adverse changes in the regulatory climate and availability of fuel sources. GOVERNMENT SECURITIES FUND The Fund's investment objective is to achieve a high level of current income consistent with reasonable concern for safety of principal by investing in debt securities issued, guaranteed or otherwise backed by the United States Government. The government securities which may be purchased by the Fund include but are not limited to (1) U.S. Treasury obligations such as Treasury Bills (maturities of one year or less), Treasury Notes (maturities of one to ten years) and Treasury Bonds (generally maturities of greater than ten years) and (2) obligations issued or guaranteed by U.S. Government agencies and instrumentalities ("Agency Securities") which are supported by any of the following: (a) the full faith and credit of the U.S. Treasury, such as obligations of the Government National Mortgage Association ("GNMA"), (b) the right of the issuers to borrow an amount limited to a specific line of credit from the U.S. Treasury, such as obligations of the Federal National Mortgage Association ("FNMA"), the Federal Home Loan Bank and the U.S. Postal Service or (c) the credit of the agency or instrumentality, such as obligations of the Federal Home Loan Mortgage Corporation ("FHLMC") and Federal Farm Credit System. Although their close relationship with the U.S. Government is believed to make them high-quality securities with minimal credit risks, the U.S. Government is not required by law to support the agencies and instrumentalities listed in (b) and (c), above. Accordingly, such securities may involve risk of loss of principal and interest; however, historically there have not been any defaults of such issues. For a listing of some of the types of Agency Securities in which the Fund may invest, see Appendix B to this Statement of Additional Information. The Fund's investments include high coupon U.S. Government Agency Mortgage-Backed Securities, which provide a higher coupon at the time of purchase than the prevailing market rate yield. The prices of high coupon U.S. Government Agency Mortgage-Backed Securities do not tend to rise as rapidly as those of traditional fixed rate securities at times when interest rates are decreasing, and tend to decline more slowly at times when interest rates are increasing. The Fund may purchase such securities at a premium, which 16 60 means that a faster principal prepayment rate than expected will reduce the market value of and income from such securities, while a slower prepayment rate will tend to increase the market value of and income from such securities. The composition and weighted average maturity of the Fund's portfolio will vary from time to time, based upon the determination of AIM and how best to further the Fund's investment objective. The Fund may invest in government securities of all maturities, short-term, intermediate-term and long-term. The Fund intends to maintain a dollar-weighted average portfolio maturity of between three and ten years. This policy regarding portfolio maturity is a non-fundamental policy of the Fund. GROWTH FUND The Fund's investment objective is to seek growth of capital principally by investing in seasoned and better capitalized companies considered to have strong earnings momentum. Current income will not be an important criterion of investment selection, and any such income should be considered incidental. It is anticipated that common stocks will be the principal form of investment by the Fund. The Fund's portfolio is primarily comprised of securities of two basic categories of companies: (1) "core" companies, which AIM considers to have experienced above-average and consistent long-term growth in earnings and to have excellent prospects for outstanding future growth, and (2) "earnings acceleration" companies which Fund management believes are currently enjoying a dramatic increase in profits. GROWTH AND INCOME FUND The Fund's primary investment objective is growth of capital, with a secondary objective of current income. The Fund seeks to meet these objectives by investing at least 65% of its total assets in securities of established companies that have long-term above-average growth in earnings and dividends, and growth companies that the portfolio managers believe have the potential for above-average growth in earnings and dividends. The Fund's portfolio managers consider whether to sell a particular security when they believe the security no longer has that potential. HIGH YIELD FUND The Fund's objective is to achieve a high level of current income. The Fund seeks to achieve its objective by investing principally in publicly traded non-investment grade debt securities. The Fund will also consider the possibility of capital growth when it purchases and sells securities. Debt securities of less than investment grade are considered "high risk" securities (commonly referred to as junk bonds). The Fund seeks high income principally by purchasing (i.e. at least 51% of the value of its total assets) securities that are rated Baa, Ba or B by Moody's or BBB, BB, or B by S&P, or securities of comparable quality in the opinion of the fund's portfolio managers, that are either unrated or rated by other NRSROs. (For a description of the various rating categories, see Appendix A to this Statement of Additional Information.) The Fund may also hold, from time to time, securities rated Caa by Moody's or CCC by S&P, or if unrated or rated by other NRSROs, securities of comparable quality as determined by AIM. It should be noted, however, that achieving the Fund's investment objective may be more dependent on the credit analysis of AIM, and less on that of credit rating agencies, than may be the case for funds that invest in more highly rated bonds. At least 80% of the value of the Fund's total assets will be invested in debt securities, including convertible debt securities, and/or cash and cash equivalents. At least 65% of the value of the Fund's assets will be invested in high yield debt securities. The Fund may also invest in preferred stocks. 17 61 While the securities held by the Fund are expected to provide greater income and, possibly, opportunity for greater gain than investments in more highly rated securities, they may be subject to greater risk of loss of income and principal and are more speculative in nature. The Fund's yield and the net asset value of its shares may be expected to fluctuate over time. Therefore, an investment in the Fund may not be appropriate for some investors and should not constitute a complete investment program for others. See "Risk Factors -- Non-Investment Grade Debt Securities." The Fund may invest in both illiquid securities and securities which are subject to restrictions on resale because they have not been registered under the Securities Act of 1933. See "Illiquid Securities" for further information regarding such investments. INTERNATIONAL EQUITY FUND The Fund's investment objective is to provide long-term growth of capital by investing in a diversified portfolio of international equity securities whose issuers are considered to have strong earnings momentum. Any income realized by the Fund will be incidental and will not be an important criterion in the selection of portfolio securities. In managing the Fund, AIM seeks to apply to a diversified portfolio of international equity securities substantially the same investment strategy which it applies to the Growth Fund with respect to that Fund's investment in United States equities markets. The Fund will utilize to the extent practicable a fully managed investment policy providing for the selection of securities which meet certain quantitative standards determined by AIM. AIM will review carefully the earnings history and prospects for growth of each company considered for investment by the Fund. It is expected that the Fund's portfolio, when fully invested, will generally be comprised of two basic categories of foreign companies: (1) "core" companies, which AIM considers to have experienced consistent long-term growth in earnings and to have strong prospects for outstanding future growth, and (2) companies that AIM believes are currently experiencing a greater than anticipated increase in earnings. If a particular foreign company meets the quantitative standards determined by AIM, its securities may be acquired by the Fund regardless of the location of the company or the percentage of the Fund's investments in the company's country or region. However, AIM will also consider other factors in making investment decisions for the Fund, including such factors as the prospects for relative economic growth among countries or regions, economic and political conditions, currency exchange fluctuations, tax considerations and the liquidity of a particular security. For a discussion of the investment risks associated with investments in foreign securities, see "Risk Factors" in this Statement of Additional Information. MONEY MARKET FUND The Fund's investment objective is to provide as high a level of current income as is consistent with the preservation of capital and liquidity. The Fund seeks to achieve its objective by investing in a diversified portfolio of high quality U.S. dollar denominated money market instruments and other similar instruments with maturities of 397 days or less from the date of purchase, and will maintain a dollar weighted-average portfolio maturity of 90 days or less. Securities subject to repurchase agreements may bear longer maturities. The Fund invests in a broad range of U.S. Government and foreign government obligations, and bank and commercial instruments that may be available in the money markets. Such obligations include U.S. Treasury obligations and repurchase agreements secured by such obligations. The Money Market Fund intends to invest in bankers' acceptances, certificates of deposit, repurchase agreements, time deposits, variable rate master demand notes, taxable municipal securities and commercial paper, and U.S. Government direct obligations and U.S. Government agencies' securities. Bankers acceptances, certificates of deposit and time deposits may be purchased from U.S. or foreign banks. All of these instruments, which are collectively referred to as "Money Market Obligations," are briefly described in Appendix C to this Statement of Additional Information. The Fund will limit investments in Money Market Obligations to those which are denominated in U.S. dollars and which at the date of purchase are "First Tier" securities as defined in Rule 2a-7 under the 1940 Act, as such Rule may be amended from time to time. Generally "First Tier" securities are securities that are 18 62 rated in the highest rating category by two NRSROs, or, if only rated by one NRSRO, are rated in the highest rating category by that NRSRO, or, if unrated, are determined by AIM (under the supervision of and pursuant to guidelines established by the Board of Directors) to be comparable quality to a rated security that meets the foregoing quality standards. For a more complete definition of a "First Tier" security, see "Money Market Obligations" in this Statement of Additional Information. The Money Market Fund may invest up to 100% of its total assets in obligations issued by banks. While the Fund will limit its investments in bank instruments to U.S. dollar denominated obligations, it may invest in Eurodollar obligations (i.e., U.S. dollar-denominated obligations issued by a foreign branch of a domestic bank), Yankee dollar obligations (i.e., U.S. dollar-denominated obligations issued by a domestic branch of a foreign bank) and obligations of foreign branches of foreign banks. The Money Market Fund will limit its aggregate investments in foreign bank obligations, including Eurodollar obligations and Yankee dollar obligations, to 25% of its total assets at the time of purchase, provided that there is no limitation upon the Fund's investments in (a) Eurodollar obligations, if the domestic parent of the foreign branch issuing the obligation is unconditionally liable in the event that the foreign branch for any reason fails to pay on the Eurodollar obligation; and (b) Yankee dollar obligations, if the U.S. branch of the foreign bank is subject to the same regulation as U.S. banks. Eurodollar, Yankee dollar and other foreign bank obligations include time deposits, which are non-negotiable deposits maintained in a bank for a specified period of time at a stated interest rate. For a discussion of the risks pertaining to investments in foreign securities, see "Risk Factors" in this Statement of Additional Information. TELECOMMUNICATIONS FUND The Fund's investment objective is long-term growth of capital. It seeks its objective by investing primarily in equity securities of companies throughout the world engaged in the development, manufacture or sale of telecommunications services or equipment. At least 65% of the Fund's total assets normally will be invested in common and preferred stocks and warrants to acquire such stocks issued by telecommunications companies. A "telecommunications company" is an entity in which (i) at least 50% of either its revenues or earnings was derived from telecommunications activities, or (ii) at least 50% of its assets was devoted to telecommunications activities, based on the issuer's most recent fiscal year. The remainder of the assets of the Fund may be invested in debt securities issued by telecommunications companies and/or equity and debt securities of companies outside of the telecommunications industry which, in the opinion of AIM, stand to benefit from developments in the telecommunications industries. (For a description of the various rating categories of corporate debt securities in which the Fund may invest, see Appendix A to this Statement of Additional Information). The Fund may, in pursuit of its objective, invest up to 5% of its total assets in below investment grade debt securities. See "Risk Factors -- Non-Investment Grade Debt Securities" for more information concerning the risk factors associated with investing in such securities. The Fund may invest substantially in securities denominated in one or more currencies. Under normal conditions, the Fund invests in the equity securities of issuers located in at least three different countries, including the United States. No more than 40% of the Fund's total assets will be invested in securities of issuers in any one country other than the United States. Telecommunications companies cover a variety of sectors, ranging from companies concentrating on established technologies to those primarily engaged in emerging or developing technologies. The characteristics of companies focusing on the same technology will vary among countries depending upon the extent to which the technology is established in the particular country. AIM will allocate the Fund's investments among these sectors depending upon its assessment of their relative long-term growth potentials. The Fund will invest primarily in issuers engaged in designing, developing or providing the following products and services: communications equipment and services (including equipment and services for both data and voice transmission); electronic components and equipment; broadcasting (including television and radio, satellite, microwave and cable television and narrowcasting); computer equipment, mobile communications and cellular radio/paging; electronic mail; local and wide area networking and linkage of word 19 63 and data processing systems; publishing and information systems; videotext and teletext; and emerging technologies combining telephone, television and/or computer systems. Telecommunications is a global industry with significant, growing markets outside of the United States. A sizeable proportion of the companies that comprise the telecommunications industry are headquartered outside of the United States. From time to time, however, a significant portion of the Fund's assets may be invested in the securities of domestic issuers. AIM uses its financial expertise in markets located throughout the world in attempting to identify those countries and telecommunications companies then providing the greatest potential for long-term capital appreciation. In this fashion, AIM and the Fund seek to enable shareholders to capitalize on the substantial investment opportunities and the potential for long-term growth of capital presented by the global telecommunications industry. AIM will allocate the Fund's assets among securities of countries and in currency denominations and industry sectors where opportunities for meeting the Fund's investment objective are expected to be the most attractive. AIM believes that there are opportunities for continued growth in demand for components, products, media and systems to collect, store, retrieve, transmit, process, distribute, record, reproduce and use information. The pervasive societal impact of communications and information technologies has been accelerated by the lower costs and higher efficiencies that result from the blending of computers with telecommunications systems. Accordingly, companies engage in the production of methods for using electronic and, potentially, video technology to communicate information are expected to be important in the Fund's portfolio. Older technologies, such as photography and print, also may be represented, however. VALUE FUND The Fund's investment objective is to achieve long-term growth of capital by investing primarily in equity securities judged by AIM to be undervalued relative to the current or projected earnings of the companies issuing the securities, or relative to current market values of assets owned by the companies issuing the securities or relative to the equity market generally. Income is a secondary objective. This secondary objective would be satisfied principally from the income (interest and dividends) generated by the common stocks, convertible bonds and convertible preferred stocks that make up the Fund's portfolio. The Fund should not be purchased by those who seek income as their primary investment objective. In addition to the securities described above, the Fund may also acquire preferred stocks and debt instruments having prospects for growth of capital. Although these different types of securities can be expected to generate amounts of income to satisfy the Fund's secondary objective, they will be purchased for their potential for growth of capital. The primary thrust of AIM's search for undervalued equity securities is in four categories: (1) out-of-favor cyclical growth companies; (2) established growth companies that are undervalued compared to historical relative valuation parameters; (3) companies where there is early but tangible evidence of improving prospects which are not yet reflected in the price of the company's equity securities; and (4) companies whose equity securities are selling at prices that do not reflect the current market value of its assets and where there is reason to expect realization of this potential in the form of increased equity values. 20 64 CERTAIN INVESTMENT STRATEGIES AND TECHNIQUES Each of the Funds has the flexibility to invest, to the extent described below, in a variety of instruments designed to enhance its investment capabilities. Each of the Funds may invest in money market obligations, foreign securities (including ADRs and EDRs), repurchase agreements, reverse repurchase agreements, taxable municipal securities, illiquid securities and Rule 144A securities; the Diversified Income Fund and the Government Fund may invest in U.S. Government Agency Mortgage-Backed Securities; each of the Funds may purchase or sell securities on a delayed delivery or when-issued basis and may borrow money; each of the Funds, other than the Money Market Fund, may lend portfolio securities and make short sales "against the box." A short sale is "against the box" to the extent that the Fund contemporaneously owns or has the right to obtain securities identical to those sold short without payment of any further consideration. Each of the Funds, other than the Money Market Fund, may write (i.e., sell) "covered" put and call options and buy put and call options on domestic and foreign securities, securities indices and currencies. Each of the Funds, other than the Money Market Fund, may use exchange-traded financial futures contracts, options thereon, and forward contracts as a hedge to protect against possible changes in market values. A brief description of these investment instruments and their risks appears below. See "Hedging and Other Investment Techniques" in this Statement of Additional Information for more detailed information. MONEY MARKET OBLIGATIONS When deemed appropriate for temporary or defensive purposes, each of the Funds may hold cash or cash equivalent Money Market Obligations. Of course, the Money Market Fund invests exclusively in Money Market Obligations. While none of the Funds other than the Money Market Fund is required by regulation or fundamental policy to limit such investments to those which, at the date of purchase, are "First Tier" securities as that term is defined in Rule 2a-7 under the 1940 Act, it is the current intention of AIM to limit such investments to those securities which, at the time of purchase, are considered "First Tier" securities or securities which AIM has determined to be of comparable credit quality. To the extent that a Fund invests to a significant degree in these instruments, its ability to achieve its investment objective may be adversely affected. In addition to the Money Market Obligations described above, as a temporary or defensive measure, and without regard to their respective investment objectives, AIM, or AIM/INVESCO for the Global Growth and Income Fund, may invest all or substantially all of the assets of the Aggressive Growth Fund, the Balanced Fund, the Dent Demographic Trends Fund, the Diversified Income Fund, the Global Growth and Income Fund, the Global Utilities Fund, the High Yield Fund, the International Fund and the Telecommunications Fund in cash or Money Market Obligations, including repurchase agreements, denominated in foreign currencies. As set forth in the Prospectus, the Money Market Fund will limit its purchases of Money Market Obligations to U.S. dollar denominated securities which are "First Tier" securities, as such term is defined from time to time in Rule 2a-7 under the 1940 Act. A First Tier Security is generally a security that: (i) has received a short-term rating, or is subject to a guarantee that has received a short-term rating, or, in either case, is issued by an issuer with a short-term rating from the Requisite NRSROs in the highest short-term rating category for debt obligations; (ii) is an unrated security that the Fund's investment adviser has determined are of comparable quality to a rated security described in (i); (iii) is a security issued by a registered investment company that is a money market fund; or (iv) is a Government Security. Subsequent to its purchase by the Fund, an issue of Money Market Obligations may cease to be a First Tier security. Subject to certain exceptions set forth in Rule 2a-7, such an event will not require the elimination of the security from the Fund, but AIM will consider such an event to be relevant in its determination of whether the Fund should continue to hold the security. 21 65 REPURCHASE AGREEMENTS Each of the Funds may enter into repurchase agreements with institutions believed by the Company's Board of Directors to present minimal credit risk. A repurchase agreement is an instrument under which the Fund acquires ownership of a debt security and the seller agrees, at the time of the sale, to repurchase the obligation at a mutually agreed upon time and price, thereby determining the yield during the Fund's holding period. With regard to repurchase transactions, in the event of a bankruptcy or other default of a seller of a repurchase agreement (such as the sellers' failure to repurchase the obligation in accordance with the terms of the agreement), a Fund could experience both delays in liquidating the underlying securities and losses, including: (a) a possible decline in the value of the underlying security during the period while the Fund seeks to enforce its rights thereto; (b) possible subnormal levels of income and lack of access to income during this period; and (c) expenses of enforcing its rights. Repurchase agreements are considered to be loans by the Fund under the 1940 Act. Repurchase agreements will be secured by U.S. Treasury securities, U.S. Government agency securities (including, but not limited to, those which have been stripped of their interest payments and mortgage-backed securities) and commercial paper. Although the underlying collateral for repurchase agreements may have maturities exceeding one year, the Funds will not enter into repurchase agreements expiring in more than seven days. The Fund may, however, enter into a "continuing contract" or "open" repurchase agreement under which the seller is under a continuing obligation to repurchase the underlying obligation from the Fund on demand and the effective interest rate is negotiated on a daily basis. Repurchase agreements are considered to be loans by the Fund under the 1940 Act. Securities subject to repurchase agreements will be held in the custodian's account with the Federal Book-Entry System on behalf of the Fund. U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES The Diversified Income Fund and the Government Fund may invest in U.S. Government Agency Mortgage-Backed Securities. These securities are obligations issued or guaranteed by the United States Government or by one of its agencies or instrumentalities, including but not limited to GNMA, FNMA, or FHLMC. U.S. Government Agency Mortgage-Backed Certificates provide for the pass-through to investors of their pro-rata share of monthly payments (including any principal prepayments) made by the individual borrowers on the pooled mortgage loans, net of any fees paid to the guarantor of such securities and servicers of the underlying mortgage loans. GNMA, FNMA and FHLMC each guarantee timely distributions of interest to certificate holders. GNMA and FNMA guarantee timely distributions of scheduled principal. FHLMC has in the past guaranteed only the ultimate collection of principal of the underlying mortgage loan; however, FHLMC Gold Participation Certificates now guarantee timely payment of monthly principal reductions. Although their close relationship with the U.S. Government is believed to make them high-quality securities with minimal credit risks, the U.S. Government is not obligated by law to support either FNMA or FHLMC. However, historically there have not been any defaults of FNMA or FHLMC issues. See Appendix B for a more complete description of GNMA securities. Mortgage-backed securities consist of interests in underlying mortgages generally with maturities of up to thirty years. However, due to early unscheduled payments of principal of the underlying mortgages, the securities have a shorter average life and, therefore, less volatility than a comparable thirty-year bond. The value of U.S. Government Agency Mortgage-Backed Securities, like other traditional debt instruments, will tend to move in the opposite direction compared to interest rates. 22 66 CONVERTIBLE SECURITIES To the extent consistent with their respective investment objectives, each of the Funds (except the Money Market Fund) may invest in convertible securities. Convertible securities usually consist of corporate debt securities or preferred stock that may in certain circumstances be converted into a predetermined number of shares of another form of that issuer's equity, usually common stock. Convertible securities consequently often involve attributes of both debt and equity instruments, and investment in such securities requires analysis of both credit and stock market risks. Convertible securities rank senior to common stock in a corporation's capital structure but are usually subordinated to comparable nonconvertible securities. Convertible securities may be subject to redemption at the option of the issuer at a price established in the convertible security's governing instrument. Although the Funds will only purchase convertible securities that AIM considers to have adequate protection parameters, including an adequate capacity to pay interest and repay principal in a timely manner, each applicable Fund invests in such securities without regard to corporate bond ratings. REAL ESTATE INVESTMENT TRUSTS ("REITs") To the extent consistent with their respective investment objectives and policies, each of the Funds (except the Government Fund and the Money Market Fund) may invest in equity and/or debt securities issued by REITs. Such investments will not exceed (i) 25% of the total assets of the Aggressive Growth Fund, the Balanced Fund, the Blue Chip Fund, the Capital Appreciation Fund, the Capital Development Fund, the Dent Demographic Trends Fund, the Global Growth and Income Fund, the Global Utilities Fund, the Growth Fund, the Growth and Income Fund, the International Fund, the Telecommunications Fund and the Value Fund; and (ii) 10% of the total assets of the Diversified Income Fund and the High Yield Fund. REITs are trusts which sell equity or debt securities to investors and use the proceeds to invest in real estate or interest therein. A REIT may focus on particular projects, such as apartment complexes, or geographic regions, such as the Southeastern United States, or both. To the extent that the Fund has the ability to invest in REITs, the Fund could conceivably own real estate directly as a result of a default on the securities it owns. The Fund, therefore, may be subject to certain risks associated with the direct ownership of real estate including difficulties in valuing and trading real estate, declines in the value of real estate, risks related to general and local economic conditions, adverse changes in the climate for real estate, increases in property taxes and operating expenses, changes in zoning laws, casualty or condemnation losses, limitations on rents, changes in neighborhood values, the appeal of properties to tenants, and increases in interest rates. In addition to the risks described above, equity REITs may be affected by any changes in the value of the underlying property owned by the trusts, while mortgage REITs may be affected by the quality of any credit extended. Equity and mortgage REITs are dependent upon management skill, are not diversified, and are therefore subject to the risk of financing single or a limited number of projects. Such trusts are also subject to heavy cash flow dependency, defaults by borrowers, self-liquidation, and the possibility of failing to maintain exemption from the 1940 Act. Changes in interest rates may also affect the value of debt securities held by a Fund. By investing in REITs indirectly through a Fund, a shareholder will bear not only his/her proportionate share of the expenses of the Fund, but also, indirectly, similar expenses of the REITs. FOREIGN SECURITIES To the extent consistent with their respective investment objectives, each of the Funds may invest in foreign securities. It is not anticipated that such foreign securities will constitute more than: (i) 20% of the value of the total assets of the Balanced Fund, the Capital Appreciation Fund, the Government Fund, the Growth Fund and the Growth and Income Fund; (ii) 25% of the value of the total assets of the Aggressive Growth Fund, the Blue Chip Fund, the Capital Development Fund, the Dent Demographic Trends Fund, the High Yield Fund and the Value Fund; (iii) 50% of the value of the total assets of the Diversified Income Fund and the Money Market Fund (however, the Money Market Fund may only invest in foreign securities denominated in U.S. dollars); (iv) 75% of the value of the total assets of the Telecommunications Fund; (v) 80% of the value of the total assets of the Global Utilities Fund; and (vi) 90% of the value of the total assets 23 67 of the Global Growth and Income Fund. The International Fund will invest at least 70% of its total assets in foreign securities. The Diversified Income Fund may invest in debt obligations which may be denominated in the U.S. dollar or in other currencies issued or guaranteed by foreign corporations, certain supranational entities (such as the World Bank, Asian Development Bank and European Economic Community), and foreign governments (including political subdivisions having taxing authority) or their agencies or instrumentalities. The Diversified Income Fund may also invest in debt obligations issued by corporations denominated in non-U.S. dollar currencies. No more than 25% of the Diversified Income Fund's total assets, at the time of purchase, will be invested in government securities of any one foreign country. At the present time, AIM does not intend to invest more than 10% of the Diversified Income Fund's total assets in securities issued by foreign governments or foreign companies located in developing countries in various regions of the world. A "developing country" is a country in the initial stages of its industrial cycle. Investments in emerging markets or developing countries involve exposure to economic structures that are generally less diverse and mature and to political systems which can be expected to have less stability than those of more developed countries. Such countries may have relatively unstable governments, economies based on only a few industries, and securities markets which trade only a small number of securities. Historical experience indicates that emerging markets have been more volatile than the markets of more mature economies; such markets have also from time to time provided higher rates of return and greater risks to investors. AIM believes that these characteristics of emerging markets can be expected to continue in the future. The Global Growth and Income Fund may invest up to 90% of its total assets in securities of foreign companies. Under normal market conditions, the Global Growth and Income Fund will be invested in securities of issuers located in at least three different countries. Investments in securities of issuers in any one country other than the United States, will represent no more than 40% of the Fund's total assets. The Fund may purchase securities of an issuer located in one country but denominated in the currency of another country (or a multinational currency unit). The Global Utilities Fund may invest up to 80% of its total assets in securities of foreign companies, including investments in ADRs, EDRs and other securities representing underlying securities of foreign issuers. Under normal market conditions, the Global Utilities Fund will be invested in securities of issuers located in at least four countries, one of which will be the United States, although for defensive purposes, it may invest 100% of its total assets in securities of U.S. issuers. In some foreign countries, utility companies are partially owned by government agencies. In some cases, foreign government agencies may have significant investments in businesses other than utility companies. Also, investments in securities of foreign issuers may involve other risks which are not ordinarily associated with investments in domestic issuers. In addition, investors should also be aware that the Global Utilities Fund may invest in companies located within emerging or developing countries. Under normal market conditions the International Fund will invest at least 70% of its total assets in marketable equity securities (including common and preferred stock and depositary receipts for stock) and may invest up to 20% of its total assets in securities exchangeable for or convertible into stock of foreign companies. Under normal market conditions, the International Fund intends to invest in the securities of foreign companies located in at least four countries outside the United States. The International Fund will emphasize investment in foreign companies in the developed countries of Western Europe and the Pacific Basin, but the Fund may also invest to a lesser extent in the securities of companies located in developing countries in various regions of the world. At the present time, AIM does not intend to invest more than 20% of the International Fund's total assets in securities issued by foreign governments or foreign companies located in developing countries. For a discussion of the risks pertaining to investments in foreign obligations, see "Risk Factors" in this Statement of Additional Information. 24 68 FOREIGN EXCHANGE TRANSACTIONS Purchases and sales of foreign securities are usually made with foreign currencies, and consequently the Funds (except the Money Market Fund) may from time to time hold cash balances in the form of foreign currencies and multinational currency units. Such foreign currencies and multinational currency units will usually be acquired on a spot (i.e. cash) basis at the spot rate prevailing in foreign exchange markets and will result in currency conversion costs to the Fund. A Fund attempts to purchase and sell foreign currencies on as favorable a basis as practicable; however, some price spread on foreign exchange transactions (to cover service charges) may be incurred, particularly when the Fund changes investments from one country to another, or when U.S. Dollars are used to purchase foreign securities. Certain countries could adopt policies which would prevent the Fund from transferring cash out of such countries, and the Fund may be affected either favorably or unfavorably by fluctuations in relative exchange rates while the Fund holds foreign currencies. ADRs AND EDRs To the extent consistent with their respective investment objectives each of the Funds (except the International Fund which is discussed separately above) may also invest in securities which are in the form of ADRs, EDRs or other securities representing underlying securities of foreign issuers. ADRs are receipts typically issued by a United States bank or trust company which evidence ownership of underlying securities issued by a foreign corporation. EDRs are receipts issued in Europe which evidence a similar ownership arrangement. ADRs, EDRs and other securities representing underlying securities of foreign issuers are treated as foreign securities for purposes of determining the applicable limitation on investment in foreign securities. LENDING OF PORTFOLIO SECURITIES Each Fund (except the Money Market Fund) may, from time to time, lend securities from their respective portfolios, with a value not exceeding 33 1/3% of their respective total assets, to banks, brokers and other financial institutions, and receive in return collateral in the form of liquid assets which will be maintained at all times in an amount equal to at least 100% of the current market value of the loaned securities. The collateral received will consist of cash, U.S. Government securities, letters of credit or such other collateral as may be permitted under each such Fund's investment program. While the securities are being lent, a Fund will continue to receive the equivalent of the interest or dividends paid by the issuer on the securities, as well as interest on the investment of the collateral or a fee from the borrower. A Fund has a right to call each loan and obtain the securities on five business days' notice or, in connection with securities trading on foreign markets, within such longer period of time which coincides with the normal settlement period for purchases and sales of such securities in such foreign markets. A Fund will not have the right to vote securities while they are being lent, but it will call a loan in anticipation of any important vote. During the period of the loan, the applicable Fund receives the income on both the loaned securities and the collateral (or a fee) and thereby increases its yield. In the event that the borrower defaults on its obligation to return loaned securities because of insolvency or otherwise, the Fund could experience delays and costs in gaining access to the collateral and could suffer a loss to the extent that the value of the collateral falls below the market value of the loaned securities. Loans will only be made to persons deemed by AIM to be of good standing and will not be made unless, in the judgment of AIM, the consideration to be earned from such loans would justify the risk. 25 69 REVERSE REPURCHASE AGREEMENTS Reverse repurchase agreements involve the sale by the Fund of portfolio securities, with an agreement that the Fund will repurchase the securities at an agreed upon price, date and interest payment. Each Fund may employ reverse repurchase agreements (i) for temporary emergency purposes, such as to meet unanticipated net redemptions so as to avoid liquidating other portfolio securities during unfavorable market conditions; (ii) to cover short-term cash requirements resulting from the timing of trade settlements; (iii) to take advantage of market situations where the interest income to be earned from the investment of the proceeds of the transaction is greater than the interest expense of the transaction. At the time it enters into a reverse repurchase agreement, a Fund will segregate liquid assets having a dollar value equal to the repurchase price. Each of the Funds may enter into reverse repurchase agreements in amounts not exceeding 33 1/3% of the value of their respective total assets. Reverse repurchase agreements involve the risk that the market value of securities retained by a Fund in lieu of liquidating may decline below the repurchase price of the securities sold by the Fund which is obligated to repurchase. This risk, if encountered, could cause a reduction in the net asset value of the Fund's shares. Reverse repurchase agreements are considered to be borrowings under the 1940 Act. See "Borrowing" in this Statement of Additional Information for percentage limitations on borrowings. DELAYED DELIVERY AGREEMENTS AND WHEN-ISSUED SECURITIES Each Fund may enter into delayed delivery agreements and may purchase securities on a "when-issued" basis. Delayed delivery agreements involve commitments by each such Fund to dealers or issuers to acquire securities or instruments at a specified future date beyond the customary settlement date for such securities. These commitments fix the payment price and interest rate to be received on the investment. Delayed delivery agreements will not be used as a speculative or leverage technique. Rather, from time to time, AIM can anticipate that cash for investment purposes will result from scheduled maturities of existing portfolio instruments or from net sales of shares of the Fund and may enter into delayed delivery agreements to assure that the Fund will be as fully invested as possible in instruments meeting its investment objective. Until the settlement date, the Fund will segregate cash or other liquid assets of a dollar value sufficient at all times to make payment for the delayed delivery securities. The delayed delivery securities, which will not begin to accrue interest until the settlement date, will be recorded as an asset of the Fund and will be subject to the risks of market fluctuation. The purchase price of the delayed delivery securities is a liability of the Fund until settlement. If cash is not available to the Fund at the time of settlement, the Fund may be required to dispose of portfolio securities that it would otherwise hold to maturity in order to meet its obligation to accept delivery under a delayed delivery agreement. The Board of Directors has determined that entering into delayed delivery agreements does not present a materially increased risk of loss to shareholders, but the Board of Directors may restrict the use of delayed delivery agreements if the risk of loss is determined to be material or if it affects the constant net asset value of the Money Market Fund. Many new issues of debt securities are offered on a "when-issued" basis, that is, the date for delivery of and payment for the securities is not fixed at the date of purchase, but is set after the securities are issued (normally within forty-five days after the date of the transaction). The payment obligation and the interest rate that will be received on the securities are fixed at the time the buyer enters into the commitment. The Funds will only make commitments to purchase such debt securities with the intention of actually acquiring such securities, but the Funds may each sell these securities before the settlement date if it is deemed advisable. The Fund holds, and maintains until the settlement date segregated liquid assets of a dollar value sufficient at all times to make payment for the when-issued securities. The securities will be marked-to-market and additional assets will be segregated if necessary to maintain adequate coverage of the when-issued commitments. Securities purchased on a when-issued basis and the securities held in the Funds' portfolios are subject to changes in market value based upon the public's perception of the creditworthiness of the issuer and changes in the level of interest rates (which will generally result in all of those securities changing in value in the same way, i.e., all those securities experiencing appreciation when interest rates rise). Therefore, if, in order to achieve higher interest income, a Fund is to remain substantially fully invested at the same time that it has purchased securities on a when-issued basis, there will be a possibility that the market value of the 26 70 Fund's assets will fluctuate to a greater degree. Furthermore, when the time comes for the Fund to meet its obligations under when-issued commitments, the Fund will do so by using then-available cash flow, by sale of the segregated securities, by the sale of other securities or, although it would not normally expect to do so, by directing the sale of the when-issued securities themselves (which may have a market value greater or less than the applicable Fund's payment obligation). A sale of securities to meet such obligations carries with it a greater potential for the realization of net short-term capital gains, which are not exempt from federal income taxes. The value of when-issued securities on the settlement date may be more or less than the purchase price. If a Fund enters into a delayed delivery agreement or purchases a when-issued security, the Fund will direct its custodian bank to segregate liquid assets in an amount equal to its delayed delivery agreements or when-issued commitments. If the market value of such securities declines, additional cash or securities will be segregated on a daily basis so that the market value of the account will equal the amount of such Fund's delayed delivery agreements and when-issued commitments. To the extent that funds are segregated, they will not be available for new investment or to meet redemptions. Investment in securities on a when-issued basis and use of delayed delivery agreements may increase the Fund's exposure to market fluctuation, or may increase the possibility that the Fund will incur a short-term loss, if the Fund must engage in portfolio transactions in order to honor a when-issued commitment or accept delivery of a security under a delayed delivery agreement. The Fund may employ techniques designed to minimize these risks. No additional delayed delivery agreements or when-issued commitments will be made by a Fund if, as a result, more than 25% of the Fund's net assets would become so committed. The Government Fund may engage in buy/sell back transactions (a form of delayed delivery agreement). In a buy/sell back transaction, the Fund enters a trade to sell securities at one price and simultaneously enters a trade to buy the same securities at another price for settlement at a future date. DOLLAR ROLL TRANSACTIONS In order to enhance portfolio returns and manage prepayment risk, the Diversified Income Fund and the Government Fund may engage in dollar roll transactions with respect to mortgage securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage security held in the portfolio to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with different prepayments histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on the securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the sold security. Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities under a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. See "Borrowing," below for the applicable limitation on dollar roll transactions. BORROWING Each of the Funds may borrow money to a limited extent from banks (including the Funds' custodian bank) for temporary or emergency purposes subject to the limitations under the 1940 Act. Each Fund will restrict borrowings, reverse repurchase agreements and dollar roll transactions to an aggregate of 33 1/3% of the Fund's total assets at the time of the transaction. No Fund will purchase additional securities when any borrowings from banks exceed 5% of the Fund's total assets. 27 71 ILLIQUID SECURITIES None of the Funds will invest more than 15% of their respective net assets in illiquid securities, including restricted securities which are illiquid. The Money Market Fund will not invest more than 10% of its net assets in illiquid securities. SPECIAL SITUATIONS Although the Capital Appreciation Fund does not currently intend to do so, it may invest in "special situations." A special situation arises when, in the opinion of the Fund's management, the securities of a particular company will, within a reasonably estimable period of time, be accorded market recognition at an appreciated value solely by reason of a development applicable to that company, and regardless of general business conditions or movements of the market as a whole. Developments creating special situations might include, among others: liquidations, reorganizations, recapitalizations, mergers, material litigation, technical breakthroughs and new management or management policies. Although large and well known companies may be involved, special situations more often involve comparatively small or unseasoned companies. Investments in unseasoned companies and special situations often involve much greater risk than is inherent in ordinary investment securities. WARRANTS The Aggressive Growth Fund, the Blue Chip Fund, the Capital Development Fund, the Dent Demographic Trends Fund, the Global Growth and Income Fund, the Growth and Income Fund, the High Yield Fund and the Telecommunications Fund may, from time to time, invest in warrants. Warrants are, in effect, longer-term call options. They give the holder the right to purchase a given number of shares of a particular company at specified prices within certain periods of time. The purchaser of a warrant expects that the market price of the security will exceed the purchase price of the warrant plus the exercise price of the warrant, thus giving him a profit. Of course, since the market price may never exceed the exercise price before the expiration date of the warrant, the purchaser of the warrant risks the loss of the entire purchase price of the warrant. Warrants generally trade in the open market and may be sold rather than exercised. Warrants are sometimes sold in unit form with other securities of an issuer. Units of warrants and common stock may be employed in financing young, unseasoned companies. The purchase price of a warrant varies with the exercise price of a warrant, the current market value of the underlying security, the life of the warrant and various other investment factors. SHORT SALES Each of the Funds (except the Money Market Fund) may enter into short sales transactions from time to time. None of these Funds will make short sales of securities nor maintain a short position unless at all times when a short position is open, the Fund owns an equal amount of such securities or securities convertible into or exchangeable, without payment of any further consideration, for securities of the same issue as, and equal in amount to, the securities sold short. This is a technique known as selling short "against the box." Such short sales will be used by each of the Funds for the purpose of deferring recognition of gain or loss for federal income tax purposes. In no event may more than 10% of the value of any such Fund's total assets be deposited or pledged as collateral for such sales at any time. RULE 144A SECURITIES Each of the Funds may invest in securities that are subject to restrictions on resale because they have not been registered under the Securities Act of 1933 (the "1933 Act"). These securities are sometimes referred to as private placements. Although securities which may be resold only to "qualified institutional buyers" in accordance with the provisions of Rule 144A under the 1933 Act are technically considered "restricted securities," the Funds may each purchase Rule 144A securities without regard to the limitation on investments in illiquid securities described above under "Illiquid Securities," provided that a determination is made that such securities have a readily available trading market. AIM will determine the liquidity of Rule 144A securities under the supervision of the Company's Board of Directors. Determination of whether a Rule 144A security is liquid or not is a question of fact. In making this determination AIM will consider the trading 28 72 markets for the specific security taking into account the unregistered nature of a Rule 144A security. In addition, AIM could consider the (i) frequency of trades and quotes, (ii) number of dealers and potential purchasers, (iii) dealer undertakings to make a market, and (iv) nature of the security and of market place trades (for example, the time needed to dispose of the security, the method of soliciting offers and the mechanics of transfer). The liquidity of Rule 144A securities will be monitored by AIM and, if as a result of changed conditions, it is determined that a Rule 144A security is no longer liquid, the Fund's holdings of illiquid securities will be reviewed to determine what, if any, action is required to assure that the Fund does not exceed its applicable percentage limitation for investments in illiquid securities. EQUITY-LINKED DERIVATIVES Aggressive Growth Fund, Balanced Fund, Blue Chip Fund, Capital Appreciation Fund, Capital Development Fund, Dent Demographic Trends Fund, Global Growth and Income Fund, Global Utilities Fund, Growth and Income Fund, Growth Fund, International Equity Fund, Telecommunications Fund and Value Fund may invest in equity-linked derivative products designed to replicate the composition and performance of particular indices. Examples of such products include S&P Depositary Receipts ("SPDRs"), World Equity Benchmark Series ("WEBs"), NASDAQ 100 tracking shares ("QQQs"), Dow Jones Industrial Average Instruments ("DIAMONDS") and Optomised Portfolios as Listed Securities ("OPALS"). Investments in equity-linked derivatives involve the same risks associated with a direct investment in the types of securities included in the indices such products are designed to track. There can be no assurance that the trading price of the equity-linked derivatives will equal the underlying value of the basket of securities purchased to replicate a particular index or that such basket will replicate the index. Investments in equity-linked derivatives may constitute investment in other investment companies. See "Investment in Other Investment Companies." INVESTMENT IN OTHER INVESTMENT COMPANIES Each of the Funds may invest in other investment companies to the extent permitted by the 1940 Act, and rules and regulations thereunder, and if applicable, exemptive orders granted by the SEC. The following restrictions apply to investments in other investment companies other than Affiliated Money Market Funds (defined below): (i) a Fund may not purchase more than 3% of the total outstanding voting stock of another investment company; (ii) a Fund may not invest more than 5% of its total assets in securities issued by another investment company; and (iii) a Fund may not invest more than 10% of its total assets in securities issued by other investment companies other than Affiliated Money Market Funds. With respect to a Fund's purchase of shares of another investment company, including Affiliated Money Market Funds, the Fund will indirectly bear its proportionate share of the advisory fees and other operating expenses of such investment company. The Funds have obtained an exemptive order from the SEC allowing them to invest in money market funds that have AIM or an affiliate of AIM as an investment advisor (the "Affiliated Money Market Funds"), provided that investments in Affiliated Money Market Funds do not exceed 25% of the total assets of such Fund. With respect to a Fund's purchase of shares of the Affiliated Money Market Funds, the Fund will indirectly pay the advisory fees and other operating expenses of the Affiliated Money Market Funds. TEMPORARY DEFENSIVE INVESTMENTS In anticipation of or in response to adverse market conditions, for cash management purposes, or for defensive purposes, each of the Funds (except Money Market Fund) may temporarily hold all or a portion of its assets in cash, money market instruments, bonds, or other debt securities. The Funds may also invest up to 25% of their respective total assets in Affiliated Money Market Funds for these purposes. For a description of the various rating categories of corporate bonds and commercial paper in which the Funds may invest, see the Appendix to this Statement of Additional Information. In anticipation of or in response to adverse market conditions, for cash management purposes, or for defensive purposes, Money Market Fund may temporarily hold all or a portion of its assets in cash, and may invest up to 25% of its total assets in Affiliated Money Market Funds. 29 73 ASSET ALLOCATION AMONG COUNTRIES The Global Growth and Income Fund currently contemplates that it will invest principally in securities of issuers in the United States, Canada, Japan, the Western European nations, New Zealand and Australia, and it may invest in securities denominated in more than one currency. UTILITIES INDUSTRY The following is a general description of the particular types of utilities industries in which the Global Utilities Fund may invest. Electric Utility Industry. Electric utilities are heavily regulated. Local rates are subject to the review of state commissions, and sales either between companies or that cross state lines are subject to review by the Federal Energy Regulatory Commission. The industry is also subject to regulation by the SEC under the Public Utility Holding Company Act of 1935. In addition, companies constructing or operating nuclear powered generating stations are subject to extensive regulation by the Nuclear Regulatory Commission. Electric utility companies are also subject to extensive local regulation in environmental and site location matters. Future legislation with regard to the issues of acid rain and toxic and radioactive wastes could have a significant impact on the manner in which utility companies conduct their business, and the costs that they incur. Since the late 1970s, investor-owned utilities have experienced a number of unfavorable regulatory trends, including increased regulatory resistance to price increases and new legislation encouraging competition. Electric utilities have recently become subject to competition in varying degrees. This competition can have the effect of decreasing revenues and profit margins. Natural Gas Industry. The natural gas industry is comprised primarily of many small distribution companies and a few large interstate pipeline companies. The Public Utility Holding Company Act of 1935 has generally acted as a bar to the consolidation of pipeline and distribution companies. Regulation of these companies is similar to that of electric companies. The performance of natural gas utilities may also be substantially affected by fluctuations in energy prices. Competition in the natural gas industry has resulted in the consolidation of the industry. Communications Industry. Most of the communications industry capacity is concentrated in the hands of a few very large publicly-held companies, unlike the situation in the electric and gas industries. Significant risks for the investor to overcome still exist, however, including risk relating to pricing at marginal versus embedded cost. New entrants may have lower costs of material due to newer technologies or lower standards of reliability than those heretofore imposed by American Telephone & Telegraph ("AT&T") on the industry. Accordingly, the marginal cost of incremental service is much lower than the costs embedded in an existing network. Communications companies are not subject to the Public Utility Holding Company Act of 1935. Interstate communications service may be subject to Federal Communications Commission regulation. Local service may be regulated by the states. In addition, AT&T and its former subsidiaries are still subject to judicial review pursuant to the settlement of the antitrust case brought against them by the Department of Justice. Water Utility Industry. The water utility industry is composed of regulated public utilities that are involved in the distribution of drinking water to densely populated areas. The industry is geographically diverse and subject to the same rate base and rate of return regulations as are other public utilities. Demand for water is most heavily influenced by the local weather, population growth in the service area and new construction. Supplies of clean, drinkable water are limited and are primarily a function of the amount of past rainfall. Other. In addition to the particular types of utilities industries described above, the Fund may invest in developing utility technology companies (such as cellular telephone, fiber optics and satellite communications firms) and in holding companies which derive a substantial portion of their revenues from utility-related activities. 30 74 OPTIONS, FUTURES AND CURRENCY STRATEGIES INTRODUCTION Each of the Funds (except the Money Market Fund) may use forward contracts, futures contracts, options on securities, options on indices, options on currencies, and options on futures contracts to attempt to hedge against the overall level of investment and currency risk normally associated with each Fund's investments. These instruments are often referred to as "derivatives," which may be defined as financial instruments whose performance is derived, at least in part, from the performance of another asset (such as a security, currency or an index of securities). GENERAL RISKS OF OPTIONS, FUTURES AND CURRENCY STRATEGIES The use by the Funds of options, futures contracts and forward currency contracts involves special considerations and risks, as described below. Risks pertaining to particular strategies are described in the sections that follow. (1) Successful use of hedging transactions depends upon AIM's ability to correctly predict the direction of changes in the value of the applicable markets and securities, contracts and/or currencies. While AIM is experienced in the use of these instruments, there can be no assurance that any particular hedging strategy will succeed. (2) There might be imperfect correlation, or even no correlation, between the price movements of an instrument (such as an option contract) and the price movements of the investments being hedged. For example, if a "protective put" is used to hedge a potential decline in a security and the security does decline in price, the put option's increased value may not completely offset the loss in the underlying security. Such a lack of correlation might occur due to factors unrelated to the value of the investments being hedged, such as changing interest rates, market liquidity, and speculative or other pressures on the markets in which the hedging instrument is traded. (3) Hedging strategies, if successful, can reduce risk of loss by wholly or partially offsetting the negative effect of unfavorable price movements in the investments being hedged. However, hedging strategies can also reduce opportunity for gain by offsetting the positive effect of favorable price movements in the hedged investments. (4) There is no assurance that a liquid secondary market will exist for any particular option, futures contract, forward contract or option thereon at any particular time. (5) As described below, a Fund might be required to maintain assets as "cover," maintain segregated accounts or make margin payments when it takes positions in instruments involving obligations to third parties. If a Fund were unable to close out its positions in such instruments, it might be required to continue to maintain such assets or accounts or make such payments until the position expired or matured. The requirements might impair the Fund's ability to sell a portfolio security or make an investment at a time when it would otherwise be favorable to do so, or require that the Fund sell a portfolio security at a disadvantageous time. (6) There is no assurance that a Fund will use hedging transactions. For example, if a Fund determines that the cost of hedging will exceed the potential benefit to the Fund, the Fund will not enter into such transaction. COVER Transactions using forward contracts, futures contracts and options (other than options purchased by a Fund) expose a Fund to an obligation to another party. A Fund will not enter into any such transactions unless it owns either (1) an offsetting ("covered") position in securities, currencies, or other options, forward contracts or futures contracts or (2) cash, liquid assets and/or short-term debt securities with a value sufficient 31 75 at all times to cover its potential obligations not covered as provided in (1) above. Each Fund will comply with SEC guidelines regarding cover for these instruments and, if the guidelines so require, set aside cash or liquid securities. To the extent that a futures contract, forward contract or option is deemed to be illiquid, the assets used to "cover" the Fund's obligation will also be treated as illiquid for purposes of determining the Fund's maximum allowable investment in illiquid securities. Even though options purchased by the Funds do not expose the Funds to an obligation to another party, but rather provide the Funds with a right to exercise, the Funds intend to "cover" the cost of any such exercise. To the extent that a purchased option is deemed illiquid, the Fund will treat the market value of the option (i.e., the amount at risk to the Fund) as illiquid, but will not treat the assets used as cover on such transactions as illiquid. Assets used as cover cannot be sold while the position in the corresponding forward contract, futures contract or option is open, unless they are replaced with other appropriate assets. If a large portion of a Fund's assets is used for cover or otherwise set aside, it could affect portfolio management or the Fund's ability to meet redemption requests or other current obligations. WRITING CALL OPTIONS Each of the Funds may write (sell) covered call options on securities, futures contracts, forward contracts, indices and currencies. As the writer of a call option, a Fund would have the obligation to deliver the underlying security, cash or currency (depending on the type of derivative) to the holder (buyer) at a specified price (the exercise price) at any time until (American style) or on (European style) a certain date (the expiration date). So long as the obligation of a Fund continues, it may be assigned an exercise notice, requiring it to deliver the underlying security, cash or currency against payment of the exercise price. This obligation terminates upon the expiration of the call option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option identical to that previously sold. When writing a call option a Fund, in return for the premium, gives up the opportunity for profit from a price increase in the underlying security, contract or currency above the exercise price, and retains the risk of loss should the price of the security, contract or currency decline. Unlike one who owns securities, contracts or currencies not subject to an option, a Fund has no control over when it may be required to sell the underlying securities, contracts or currencies, since most options may be exercised at any time prior to the option's expiration. If a call option that a Fund has written expires, it will realize a gain in the amount of the premium; however, such gain may be offset by a decline in the market value of the underlying security, contract or currency during the option period. If the call option is exercised, a Fund will realize a gain or loss from the sale of the underlying security, contract or currency, which will be increased or offset by the premium received. Writing call options can serve as a limited hedge because declines in the value of the hedged investment would be offset to the extent of the premium received for writing the option. Closing transactions may be effected in order to realize a profit on an outstanding call option, to prevent an underlying security, contract or currency from being called or to permit the sale of the underlying security, contract or currency. Furthermore, effecting a closing transaction will permit the Fund to write another call option on the underlying security, contract or currency with either a different exercise price or expiration date, or both. WRITING PUT OPTIONS Each of the Funds may write (sell) covered put options on securities, futures contracts, forward contracts, indices and currencies. As the writer of a put option, a Fund would have the obligation to buy the underlying security, contract or currency (depending on the type of derivative) at the exercise price at any time until (American style) or on (European style) the expiration date. This obligation terminates upon the expiration of the put option, or such earlier time at which a Fund effects a closing purchase transaction by purchasing an option identical to that previously sold. 32 76 A Fund would write a put option at an exercise price that, reduced by the premium received on the option, reflects the lower price it is willing to pay for the underlying security, contract or currency. The risk in such a transaction would be that the market price of the underlying security, contract or currency would decline below the exercise price less the premium received. PURCHASING PUT OPTIONS Each of the Funds may purchase covered put options on securities, futures contracts, forward contracts, indices and currencies. As the holder of a put option, a Fund would have the right to sell the underlying security, contract or currency at the exercise price at any time until (American style) or on (European style) the expiration date. A Fund may enter into closing sale transactions with respect to such options, exercise such option or permit such option to expire. A Fund may purchase a put option on an underlying security, contract or currency ("protective put") owned by the Fund in order to protect against an anticipated decline in the value of the security, contract or currency. Such hedge protection is provided only during the life of the put option. The premium paid for the put option and any transaction costs would reduce any profit realized when the security, contract or currency is delivered upon exercise of said option. Conversely, if the underlying security, contract or currency does not decline in value, the option may expire worthless and the premium paid for the protective put would be lost. A Fund may also purchase put options on underlying securities, contracts or currencies against which it has written other put options. For example, where a Fund has written a put option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a put option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written put. Used in combinations, these strategies are commonly referred to as "put spreads." Likewise, a Fund may write call options on underlying securities, contracts or currencies against which it has purchased protective put options. This strategy is commonly referred to as a "collar." PURCHASING CALL OPTIONS Each of the Funds may purchase covered call options on securities, futures contracts, forward contracts, indices and currencies. As the holder of a call option, a Fund would have the right to purchase the underlying security, contract or currency at the exercise price at any time until (American style) or on (European style) the expiration date. A Fund may enter into closing sale transactions with respect to such options, exercise such options or permit such options to expire. Call options may be purchased by a Fund for the purpose of acquiring the underlying security, contract or currency for its portfolio. Utilized in this fashion, the purchase of call options would enable a Fund to acquire the security, contract or currency at the exercise price of the call option plus the premium paid. So long as it holds such a call option, rather than the underlying security or currency itself, the Fund is partially protected from any unexpected decline in the market price of the underlying security, contract or currency and, in such event, could allow the call option to expire, incurring a loss only to the extent of the premium paid for the option. Each of the Funds may also purchase call options on underlying securities, contracts or currencies against which it has written other call options. For example, where a Fund has written a call option on an underlying security, rather than entering a closing transaction of the written option, it may purchase a call option with a different exercise price and/or expiration date that would eliminate some or all of the risk associated with the written call. Used in combinations, these strategies are commonly referred to as "call spreads." OVER-THE-COUNTER OPTIONS Options may be either listed on an exchange or traded in over-the-counter ("OTC") markets. Listed options are third-party contracts (i.e., performance of the obligations of the purchaser and seller is guaranteed by the exchange or clearing corporation) and have standardized strike prices and expiration dates. OTC options are two-party contracts with negotiated strike prices and expiration dates. A Fund will not purchase 33 77 an OTC option unless it believes that daily valuations for such options are readily obtainable. OTC options differ from exchange-traded options in that OTC options are transacted with dealers directly and not through a clearing corporation (which guarantees performance). Consequently, there is a risk of non-performance by the dealer. Since no exchange is involved, OTC options are valued on the basis of an average of the last bid prices obtained from dealers, unless a quotation from only one dealer is available, in which case only that dealer's price will be used. In the case of OTC options, there can be no assurance that a liquid secondary market will exist for any particular option at any specific time. Although a Fund will enter into OTC options only with dealers that are expected to be capable of entering into closing transactions with it, there is no assurance that the Fund will in fact be able to close out an OTC option position at a favorable price prior to expiration. In the event of insolvency of the dealer, a Fund might be unable to close out an OTC option position at any time prior to its expiration. The staff of the SEC considers purchased OTC options (i.e., the market value of the option) to be illiquid securities. A Fund may also sell OTC options and, in connection therewith, segregate assets or cover its obligations with respect to OTC options written by it. The assets used as cover for OTC options written by the Fund will be considered illiquid unless the OTC options are sold to qualified dealers who agree that the Fund may repurchase any OTC option it writes at a maximum price to be calculated by a formula set forth in the option agreement. The cover for an OTC option written subject to this procedure would be considered illiquid only to the extent that the maximum repurchase price under the formula exceeds the intrinsic value of the option. INDEX OPTIONS Puts and calls on indices are similar to puts and calls on securities or futures contracts except that all settlements are in cash and gain or loss depends on changes in the index in question (and thus on price movements in the securities market or a particular market sector generally) rather than on price movements in individual securities or futures contracts. The amount of cash is equal to the difference between the closing price of the index and the exercise price of the call or put times a specified multiple (the "multiplier"), which determines the total dollar value for each point of such difference. The risks of investment in index options may be greater than options on securities. Because index options are settled in cash, when a Fund writes a call on an index it cannot provide in advance for its potential settlement obligations by acquiring and holding the underlying securities. A Fund can offset some of the risk of writing a call index option position by holding a diversified portfolio of securities similar to those on which the underlying index is based. However, the Fund cannot, as a practical matter, acquire and hold a portfolio containing exactly the same securities as underlie the index and, as a result, bears a risk that the value of the securities held will not be perfectly correlated with the value of the index. LIMITATIONS ON OPTIONS A Fund will not write options if, immediately after such sale, the aggregate value of securities or obligations underlying the outstanding options exceeds 20% of the Fund's total assets. A Fund will not purchase options if, at the time of the investment, the aggregate premiums paid for the options will exceed 5% of the Fund's total assets. INTEREST RATE, CURRENCY AND STOCK INDEX FUTURES CONTRACTS Each of the Funds may enter into interest rate, currency or stock index futures contracts (collectively, "Futures" or "Futures Contracts") as a hedge against changes in prevailing levels of interest rates, currency exchange rates or stock price levels, respectively, in order to establish more definitely the effective return on securities or currencies held or intended to be acquired by it. A Fund's hedging may include sales of Futures as an offset against the effect of expected increases in interest rates, and decreases in currency exchange rates and stock prices, and purchases of Futures as an offset against the effect of expected declines in interest rates, and increases in currency exchange rates or stock prices. A Futures Contract is a two party agreement to buy or sell a specified amount of a specified security or currency (or delivery of a cash settlement price, in the case of an index future) for a specified price at a 34 78 designated date, time and place. A stock index future provides for the delivery, at a designated date, time and place, of an amount of cash equal to a specified dollar amount times the difference between the stock index value at the close of trading on the contract and the price agreed upon in the Futures Contract; no physical delivery of stocks comprising the index is made. Brokerage fees are incurred when a Futures Contract is bought or sold, and margin deposits must be maintained at all times the Future is outstanding. The Funds will only enter into Futures Contracts that are traded (either domestically or internationally) on futures exchanges and are standardized as to maturity date and underlying financial instrument. Futures exchanges and trading thereon in the United States are regulated under the Commodity Exchange Act and by the Commodity Futures Trading Commission ("CFTC"). Foreign futures exchanges and trading thereon are not regulated by the CFTC and are not subject to the same regulatory controls. For a further discussion of the risks associated with investments in foreign securities, see "Foreign Securities" in this Statement of Additional Information. Closing out an open Future is effected by entering into an offsetting Future for the same aggregate amount of the identical financial instrument or currency and the same delivery date. There can be no assurance, however, that a Fund will be able to enter into an offsetting transaction with respect to a particular Future at a particular time. If a Fund is not able to enter into an offsetting transaction, it will continue to be required to maintain the margin deposits on the Future. A Fund's Futures transactions will be entered into for hedging purposes only; that is, Futures will be sold to protect against a decline in the price of securities or currencies that the Fund owns, or Futures will be purchased to protect the Fund against an increase in the price of securities or currencies it has committed to purchase or expects to purchase. "Margin" with respect to Futures is the amount of funds that must be deposited by a Fund in order to initiate Futures trading and maintain its open positions in Futures. A margin deposit made when the Futures Contract is entered ("initial margin") is intended to ensure the Fund's performance under the Futures Contract. The margin required for a particular Future is set by the exchange on which the Future is traded and may be significantly modified from time to time by the exchange during the term of the Futures Contract. Subsequent payments, called "variation margin," to and from the futures commission merchant through which a Fund entered into the Futures Contract will be made on a daily basis as the price of the underlying security, currency or index fluctuates making the Futures more or less valuable, a process known as marking-to-market. If a Fund were unable to liquidate a Future or an option on a Futures position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Fund would continue to be subject to market risk with respect to the position. In addition, except in the case of purchased options, the Fund would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the Future or option or to maintain cash or securities in a segregated account. OPTIONS ON FUTURES CONTRACTS Options on Futures Contracts are similar to options on securities or currencies except that options on Futures Contracts give the purchaser the right, in return for the premium paid, to assume a position in a Futures Contract (a long position if the option is a call and a short position if the option is a put) at a specified exercise price at any time during the period of the option. Upon exercise of the option, the delivery of the Futures position by the writer of the option to the holder of the option will be accompanied by delivery of the accumulated balance in the writer's Futures margin account. FORWARD CONTRACTS A forward contract is an obligation, usually arranged with a commercial bank or other currency dealer, to purchase or sell a currency against another currency at a future date and price as agreed upon by the parties. A Fund either may accept or make delivery of the currency at the maturity of the forward contract. A Fund may also, if its contra party agrees prior to maturity, enter into a closing transaction involving the 35 79 purchase or sale of an offsetting contract. Forward contracts are traded over-the-counter, and not on organized commodities or securities exchanges. As a result, it may be more difficult to value such contracts, and it may be difficult to enter into closing transactions. Each of the Funds may engage in forward currency transactions in anticipation of, or to protect itself against, fluctuations in exchange rates. A Fund may enter into forward contracts with respect to a specific purchase or sale of a security, or with respect to its portfolio positions generally. When a Fund purchases a security denominated in a foreign currency for settlement in the near future, it may immediately purchase in the forward market the currency needed to pay for and settle the purchase. By entering into a forward contract with respect to the specific purchase or sale of a security denominated in a foreign currency, the Fund can secure an exchange rate between the trade and settlement dates for that purchase or sale transaction. This practice is sometimes referred to as "transaction hedging." Position hedging is the purchase or sale of foreign currency with respect to portfolio security positions denominated or quoted in a foreign currency. The cost to a Fund of engaging in forward contracts varies with factors such as the currencies involved, the length of the contract period and the market conditions then prevailing. Because forward contracts are usually entered into on a principal basis, no fees or commissions are involved. The use of forward contracts does not eliminate fluctuations in the prices of the underlying securities a Fund owns or intends to acquire, but it does establish a rate of exchange in advance. In addition, while forward contract sales limit the risk of loss due to a decline in the value of the hedged currencies, they also limit any potential gain that might result should the value of the currencies increase. LIMITATIONS ON USE OF FUTURES, OPTIONS ON FUTURES AND CERTAIN OPTIONS ON CURRENCIES To the extent that a Fund enters into Futures Contracts, options on Futures Contracts and options on foreign currencies traded on a CFTC-regulated exchange, in each case other than for bona fide hedging purposes (as defined by the CFTC), the aggregate initial margin and premiums required to establish those positions (excluding the amount by which options are "in-the-money") will not exceed 5% of the total assets of the Fund, after taking into account unrealized profits and unrealized losses on any contracts it has entered into. This guideline may be modified by the Board, without a shareholder vote. This limitation does not limit the percentage of the Fund's assets at risk to 5%. RISK FACTORS Investors should consider carefully the following special factors before investing in any of the Funds. SMALL CAPITALIZATION COMPANIES Investors should realize that equity securities of small to medium-sized companies may involve greater risk than is associated with investing in more established companies. Small to medium-sized companies often have limited product and market diversification, fewer financial resources or may be dependent on a few key managers. Any one of the foregoing may change suddenly and have an immediate impact on the value of the company's securities. Furthermore, whenever the securities markets are experiencing rapid price changes due to national economic trends, secondary growth securities have historically been subject to exaggerated price changes. NON-INVESTMENT GRADE DEBT SECURITIES The Balanced Fund, the Diversified Income Fund, the High Yield Fund, and to a lesser extent the Dent Demographic Trends Fund, the Global Utilities Fund, and the Telecommunications Fund may seek to meet their respective investment objectives by investing in non-investment grade debt securities, commonly known as "junk bonds." While generally providing greater income and opportunity for gain, non-investment grade debt securities may be subject to greater risks than higher-rated securities. Economic downturns tend to disrupt the market for junk bonds and adversely affect their values. Such economic downturns may be expected to result in increased price volatility for junk bonds and of the value of shares of the above-named Funds, and increased issuer defaults on junk bonds. 36 80 In addition, many issuers of junk bonds are substantially leveraged, which may impair their ability to meet their obligations. In some cases, junk bonds are subordinated to the prior payment of senior indebtedness, which potentially limits a Fund's ability to fully recover principal or to receive payments when senior securities are subject to a default. The credit rating of a junk bond does not necessarily address its market value risk, and ratings may from time to time change to reflect developments regarding the issuer's financial condition. Junk bonds have speculative characteristics which are likely to increase in number and significance with each successive lower rating category. When the secondary market for junk bonds becomes more illiquid, or in the absence of readily available market quotations for such securities, the relative lack of reliable objective data makes it more difficult for the Company's directors to value a Fund's securities, and judgment plays a more important role in determining such valuations. Increased illiquidity in the junk bond market also may affect a Fund's ability to dispose of such securities at desirable prices. In the event a Fund experiences an unexpected level of net redemptions, the Fund could be forced to sell its junk bonds without regard to their investment merits, thereby decreasing the asset based upon which the Fund's expenses can be spread and possibly reducing the Fund's rate of return. Prices of junk bonds have been found to be less sensitive to fluctuations in interest rates, and more sensitive to adverse economic changes and individual corporate developments, than those of higher-rated debt securities. FOREIGN SECURITIES Investments by a Fund in foreign securities whether denominated in U.S. dollars or foreign currencies, may entail the following risks set forth below. Investments by a Fund in ADRs, EDRs or similar securities also may entail some or all of the risks described below. CURRENCY RISK. The value of the Fund's foreign investments (except for Money Market Fund, which may only invest in U.S. dollar denominated securities) may be affected by changes in currency exchange rates. The U.S. dollar value of a foreign security generally decreases when the value of the U.S. dollar rises against the foreign currency in which the security is denominated, and tends to increase when the value of the U.S. dollar falls against such currency. On January 1, 1999, certain members of the European Economic and Monetary Union ("EMU"), namely Austria, Belgium, Finland, France, Germany, Ireland, Italy, Luxembourg, the Netherlands, Portugal and Spain established a common European currency known as the "euro" and each member's local currency became a denomination of the euro. It is anticipated that each participating country will replace its local currency with the euro on July 1, 2002. Any other European country that is a member of the European Union and satisfies the criteria for participation in the EMU may elect to participate in the EMU and may supplement its existing currency with the euro. The anticipated replacement of existing currencies with the euro on July 1, 2002 could cause market disruptions before or after July 1, 2002 and could adversely affect the value of securities held by the Fund. POLITICAL AND ECONOMIC RISK. The economies of many of the countries in which the Fund may invest are not as developed as the United States economy and may be subject to significantly different forces. Political or social instability, expropriation or confiscatory taxation, and limitations on the removal of funds or other assets could also adversely affect the value of the Fund's investments. REGULATORY RISK. Foreign companies are generally not subject to the regulatory controls imposed on United States issuers and, as a consequence, there is generally less publicly available information about foreign securities than is available about domestic securities. Foreign companies are not subject to uniform accounting, auditing and financial reporting standards, practices and requirements comparable to those applicable to domestic companies. Income from foreign securities owned by the Fund may be reduced by a withholding tax at the source, which tax would reduce dividend income payable to the Fund's shareholders. 37 81 MARKET RISK. The securities markets in many of the countries in which the Fund invests will have substantially less trading volume than the major United States markets. As a result, the securities of some foreign companies and governments may be less liquid and experience more price volatility than comparable domestic securities. Increased custodian costs as well as administrative difficulties (such as the need to use foreign custodians) may be associated with the maintenance of assets in foreign jurisdictions. There is generally less government regulation and supervision of foreign stock exchanges, brokers and issuers which may make it difficult to enforce contractual obligations. In addition, transaction costs in foreign securities markets are likely to be higher, since brokerage commission rates in foreign countries are likely to be higher than in the United States. In addition, there are risks associated with certain investment strategies employed by the Funds as discussed in the previous section. NON-DIVERSIFIED PORTFOLIO (GLOBAL UTILITIES FUND ONLY) The Global Utilities Fund is a non-diversified portfolio, which means that it may invest a greater proportion of its assets in the securities of a smaller number of issuers and therefore may be subject to greater market and credit risk than a more broadly diversified portfolio. (A diversified portfolio may not invest more than 5% of its assets in obligations of one issuer, with respect to 75% of its total assets.) INVESTMENT RESTRICTIONS For a discussion of the proposed changes to the investment restrictions, see "Submission of Matters to Shareholders" in this Statement of Additional Information. FUNDAMENTAL RESTRICTIONS The following restrictions apply to all of the Funds and are fundamental. Unless permitted by law, they will not be changed for any Fund without approval of that Fund's voting securities. None of the Funds will: (1) invest for the purpose of exercising control over or management over a company except that each Fund may purchase securities of other investment companies to the extent permitted by applicable law or exemptive order; (2) act as an underwriter, except to the extent that, in connection with the disposition of portfolio securities, the Fund may be deemed to be an underwriter for purposes of the 1933 Act; (3) purchase or sell real estate or any interest therein, except that each Fund may, as appropriate and consistent with its investment policies and other investment restrictions, invest in securities of corporate or governmental entities secured by real estate or marketable interests therein or securities of issuers that engage in real estate operations or interests therein, and may hold and sell real estate acquired as a result of ownership in such securities; (4) purchase or sell commodity contracts, except that each Fund may, as appropriate and consistent with its investment policies and other investment restrictions, enter into futures contracts on securities, securities indices and currency, options on such futures contracts, forward foreign currency exchange contracts, forward commitments and repurchase agreements; (5) make loans, except for collateralized loans of portfolio securities in an amount not exceeding 33 1/3% of the applicable Fund's total assets. This restriction does not prevent a Fund from purchasing government obligations, short-term commercial paper, or publicly traded debt, including bonds, notes, debentures, certificates of deposit, bankers acceptances and equipment trust certificates, nor does this restriction apply to loans made under insurance policies, or through entry into repurchase agreements, to the extent they may be viewed as loans; (6) purchase the securities of issuers conducting their principal business activity in the same industry if, immediately after such purchase, the value of its investments in such industry would exceed 25% 38 82 of its total assets at market value at the time of each investment, except that the Money Market Fund may invest up to 100% of its assets in obligations issued by banks. This limitation does not apply to the Global Utilities Fund or to investments in obligations of the U.S. Government or any of its agencies or instrumentalities but will apply to foreign government obligations unless the Securities and Exchange Commission permits their exclusion; (7) issue senior securities, except to the extent permitted by the 1940 Act, including permitted borrowings; (8) purchase securities of an issuer (other than investments in obligations issued or guaranteed by the U.S. Government, its agencies or instrumentalities or except that each Fund may purchase securities of other investment companies to the extent permitted by applicable law or exemptive order), if as a result with respect to 75% of the value of the Fund's total assets, taken at market value, (i) more than 5% of the Fund's total assets taken at market value would be invested in the securities of such issuer, except that up to 25% of the Fund's total assets may be invested in securities issued or guaranteed by any foreign government or its agencies or instrumentalities, or (ii) such purchase would at the time result in more than 10% of the outstanding voting securities of such issuer being held by the Fund. As a matter of operating policy, the Money Market Fund will invest no more than 5% of the value of that Fund's total assets in securities, other than U.S. Government securities of any one issuer, except that the Money Market Fund may invest up to 25% of its total assets in First Tier Securities (as defined in Rule 2a-7 under the 1940 Act) of a single issuer for a period of up to three business days after the purchase of such security. This restriction does not apply to the Global Utilities Fund; and (9) Each Fund may, notwithstanding any other fundamental investment policy or limitation, invest all of its assets in the securities of a single open-end management investment company with substantially the same fundamental investment objectives, policies and limitations as that Fund. NON-FUNDAMENTAL RESTRICTIONS The following investment restrictions apply to all of the Funds but are not fundamental. They may be changed for any Fund without approval of that Fund's voting securities. (1) None of the Funds will invest more than 15% (10% for the Money Market Fund) of its assets in securities restricted as to disposition under federal securities laws, or securities otherwise considered illiquid or not readily marketable, including repurchase agreements having a maturity of more than seven days. (2) None of the Funds will purchase or retain the securities of any issuer if, to the knowledge of AIM, those officers and Directors of the Company, its adviser or distributor owning individually more than 1/2 of 1% of the securities of such issuer together own more than 5% of the securities of such issuer. (3) The Company does not currently intend to invest all of the assets of any Fund in the securities of a single open-end management investment company with the same fundamental investment objectives, policies and limitations as that Fund. (4) The Fund may not invest in securities issued by other investment companies except as part of a merger, reorganization or other acquisition and except to the extent permitted by (i) the 1940 Act, as amended from time to time, (ii) the rules and regulations promulgated by the SEC under the 1940 Act, as amended from time to time, or (iii) an exemption or other relief from the provisions of the 1940 Act. MANAGEMENT DIRECTORS AND OFFICERS The directors and officers of the Company and their principal occupations during at least the last five years are set forth below. Unless otherwise indicated, the address of each director and executive officer is 11 Greenway Plaza, Suite 100, Houston, Texas 77046. 39 83
POSITIONS HELD NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS --------------------- --------------- ---------------------------------------- *CHARLES T. BAUER (80) Director and Director and Chairman, A I M Management Group Chairman Inc., A I M Advisors, Inc., A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc. and Fund Management Company; and Executive Vice Chairman and Director, AMVESCAP PLC. BRUCE L. CROCKETT (55) Director Director, ACE Limited (insurance company). 906 Frome Lane Formerly, Director, President and Chief Executive McLean, VA 22102 Officer, COMSAT Corporation; and Chairman, Board of Governors of INTELSAT (international communications company). OWEN DALY II (75) Director Formerly, Director, Cortland Trust Inc. (investment Six Blythewood Road company) CF & I Steel Corp., Monumental Life Insurance Baltimore, MD 21210 Company and Monumental General Insurance Company; and Chairman of the Board of Equitable Bancorporation. EDWARD K. DUNN, JR. (64) Director Chairman of the Board of Directors, Mercantile 2 Hopkins Plaza, 8th Floor Mortgage Corp. Formerly, Vice Chairman of the Suite 805 Board of Directors, President and Chief Operating Baltimore, MD 21201 Officer, Mercantile-Safe Deposit & Trust Co.; and President, Mercantile Bankshares. JACK FIELDS (48) Director Chief Executive Officer, Texana Global, Inc. 8810 Will Clayton Parkway (foreign trading company) and Twenty First Jetero Plaza, Suite E Century, Inc. (a governmental affairs company); Humble, TX 77338 and Director, Telscape International and Administaff. Formerly, Member of the U.S. House of Representatives. **CARL FRISCHLING (62) Director Partner, Kramer, Levin, Naftalis & Frankel (law 919 Third Avenue firm). Formerly Partner, Reid & Priest (law firm). New York, NY 10022
- ---------- * A director who is an "interested person" of A I M Advisors, Inc. and the Company as defined in the 1940 Act. ** A director who is an "interested person" of the Company as defined in the 1940 Act. 40 84
POSITIONS HELD NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS --------------------- --------------- ---------------------------------------- *ROBERT H. GRAHAM (53) Director and Director, President and Chief Executive Officer, President A I M Management Group Inc.; Director and President, A I M Advisors, Inc.; Director and Senior Vice President, A I M Capital Management, Inc., A I M Distributors, Inc., A I M Fund Services, Inc. and Fund Management Company; and Director and CEO, Managed Products, AMVESCAP PLC. PREMA MATHAI-DAVIS (49) Director Chief Executive Officer, YWCA of the U.S.A. 350 Fifth Avenue, Suite 301 New York, NY 10118 LEWIS F. PENNOCK (57) Director Partner, Pennock & Cooper (law firm). 6363 Woodway, Suite 825 Houston, TX 77057 LOUIS S. SKLAR (60) Director Executive Vice President, Development and The Williams Tower, 50th Floor Operations, Hines Interests Limited Partnership 2800 Post Oak Blvd. (real estate development). Houston, TX 77056 GARY T. CRUM (52) Senior Vice President Director and President, A I M Capital Management, Inc.; Director and Executive Vice President, A I M Management Group Inc.; Director and Senior Vice President, A I M Advisors, Inc.; and Director, A I M Distributors, Inc. and AMVESCAP PLC. CAROL F. RELIHAN (45) Senior Vice Director, Senior Vice President, General Counsel President and and Secretary, A I M Advisors, Inc.; Senior Vice Secretary President, General Counsel and Secretary, A I M Management Group Inc.; Director, Vice President and General Counsel, Fund Management Company; General Counsel and Vice President, A I M Fund Services, Inc.; and Vice President, A I M Capital Management, Inc. and A I M Distributors, Inc.
- ---------- * A director who is an "interested person" of A I M Advisors, Inc. and the Company as defined in the 1940 Act. 41 85
POSITIONS HELD NAME, ADDRESS AND AGE WITH REGISTRANT PRINCIPAL OCCUPATION DURING PAST 5 YEARS --------------------- --------------- ---------------------------------------- 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.
The standing committees of the Board are the Audit Committee, the Capitalization Committee, the Investments Committee and the Nominating and Compensation Committee. The members of the Audit Committee are Messrs. Crockett, Daly, Dunn (Chairman), Fields, Frischling, Pennock and Sklar and Dr. Mathai-Davis. The Audit Committee is responsible for: o considering management's recommendations of independent accountants for each fund and evaluating such accountants' performance, costs and financial stability; o with AIM, reviewing and coordinating audit plans prepared by the funds' independent accountants and management's internal audit staff; and o reviewing financial statements contained in periodic reports to shareholders with the funds' independent accountants and management. The members of the Capitalization Committee are Messrs. Bauer, Graham (Chairman) and Pennock. The Capitalization Committee is responsible for: o increasing or decreasing the aggregate number of shares of any class of the company's common stock by classifying and reclassifying the company's authorized but unissued shares of common stock, up to the company's authorized capital; o fixing the terms of such classified or reclassified shares of common stock; and o issuing such classified or reclassified shares of common stock upon the terms set forth in the applicable fund's prospectus, up to the company's authorized capital. 42 86 The members of the Investments Committee are Messrs. Bauer, Crockett, Daly, Dunn, Fields, Frischling, Pennock and Sklar (Chairman) and Dr. Mathai-Davis. The Investments Committee is responsible for: o overseeing AIM's investment-related compliance systems and procedures to ensure their continued adequacy; and o considering and acting, on an interim basis between meetings of the full Board, on investment-related matters requiring Board consideration, including dividends and distributions, brokerage policy and pricing matters. The members of the Nominating and Compensation Committee are Messrs. Crockett (Chairman), Daly, Dunn, Fields, Pennock and Sklar and Dr. Mathai-Davis. The Nominating and Compensation Committee is responsible for: o considering and nominating individuals to stand for election as independent directors as long as the company maintains a distribution plan pursuant to Rule 12b-1 under the 1940 Act; o reviewing from time to time the compensation payable to the independent directors; and o making recommendations to the Board regarding matters related to compensation, including deferred compensation plans and retirement plans for the independent directors. The Nominating and Compensation Committee will consider nominees recommended by a shareholder to serve as directors, provided (i) that such person was a shareholder of record at the time they submit such names and is entitled to vote at the meeting, and (ii) that the Nominating and Compensation Committee or the Board, as applicable, shall make the final determination of persons to be nominated. All of the Company's Directors also serve as directors or trustees of some or all of the other investment companies managed or advised by AIM. All of the Directors' executive officers hold similar offices with some or all of the other investment companies managed or advised by AIM. Remuneration of Directors Each director is reimbursed for expenses incurred in connection with each meeting of the Board of Directors or any Committee thereof. Each director of the Company who is not also an officer of the Company is compensated for his or her services according to a fee schedule which recognizes the fact that such director also serves as a director or trustee of certain other investment companies advised or managed by AIM. Each such director receives a fee, allocated among the AIM Funds for which he or she serves as a director or trustee, which consists of an annual retainer component and a meeting fee component. Set forth below is information regarding compensation paid or accrued during the fiscal year ended December 31, 1999 for each director of the Company:
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION ACCRUED BY COMPENSATION DIRECTOR FROM COMPANY(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3) -------- --------------- ------------------- --------------------- 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-
43 87
AGGREGATE RETIREMENT BENEFITS TOTAL COMPENSATION ACCRUED BY COMPENSATION DIRECTOR FROM COMPANY(1) ALL AIM FUNDS(2) FROM ALL AIM FUNDS(3) -------- --------------- ------------------- --------------------- 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
- ---------- (1) The total amount of compensation deferred by all Directors of the Company during the fiscal year ended December 31, 1999, including interest earned thereon, was $111,120. (2) During the fiscal year ended December 31, 1999, the total amount of expenses allocated to the Company in respect of such retirement benefits was $28,223. Data reflects compensation estimated for the calendar year ended December 31, 1999. (3) Each Director serves as a director or trustee of a total of 12 registered investment companies advised by AIM. Data reflects compensation estimated for the calendar year ended December 31, 1999. (4) The Company paid the law firm of Kramer, Levin, Naftalis & Frankel LLP $54,485 in legal fees for services provided to the Funds during the fiscal year ended December 31, 1999. Mr. Frischling, a Director of the Company, is a partner in such firm. (5) Mr. Robinson was a director until March 12, 1999, when he retired. AIM Funds Retirement Plan for Eligible Directors/Trustees Under the terms of the AIM Funds Retirement Plan for Eligible Directors/Trustees (the "Plan"), each director (who is not a employee of any of the AIM Funds, A I M Management Group Inc. or any of their affiliates) may be entitled to certain benefits upon retirement from the Board of Directors. Pursuant to the Plan, the normal retirement date is the date on which the eligible director has attained age 65 and has completed at least five years of continuous service with one or more of the regulated investment companies managed, administered or distributed by AIM or its affiliates (the "Applicable AIM Funds"). Each eligible director is entitled to receive an annual benefit from the Applicable AIM Funds commencing on the first day of the calendar quarter coincident with or following his date of retirement equal to a maximum of 75% of the annual retainer paid or accrued by the Applicable AIM Funds for such director during the twelve-month period immediately preceding the director's retirement (including amounts deferred under a separate agreement between the Applicable AIM Funds and the director) and based on the number of such director's years of service (not in excess of 10 years of service) completed with respect to any of the Applicable AIM Funds. Such benefit is payable to each eligible director in quarterly installments. If an eligible director dies after attaining the normal retirement date but before receipt of all benefits under the Plan, the director's surviving spouse (if any) shall receive a quarterly survivor's benefit equal to 50% of the amount payable to the deceased director, for no more than ten years beginning the first day of the calendar quarter following the date of the director's death. Payments under the Plan are not secured or funded by any AIM Fund. Set forth below is a table that shows the estimated annual benefits payable to an eligible director upon retirement assuming a specified level of compensation and years of service classifications. The estimated credited years of service for Messrs. Crockett, Daly, Dunn, Fields, Frischling, Pennock, Robinson and Sklar and Dr. Mathai-Davis are 13, 13, 2, 3, 23, 18, 11, 10 and 1 years, respectively. 44 88 ESTIMATED ANNUAL BENEFITS UPON RETIREMENT
Number of Years of Service With Annual Retirement the Applicable AIM Compensation Paid By All Funds Applicable AIM Funds ------------------ ------------------------ 10 $67,500 9 $60,750 8 $54,000 7 $47,250 6 $40,500 5 $33,750
Deferred Compensation Agreements Messrs. Daly, Dunn, Fields, Frischling and Sklar and Dr. Mathai-Davis (for purposes of this paragraph only, the "deferring directors") have each executed a Deferred Compensation Agreement (collectively, the "Agreements"). Pursuant to the Agreements, the deferring directors elected to defer receipt of 100% of their compensation payable by the Company, and such amounts are placed into a deferral account. Currently, the deferring directors may select various AIM Funds in which all or part of their deferral account shall be deemed to be invested. Distributions from the deferring directors' deferral accounts will be paid in cash, in generally equal quarterly installments over a period of five (5) or ten (10) years (depending on the Agreement) beginning on the date the deferring director's retirement benefits commence under the Plan. The Company's Board of Directors, in its sole discretion, may accelerate or extend the distribution of such deferral accounts after the deferring director's termination of service as a director of the Company. If a deferring director dies prior to the distribution of amounts in his or her deferral account, the balance of the deferral account will be distributed to his or her designated beneficiary in a single lump sum payment as soon as practicable after such deferring director's death. The Agreements are not funded and, with respect to the payments of amounts held in the deferral accounts, the deferring directors have the status of unsecured creditors of the Company and of each other AIM Fund from which they are deferring compensation. INVESTMENT ADVISORY, SUB-ADVISORY AND ADMINISTRATIVE SERVICES AGREEMENTS Each Fund has entered into a master investment advisory agreement (the "Advisory Agreement") dated February 28, 1997, and a master administrative services agreement (the "Administrative Services Agreement"), dated May 1, 1998, with AIM. A prior investment advisory agreement with substantially identical terms to the Advisory Agreement was in effect prior to February 28, 1997. A prior master administrative services agreement ("Prior Administrative Services Agreement") with substantially similar terms to the Administrative Services Agreement, was in effect prior to May 1, 1998. In addition, AIM has entered into a Sub-Advisory Agreement, dated December 14, 1998, (a "Sub-Advisory Agreement") with INVESCO Asset Management Limited ("INVESCO"), an indirect wholly owned subsidiary of AMVESCAP PLC, with respect to the Global Growth and Income Fund. The address of INVESCO is 11 Devonshire Square, London, England EC2 M4YR. AIM has also entered into a Sub-Advisory Agreement, dated December 29, 1999 (also a "Sub-Advisory Agreement") with H.S. Dent Advisors, Inc. ("Dent"), with respect to the Dent Demographic Trends Fund. The address of Dent is 6515 Gwin Road, Oakland, California 94611. See "Fund Management" in each Prospectus. AIM was organized in 1976, and along with its subsidiaries, manages or advises over 120 investment portfolios encompassing a broad range of investment objectives. AIM is a wholly owned subsidiary of A I M Management Group Inc. ("AIM Management"), a holding company that has been engaged in the 45 89 financial services business since 1976. The address of AIM is 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. AIM and the Company have adopted a Code of Ethics (the "Code of Ethics") which requires investment personnel and certain other employees (a) to pre-clear all personal securities transactions subject to the Code of Ethics, (b) to file reports or duplicate confirmations regarding such transactions, (c) to refrain from personally engaging in (i) short-term trading of a security, (ii) transactions involving a security within seven days of an AIM Fund transaction involving the same security, and (iii) transactions involving securities being considered for investment by an AIM Fund and (d) abide by certain other provisions under the Code of Ethics. The Code of Ethics also prohibits investment personnel and all other employees from purchasing securities in an initial public offering. Personal trading reports are reviewed periodically by AIM, and the Board of Directors reviews quarterly and annual reports (including information on any substantial violations of the Code of Ethics). Sanctions for violations of the Code of Ethics may include censure, monetary penalties, suspension or termination of employment. The Advisory Agreement for the Funds provides that each Fund will pay all expenses of the Fund, including, without limitation: brokerage commissions, taxes, legal, auditing, or governmental fees, the cost of preparing share certificates, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Company on behalf of the Funds in connection with membership in investment company organizations, the cost of printing copies of prospectuses and statements of additional information distributed to the Fund's shareholders; and all other charges and costs of the Fund's operations unless otherwise explicitly provided. The Advisory Agreement for the Funds and the Sub-Advisory Agreements for the Global Growth and Income Fund and the Dent Demographic Trends Fund provide that they will each remain in effect for the initial term and continue in effect from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of the directors who are not parties to the agreement or "interested persons" of any such party (the "Non-Interested Directors") by votes cast in person at a meeting called for such purpose. The Advisory Agreement was initially approved by the Company's Board of Directors (including the affirmative vote of all of the Non-Interested Directors) on December 11, 1996 and was approved by the Funds' shareholders on February 7, 1997. The Board of Directors of the Company approved the continuance of the Agreement until June 30, 2000. The Advisory Agreement became effective on February 28, 1997. The Sub-Advisory Agreement for the Global Growth and Income Fund was initially approved by the Company's Board of Directors (including the affirmative vote of all of the Non-Interested Directors) on September 26, 1998, and was approved by the Fund's sole shareholder and became effective December 14, 1998. The Sub-Advisory Agreement for the Dent Demographic Trends Fund was initially approved by the Company's Board of Directors (including the affirmative vote of all of the Non-Interested Directors) on September 24, 1999, and became effective December 29, 1999. The Advisory and Sub-Advisory Agreements provide that each company, AIM (in the case of the Advisory Agreement), INVESCO (in the case of the Global Growth and Income Sub-Advisory Agreement), and Dent (in the case of the Dent Demographic Trends Fund Sub-Advisory Agreement), may terminate such agreement with respect to any Fund(s) on sixty (60) days' written notice without penalty. Each agreement terminates automatically in the event of its assignment. As compensation for its services, AIM pays 0.40% of the Global Growth and Income Fund's average daily net assets to INVESCO. As compensation for its services, AIM pays Dent the following fees pursuant to the Sub-Advisory Agreement with respect to the Dent Demographic Trends Fund:
NET ASSETS ANNUAL RATE - ---------- ----------- First $1 billion ............................................... 0.13% Over $1 billion, to and including $2 billion..................... 0.10%
46 90
NET ASSETS ANNUAL RATE - ---------- ----------- Over $2 billion ............................................... 0.07%
AIM may from time to time waive or reduce its fee. Voluntary fee waivers or reductions may be rescinded at any time without further notice to investors. During periods of voluntary fee waivers or reductions, AIM will retain its ability to be reimbursed for such fee prior to the end of each fiscal year. Contractual fee waivers or reductions set forth in the Fee Table in a Prospectus may not be terminated or amended to the Fund's detriment during the period stated in the agreement between AIM and the Fund. Pursuant to the Advisory Agreement, AIM receives a fee from each of the AIM V.I. Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I. Blue Chip Fund, the AIM V.I. Capital Appreciation Fund, the AIM V.I. Capital Development Fund, the AIM V.I. Dent Demographic Trends Fund, the AIM V.I. Diversified Income Fund, the AIM V.I. Global Growth and Income Fund, the AIM V.I. Global Utilities Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM V.I. Growth and Income Fund, the AIM V.I. High Yield Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund, the AIM V.I. Telecommunications Fund and the AIM V.I. Value Fund calculated at the following annual rate, based on the average daily net assets of the Fund during the year: AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. GLOBAL UTILITIES FUND AIM V.I. GROWTH FUND AIM V.I. GROWTH AND INCOME FUND AIM V.I. VALUE FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million................................................... 0.65% Over $250 million ................................................... 0.60%
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million................................................... 0.80% Over $150 million ................................................... 0.625%
AIM V.I. BALANCED FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million................................................... 0.75% Over $150 million ................................................... 0.50%
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $350 million................................................... 0.75% Over $350 million ................................................... 0.625%
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $2 billion ................................................... 0.85% Over $2 billion ................................................... 0.80%
47 91 AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million................................................... 0.60% Over $250 million ................................................... 0.55%
AIM V.I. GLOBAL GROWTH AND INCOME FUND AIM V.I. TELECOMMUNICATIONS FUND
ANNUAL NET ASSETS RATE - ---------- ------ All ................................................................. 1.00%
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million................................................... 0.50% Over $250 million ................................................... 0.45%
AIM V.I. HIGH YIELD FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $200 million................................................... 0.625% Next $300 million ................................................... 0.55% Next $500 million ................................................... 0.50% Amount over $1 billion .............................................. 0.45%
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million .............................................. 0.75% Over $250 million ................................................ 0.70%
AIM V.I. MONEY MARKET FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million................................................... 0.40% Over $250 million ................................................... 0.35%
Each of the Funds (except the AIM V.I. Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) paid to AIM a management fee (net of fee waivers) for the fiscal years ended December 31, 1999, December 31, 1998, and December 31, 1997, under the Advisory Agreement and a prior, substantially identical advisory agreement, as follows:
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Aggressive Growth Fund $ 7,663 $ 1,609* N/A AIM V.I. Balanced Fund $ 210,282 $ -0-* N/A AIM V.I. Capital Appreciation Fund $4,830,846 $3,521,837 $3,083,708 AIM V.I. Capital Development Fund $ -0- $ -0-* N/A AIM V.I. Diversified Income Fund $ 556,418 $ 580,119 $ 447,539
48 92 AIM V.I. Global Growth and Income Fund $ 436,438 N/A N/A AIM V.I. Global Utilities Fund $ 202,137 $ 161,488 $ 106,309 AIM V.I. Government Securities Fund $ 315,598 $ 221,956 $ 138,550 AIM V.I. Growth Fund $ 3,026,404 $1,941,818 $1,453,488 AIM V.I. Growth and Income Fund $10,438,977 $5,556,833 $2,609,695 AIM V.I. High Yield Fund $ 101,825 $ -0-* N/A AIM V.I. International Equity Fund $ 2,066,153 $1,744,127 $1,519,323 AIM V.I. Money Market Fund $ 317,031 $ 252,407 $ 254,546 AIM V.I. Telecommunications Fund $ 756,068 N/A N/A AIM V.I. Value Fund $10,380,472 $5,570,566 $3,303,799
* Fees paid were for the period May 1, 1998 (date operations commenced) through December 31, 1998. For the fiscal years ended December 31, 1999, December 31, 1998 and December 31, 1997, AIM waived management fees for each Fund (except the AIM V.I. Blue Chip Fund and the AIM V.I. Dent Demographic Trends Fund) as follows:
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Aggressive Growth Fund $ 59,101 $11,445* N/A AIM V.I. Balanced Fund $ -0- $21,238* N/A AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- AIM V.I. Capital Development Fund $ 35,726 $ 9,522* N/A AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0- AIM V.I. Global Growth and Income Fund $ -0- N/A N/A AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0- AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- AIM V.I. Growth Fund $ -0- $ -0- $ -0- AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0- AIM V.I. High Yield Fund $ 1,750 $20,728* N/A AIM V.I. International Equity Fund $ -0- $ -0- $ -0- AIM V.I. Money Market Fund $ -0- $ -0- $ -0- AIM V.I. Telecommunications Fund $ -0- N/A N/A AIM V.I. Value Fund $ -0- $ -0- $ -0-
* 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:
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Aggressive Growth Fund $ 43,901 $43,400 N/A AIM V.I. Balanced Fund $ 26,814 $25,501 N/A AIM V.I. Capital Appreciation Fund $ -0- $ -0- $ -0- AIM V.I. Capital Development Fund $ 68,305 $48,808 N/A AIM V.I. Diversified Income Fund $ -0- $ -0- $ -0-
49 93
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Global Growth and Income Fund $ 11,500 N/A N/A AIM V.I. Global Utilities Fund $ -0- $ -0- $ -0- AIM V.I. Government Securities Fund $ -0- $ -0- $ -0- AIM V.I. Growth Fund $ -0- $ -0- $ -0- AIM V.I. Growth and Income Fund $ -0- $ -0- $ -0- AIM V.I. High Yield Fund $ 43,433 $24,798 N/A AIM V.I. International Equity Fund $ -0- $ -0- $ -0- AIM V.I. Money Market Fund $ -0- $ -0- $ -0- AIM V.I. Telecommunications Fund $ -0- N/A N/A AIM V.I. Value Fund $ -0- $ -0- $ -0-
* Fee amounts are for the period May 1, 1998 (date operations commenced) through December 31, 1998. The Administrative Services Agreement for the Funds provides that AIM may perform certain accounting and other administrative services to each Fund which are not required to be performed by AIM under the Advisory Agreement. For such services, AIM would be entitled to receive from each Fund reimbursement of its expenses. In addition, AIM provides, or assures that Participating Insurance Companies will provide, certain services implementing the Company's funding arrangements with Participating Insurance Companies. These services include: establishment of compliance procedures; negotiation of participation agreements; preparation of prospectuses, financial reports and proxy statements for existing Contractowners; maintenance of master accounts; facilitation of purchases and redemptions requested by Contractowners; distribution to existing Contractowners of copies of prospectuses, proxy materials, periodic Fund reports and other materials; maintenance of records; and Contractowner services and communication. Effective May 1, 1998, the Funds reimburse AIM for its costs in providing, or assuring that Participating Insurance Companies provide, these services, currently in an amount up to 0.25% of the average net asset value of each Fund in excess of the net asset value of each Fund on April 30, 1998. AIM has agreed to bear certain of these costs on the net assets of each fund as of April 30, 1998. The Administrative Services Agreement for the Funds provides that the agreement will remain in effect for the initial term and continue in effect from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of the Non-Interested Directors, by votes cast in person at a meeting called for such purpose. The agreement terminates automatically in the event of its assignment or in the event of termination of the Master Investment Advisory Agreement. For the fiscal years ended December 31, 1999, December 31, 1998 and December 31, 1997, AIM received reimbursement of administrative services costs from each of the Funds (except the AIM V.I. Blue Chip Fund, the AIM V.I. Dent Demographic Trends Fund) pursuant to the Administrative Services Agreement and the Prior Administrative Services Agreement as follows:
December 31, December 31, December 31, 1999 1998 1997 ------------ ------------ ------------ AIM V.I. Aggressive Growth Fund $ -0- $ 26,658* N/A AIM V.I. Balanced Fund $ 17,161 $ 26,649* N/A AIM V.I. Capital Appreciation Fund $ 78,369 $ 62,063 $43,588 AIM V.I. Capital Development Fund $ -0- $ 26,658* N/A AIM V.I. Diversified Income Fund $ 50,901 $ 47,528 $48,683
50 94 AIM V.I. Global Growth and Income Fund $ 20,870 N/A N/A AIM V.I. Global Utilities Fund $ 51,234 $ 46,855 $47,128 AIM V.I. Government Securities Fund $ 44,501 $ 50,152 $37,872 AIM V.I. Growth Fund $ 73,728 $ 57,128 $44,692 AIM V.I. Growth and Income Fund $102,711 $296,138 $43,065 AIM V.I. High Yield Fund $ -0- $ 28,103* N/A AIM V.I. International Equity Fund $ 64,730 $ 76,026 $59,724 AIM V.I. Money Market Fund $ 44,311 $ 36,480 $38,289 AIM V.I. Telecommunications Fund $ 34,698 N/A N/A AIM V.I. Value Fund $107,813 $420,725 $53,632
* Fees paid were for the period May 1, 1998 (date operations commenced) through December 31, 1998. THE DISTRIBUTION AGREEMENT The Funds have entered into a master distribution agreement (the "Distribution Agreement") with AIM Distributors, dated February 28, 1997. Information concerning AIM Distributors and the continuous offering of the Funds" shares is set forth in the Prospectus under the heading "Fund Management." The Distribution Agreement provides that AIM Distributors will bear the expenses of printing from the final proof and distributing prospectuses and statements of additional information of the Funds relating to the sale of Fund shares. The Distribution Agreement provides that the Funds shall bear the expenses of qualification of shares of the Fund for sale in connection with the public offering in any jurisdictions where qualification is required by law. AIM Distributors has not undertaken to sell any specified number of shares of the Funds. The Distribution Agreement for the Funds provides that it will continue in effect for its initial term and from year to year thereafter only if such continuance is specifically approved at least annually (i) by the Company's Board of Directors or by the vote of a majority of the outstanding voting securities of the Funds (as defined in the 1940 Act); and (ii) by the affirmative vote of a majority of Non-Interested Directors by votes cast in person at a meeting called for such purpose. The Company or AIM Distributors may terminate its Distribution Agreement on sixty (60) days' written notice without penalty. The Distribution Agreement will terminate automatically in the event of its assignment. DETERMINATION OF NET ASSET VALUE The net asset value per share (or share price) of each of the Funds will be determined as of the close of regular trading of the New York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern Time) on each "business day of the Fund." In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net asset value of a Fund share is determined as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the NYSE. A "business day of a Fund" is any day on which the NYSE is open for business. It is expected that the NYSE will be closed during the next twelve months on Saturdays and Sundays and on the observed holidays of New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. The net asset value per share of a Fund is determined by subtracting the liabilities (e.g., the expenses) of the Fund from the assets of the Fund and dividing the result by the total number of shares outstanding of such Fund. The determination of a Fund's net asset value per share is made in accordance with generally accepted accounting principles. VALUATION OF INVESTMENTS OF ALL FUNDS EXCEPT THE MONEY MARKET FUND. Among other items, a Fund's liabilities include accrued expenses and dividends payable, and its total assets include portfolio securities valued at their market value as well as income accrued but not received. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Company's officers and in accordance with methods which are specifically authorized 51 95 by the Board of Directors of the Company. Short-term obligations with maturities of 60 days or less are valued at amortized cost as reflecting fair value. VALUATION OF THE MONEY MARKET FUND'S INVESTMENTS. The Money Market Fund uses the amortized cost method of valuing the securities held by the Fund and rounds the Fund's per share net asset value to the nearest whole cent; therefore, it is anticipated that the net asset value of the shares of the Fund will remain constant at $1.00 per share. However, the Company can give no assurance that the Fund can maintain a $1.00 net asset value per share. FUTURES CONTRACTS. Initial margin deposits made upon entering into futures contracts are recognized as assets due from the broker (the Fund's agent in acquiring the futures position). During the period the futures contract is open, changes in the value of the contract are recognized as unrealized gains or losses by "marking-to-market" on a daily basis to reflect the market value of the contract at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contract is closed, the Fund that has entered into the futures contract records a realized gain or loss equal to the difference between the proceeds from (or cost of) the closing transaction and the Fund's basis in the contract. For the Money Market Fund: The net asset value per share of the Fund is determined daily as of the close of trading on the New York Stock Exchange ("NYSE") (generally 4:00 p.m. Eastern time) on each business day of the Fund. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net asset value of a Fund share is determined as of the close of the NYSE on such day. Net asset value per share is determined by dividing the value of the Fund's securities, cash and other assets (including interest accrued but not collected), less all its liabilities (including accrued expenses and dividends payable), by the number of shares outstanding of the Fund and rounding the resulting per share net asset value to the nearest one cent. Determination of the Fund's net asset value per share is made in accordance with generally accepted accounting principles. The securities of the Fund are valued on the basis of amortized cost. This method values a security at its cost on the date of purchase and thereafter assumes a constant amortization to maturity of any discount or premium, regardless of the impact of fluctuating interest rates on the market value of the security. While this method provides certainty in valuation, it may result in periods during which value, as determined by amortized cost, is higher or lower than the price the Fund would receive if the security were sold. During such periods, the daily yield on shares of the Fund computed as described under "Yield Information" may differ somewhat from an identical computation made by another investment company with identical investments utilizing available indications as to the market value of its portfolio securities. The valuation of the portfolio instruments based upon their amortized cost and the concomitant maintenance of the net asset value per share of $1.00 for the Fund is permitted in accordance with applicable rules and regulations of the SEC which require the Fund to adhere to certain conditions. The Fund will invest only in "Eligible Securities," as defined in Rule 2a-7 of the 1940 Act, which the Fund's Board of Directors has determined present minimal credit risk. Rule 2a-7 also requires, among other things, that the Fund maintain a dollar-weighted average portfolio maturity of 90 days or less and purchase only instruments having remaining maturities of 397 calendar days or less. The Board of Directors is required to establish procedures designed to stabilize, to the extent reasonably practicable, the Fund's price per share at $1.00 for the Fund as computed for the purpose of sales and redemptions. Such procedures include review of the Fund's holdings by the Board of Directors at such intervals as they may deem appropriate, to determine whether the net asset value calculated by using available market quotations or other reputable sources for the Fund deviates from $1.00 per share and, if so, whether such deviation may result in material dilution or is otherwise unfair to existing holders of the Fund's shares. In the event the Board of Directors determines that such a deviation exists for the Fund, it will take such corrective action as the Board of Directors deems necessary and appropriate with respect to the Fund, including the sale of portfolio instruments prior to maturity to realize capital gains or losses or to shorten the average portfolio maturity; the withholding of dividends; redemption of shares in kind; or the establishment of a net asset value per share by using available market quotations. 52 96 The Fund intends to comply with any amendments made to Rule 2a-7 which may require corresponding changes in the Fund's procedures which are designed to stabilize the Fund's price per share at $1.00. For All Other Funds: The net asset value per share of each Fund is normally determined daily as of the close of trading on the NYSE (generally 4:00 p.m. Eastern time) on each business day of the Company. In the event the NYSE closes early (i.e. before 4:00 p.m. Eastern Time) on a particular day, the net asset value of a Fund share is determined as of the close of the NYSE on such day. For purposes of determining net asset value per share, futures and options contracts closing prices which are available 15 minutes after the close of trading of the NYSE will generally be used. Net asset value per share is determined by dividing the value of the Fund's securities, cash and other assets (including interest accrued but not collected), less all its liabilities (including accrued expenses and dividends payable), by the total number of shares outstanding. Determination of the Fund's net asset value per share is made in accordance with generally accepted accounting principles. Each equity security held by the Fund is valued at its last sales price on the exchange where the security is principally traded or, lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security traded in the over-the-counter market (but not including securities reported on the NASDAQ National Market System) is valued at the mean between the last bid and asked prices based upon quotes furnished by market makers for such securities. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price on that day. Debt securities are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as institution-size trading in similar groups of securities, developments related to special securities, yield, quality, coupon rate, maturity, type of issue, individual trading characteristics and other market data. Securities for which market quotations are not readily available are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued on the basis of amortized cost. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the NYSE. Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such foreign securities used in computing the net asset value of each Fund's shares are determined at such times as trading is completed. Foreign currency exchange rates are also generally determined prior the close of the NYSE. Occasionally, events affecting the values of such foreign securities and such foreign securities exchange rates may occur after the time at which such values are determined and prior to the close of the NYSE that will not be reflected in the computation of a Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. PURCHASE AND REDEMPTION OF SHARES The Company offers the shares of the Funds, on a continuous basis, to both registered and unregistered separate accounts of affiliated and unaffiliated Participating Insurance Companies to fund variable annuity contracts (the "Contracts") and variable life insurance policies ("Policies"). Each separate account contains divisions, each of which corresponds to a Fund in the Company. Net purchase payments under the Contracts are placed in one or more of the divisions of the relevant separate account and the assets of each division are invested in the shares of the Fund which corresponds to that division. Each separate account purchases and redeems shares of these Funds for its divisions at net asset value without sales or redemption charges. Currently several insurance company separate accounts invest in the Funds. The Company, in the future, may offer the shares of its Funds to certain pension and retirement plans ("Plans") qualified under the Internal Revenue Code. The relationships of Plans and Plan participants to the Fund would be subject, in part, to the provisions of the individual plans and applicable law. Accordingly, such 53 97 relationships could be different from those described in this Prospectus for separate accounts and owners of Contracts and Policies, in such areas, for example, as tax matters and voting privileges. The Board of Directors monitors for possible conflicts among separate accounts (and will do so for plans) buying shares of the Funds. Conflicts could develop for a variety of reasons. For example, differences in treatment under tax and other laws or the failure by a separate account to comply with such laws could cause a conflict. To eliminate a conflict, the Board of Directors may require a separate account or Plan to withdraw its participation in a Fund. A Fund's net asset value could decrease if it had to sell investment securities to pay redemptions proceeds to a separate account (or plan) withdrawing because of a conflict. Each Fund ordinarily effects orders to purchase or redeem its shares that are based on transactions under Policies or Contracts (e.g., purchase or premium payments, surrender or withdrawal requests, etc.) at the Fund's net asset value per share next computed on the day on which the separate account processes such transactions. Each Fund effects orders to purchase or redeem its shares that are not based on such transactions at the Fund's net asset value per share next computed on the day on which the Fund receives the orders. Please refer to the appropriate separate account prospectus related to your Contract for more information regarding the Contract. DIVIDENDS, DISTRIBUTIONS AND TAX MATTERS DIVIDENDS AND DISTRIBUTIONS. The Funds declare and distribute dividends representing substantially all net investment income as follows:
DIVIDENDS DIVIDENDS DECLARED PAID --------- --------- 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
Substantially all net realized capital gains, if any, are distributed on an annual basis, except for the Money Market Fund, which may distribute net realized short-term gains more frequently. All such distributions will be automatically reinvested, at the election of Participating Insurance Companies, in shares of the Fund issuing the distribution at the net asset value determined on the reinvestment date. 54 98 TAX MATTERS. Each series of shares of the Company is treated as a separate association taxable as a corporation. Each Fund intends to qualify under the Internal Revenue Code of 1986, as amended (the "Code"), as a regulated investment company ("RIC") for each taxable year. As a RIC, a Fund will not be subject to federal income tax to the extent it distributes to its shareholders its net investment income and net capital gains. In order to qualify as a regulated investment company, each Fund must satisfy certain requirements concerning the nature of its income, diversification of its assets and distribution of its income to shareholders. In order to ensure that individuals holding the Contracts whose assets are invested in a Fund will not be subject to federal income tax on distributions made by the Fund prior to the receipt of payments under the Contracts, each Fund intends to comply with additional requirements of Section 817(h) of the Code relating to both diversification of its assets and eligibility of an investor to be its shareholder. Certain of these requirements in the aggregate may limit the ability of a Fund to engage in transactions involving options, futures contracts, forward contracts and foreign currency and related deposits. Any Fund's transactions in non-equity options, forward contracts, futures contracts and foreign currency will be subject to special tax rules, the effect of which may be to accelerate income to the Fund, defer Fund losses, cause adjustments in the holding periods of fund securities and convert short-term capital losses into long-term capital losses. These losses could therefore affect the amount, timing and character of distributions. The holding of the foreign currencies and investments by a Fund in certain "passive foreign investment companies" may be limited in order to avoid imposition of a tax on such Fund. Each Fund investing in foreign securities may be subject to foreign withholding taxes on income from its investments. In any year in which more than 50% in value of a Fund's total assets at the close of the taxable year consists of securities of foreign corporations, the Fund may elect to treat any foreign taxes paid by it as if they had been paid by its shareholders. The insurance company segregated asset accounts holding Fund shares should consider the impact of this election. Holders of Contracts under which assets are invested in the Funds should refer to the prospectus for the Contracts for information regarding the tax aspects of ownership of such Contracts. Each Fund is treated as a separate association taxable as a corporation. Because each Fund intends to qualify under the Code as a RIC for each taxable year, each Fund must, among other things, meet the following requirements: A. Each Fund must generally derive at least 90% of its gross income from dividends, interest, payments with respect to securities loans, gains from the sale or other disposition of stock, securities, foreign currencies, or other income derived with respect to its business of investing in such stock, securities or currencies. B. Each Fund must diversify its holdings so that, at the end of each fiscal quarter or within 30 days thereafter: (i) at least 50% of the market value of the Fund's assets is represented by cash, cash items (including receivables), U.S. Government securities, securities of other RICs, and other securities, with such other securities limited, with respect to any one issuer, to an amount not greater than 5% of the Fund's assets and not more than 10% of the outstanding voting securities of such issuer, and (ii) not more than 25% of the value of its assets is invested in the securities of any one issuer (other than U.S. Government securities or securities of other RICs). The Code imposes a nondeductible 4% excise tax on a RIC that fails to distribute during each calendar year at least 98% of its ordinary income for the calendar year, at least 98% of its capital gain net income for the 12-month period ending on October 31 of the calendar year and certain other amounts. Each Fund intends to make sufficient distributions to avoid imposition of the excise tax. Some Funds meet an exception which results in their not being subject to excise tax. As a RIC, each Fund will not be subject to federal income tax on its income and gains distributed to shareholders if it distributes at least (i) 90% of its investment company taxable income for the taxable year; and (ii) 90% of the excess of its tax-exempt interest income under Code Section 103(a) over its deductions disallowed under Code Sections 265 and 171(a)(2). 55 99 Each Fund intends to comply with the diversification requirements imposed by Section 817(h) of the Code and the regulations thereunder. These requirements, which are in addition to the diversification requirements imposed on each Fund by the 1940 Act and Subchapter M of the Code, place certain limitations on (i) the assets of the insurance company separate accounts that may be invested in securities of a single issuer and (ii) eligible investors. Because Section 817(h) and those regulations treat the assets of each Fund as assets of the corresponding division of the insurance company separate accounts, each Fund intends to comply with these diversification requirements. Specifically, the regulations provide that, except as permitted by the "safe harbor" described below, as of the end of each calendar quarter or within 30 days thereafter no more than 55% of a Fund's total assets may be represented by any one investment, no more than 70% by any two investments, no more than 80% by any three investments and no more than 90% by any four investments. For this purpose, all securities of the same issuer are considered a single investment, and while each U.S. Government agency and instrumentality is considered a separate issuer, a particular foreign government and its agencies, instrumentalities and political subdivisions all will be considered the same issuer. The regulations also provide that a Fund's shareholders are limited, generally, to life insurance company separate accounts, general accounts of the same life insurance company, an investment adviser or affiliate in connection with the creation or management of a Fund or the trustee of a qualified pension plan. Section 817(h) provides, as a safe harbor, that a separate account will be treated as being adequately diversified if the diversification requirements under Subchapter M are satisfied and no more than 55% of the value of the account's total assets are cash and cash items, government securities and securities of other RICs. Failure of a Fund to satisfy the Section 817(h) requirements would result in taxation of and treatment of the Contract holders investing in a corresponding division other than as described in the applicable prospectuses of the various insurance company separate accounts. MISCELLANEOUS INFORMATION ORGANIZATION OF THE COMPANY The Company was organized on January 22, 1993 as a Maryland corporation, and is registered with the Securities and Exchange Commission as an open-end, series, management investment company. The Company currently consists of seventeen separate portfolios (i.e., the Funds). The authorized capital stock of the Company consists of 4,500,000,000 shares of common stock with a par value of $.001 per share, of which 250,000,000 shares are classified AIM V.I. AGGRESSIVE GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. BALANCED FUND shares, 250,000,000 shares are classified AIM V.I. BLUE CHIP FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL APPRECIATION FUND shares, 250,000,000 shares are classified AIM V.I. CAPITAL DEVELOPMENT FUND shares, 250,000,000 shares are classified as AIM V.I. DENT DEMOGRAPHIC TRENDS FUND shares, 250,000,000 shares are classified AIM V.I. DIVERSIFIED INCOME FUND shares, 250,000,000 shares are classified AIM V.I. GLOBAL GROWTH AND INCOME FUND shares, 250,000,000 shares are classified AIM V.I. GLOBAL UTILITIES FUND shares, 250,000,000 shares are classified AIM V.I. GOVERNMENT SECURITIES FUND shares, 250,000,000 are classified AIM V.I. GROWTH FUND shares, 250,000,000 shares are classified AIM V.I. GROWTH AND INCOME FUND shares, 250,000,000 shares are classified AIM V.I. HIGH YIELD FUND shares, 250,000,000 shares are classified AIM V.I. INTERNATIONAL EQUITY FUND shares, 250,000,000 shares are classified AIM V.I. MONEY MARKET FUND shares, 250,000,000 shares are classified AIM V.I. TELECOMMUNICATIONS FUND shares, 250,000,000 shares are classified AIM V.I. VALUE FUND shares, and the balance of which are unclassified. The shares of each Fund have equal rights with respect to voting, except that (i) the holders of shares of a particular Fund voting together will have the exclusive right to vote on matters (such as advisory fees) pertaining solely to that Fund, and (ii) the holders of shares of a particular Fund will have the exclusive right to vote on matters pertaining to distribution plans, if any such plans are adopted, relating solely to such Fund. Shareholders of the Funds do not have cumulative voting rights. The Company understands that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with the instructions received from Contract owners, annuitants and beneficiaries. Fund shares held by a registered separate account as to which no instructions have been received will be voted for or against any proposition, or in abstention, in the same proportion as the shares 56 100 of that separate account as to which instructions have been received. Fund shares held by a registered separate account that are not attributable to Contracts will also be voted for or against any proposition in the same proportion as the shares for which voting instructions are received by that separate account. If an insurance company determines, however, that it is permitted to vote any such shares of the Funds in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder. Under Maryland law and the Company's By-Laws, the Company need not hold an annual meeting of shareholders unless a meeting is required under the 1940 Act to elect directors. Shareholders may remove directors from office, and a meeting of shareholders may be called at the request of the holders of 10% or more of the Company's outstanding shares. There are not preemptive or conversion rights applicable to any of the Company's shares. Each Fund's shares, when issued, are fully paid and non-assessable. AUDIT REPORTS The Company furnishes semi-annual reports containing information about the Funds and their operations, including a list of the investments held in each Fund's portfolio and their respective financial statements. Financial statements, audited by independent auditors, will be issued annually. The firm of Tait, Weller & Baker, Eight Penn Center Plaza, Philadelphia, PA 19103, serves as the auditors of each Fund. LEGAL MATTERS Freedman, Levy, Kroll & Simonds, Washington, D.C. has advised the Company on certain federal securities law matters. CUSTODIAN AND TRANSFER AGENT State Street Bank and Trust Company ("State Street"), 225 Franklin Street, Boston, MA 02110, is custodian of all securities and cash of the Funds. The custodian attends to the collection of principal and income, pays and collects all monies for securities bought and sold by the Portfolios, and performs certain other ministerial duties. State Street also acts as transfer and dividend disbursing agent for the Funds. These services do not include any supervisory function over management or provide any protection against any possible depreciation of assets. The Funds pay State Street such compensation as may be agreed upon from time to time. PRINCIPAL HOLDERS OF SECURITIES To the best of the knowledge of each Fund, the names of the record holders of 5% or more of the outstanding shares of the Fund as of February 1, 2000, and the percentage of the outstanding shares of such Fund owned by such shareholders as of such date are set out below. The address of A I M Advisors, Inc. is 11 Greenway Plaza, Suite 100, Houston, TX 77046. The address of Connecticut General Life Insurance Company is 900 Cottage Grove Road, Hartford, CT 06152-2321. The address of Glenbrook Life and Annuity Company is 3100 Sanders Road, N4C, Northbrook, IL 60062. The address of IDS Life Insurance Company is IDS Tower 10, T27/52, Minneapolis, MN 55440. The address of Merrill Lynch Life Insurance Company is 800 Scudders Mill Road, Plainsboro, NJ 08536. The address of Pruco Life Insurance Company and Pruco Life Insurance Company of New Jersey is Gateway Center Three, 13th Floor, Newark, NJ 07102. The address of First Citicorp Life Insurance Company is One Court Square, Long Island City, NY 11120. The address of Union Central Life Insurance Company is 1876 Waycross Road, Cincinnati, OH 45240. The address for Hartford Life Insurance Company is 200 Hopmeadow Street, Simsburg, CT 06089. The address of Security Life of Denver Insurance Company is 1290 Broadway, Denver, CO 80203. The address of Aetna Life Insurance and Annuity Company is 151 Farmington Avenue, Hartford, CT 06156. The address of General American Life Insurance Company is 9735 Landmark Parkway Drive, St. Louis, MO 63127. The address of The Lincoln National Life Insurance Company is 1300 S. Clinton, Fort Wayne, IN 46802. 57 101 AIM V.I. AGGRESSIVE GROWTH FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Glenbrook Life & Annuity Company -0- -0- 98.47%*
AIM V.I. BALANCED FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Glenbrook Life & Annuity Company -0- -0- 76.89%* Union Central Life Insurance Company -0- -0- 22.45%
AIM V.I. BLUE CHIP FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- A I M Advisors, Inc. -0- -0- 62.06%* Glenbrook Life & Annuity Company -0- -0- 37.95%*
AIM V.I. CAPITAL APPRECIATION FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 34.09%* Glenbrook Life & Annuity Company -0- -0- 19.33% Merrill Lynch Life Insurance Company -0- -0- 15.68% Aetna Life Insurance and Annuity Company -0- -0- 11.19%
AIM V.I. CAPITAL DEVELOPMENT FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Glenbrook Life & Annuity Company -0- -0- 50.40%* IDS Life Insurance Company -0- -0- 49.20%*
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Glenbrook Life & Annuity Company -0- -0- 73.99%* A I M Advisors, Inc. -0- -0- 25.69%*
AIM V.I. DIVERSIFIED INCOME FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 47.13%* Glenbrook Life & Annuity Company -0- -0- 29.99%* General American Life Insurance Company -0- -0- 14.30%
- ---------- * 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. 58 102 AIM V.I. GLOBAL GROWTH AND INCOME FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- General American Life Insurance Company -0- -0- 99.64%*
AIM V.I. GLOBAL UTILITIES FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 49.30%* Glenbrook Life & Annuity Company -0- -0- 43.74%*
AIM V.I. GOVERNMENT SECURITIES FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 30.10%* Glenbrook Life & Annuity Company -0- -0- 27.54%* First Citicorp Life Insurance Company -0- -0- 19.48% Security Life of Denver Insurance Company -0- -0- 11.34%
AIM V.I. GROWTH FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 38.80%* Glenbrook Life & Annuity Company -0- -0- 24.84% Aetna Life Insurance and Annuity Company -0- -0- 10.82% The Lincoln National Life Insurance Company -0- -0- 5.78%
- ---------- * A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the Funds in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder. 59 103 AIM V.I. GROWTH AND INCOME FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- IDS Life Insurance Company -0- -0- 61.43%* Glenbrook Life & Annuity Company -0- -0- 9.47% Pruco Life Insurance Company -0- -0- 8.12% Connecticut General Life Insurance Company -0- -0- 7.75%
AIM V.I. HIGH YIELD FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Glenbrook Life & Annuity Company -0- -0- 57.13%* Hartford Life Insurance Company -0- -0- 35.27%* A I M Advisors, Inc. -0- -0- 7.53%
AIM V.I. INTERNATIONAL EQUITY FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 41.62%* Glenbrook Life & Annuity Company -0- -0- 19.71% General American Life Insurance Company -0- -0- 11.87% First Citicorp Life Insurance Company -0- -0- 6.12%
- ---------- * A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the Funds in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder. 60 104 AIM V.I. MONEY MARKET FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Connecticut General Life Insurance Company -0- -0- 48.91%* Glenbrook Life & Annuity Company -0- -0- 29.94%* General American Life Insurance Company -0- -0- 19.27%
AIM V.I. TELECOMMUNICATIONS FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- General American Life Insurance Company -0- -0- 97.13%*
AIM V.I. VALUE FUND
PERCENT OWNED PERCENT OWNED NAME OF OF RECORD BENEFICIALLY PERCENT OWNED RECORD OWNER AND BENEFICIALLY ONLY OF RECORD ONLY ------------ ---------------- ------------- -------------- Merrill Lynch Life Insurance Company -0- -0- 25.05%* Connecticut General Life Insurance Company -0- -0- 21.82% Pruco Life Insurance Company of New Jersey -0- -0- 15.27% Glenbrook Life & Annuity Company -0- -0- 12.23%
As of February 1, 2000, the directors and officers of the Company as a group owned beneficially less than 1% of the outstanding shares of the Company. - ---------- * A shareholder who beneficially owns more than 25% of the voting securities of a Fund may be presumed to "control" the Fund. The Funds understand that insurance company separate accounts owning shares of the Funds will vote their shares in accordance with instructions received from Contract owners, annuitants and beneficiaries. If an insurance company determines, however, that it is permitted to vote any such shares of the Funds in its own right, it may elect to do so, subject to the then current interpretation of the 1940 Act and the rules thereunder. 61 105 OTHER INFORMATION The Prospectus and this Statement of Additional Information omit certain information contained in the Registration Statement which the Funds have filed with the SEC under the Securities Act of 1933 and reference is hereby made to the Registration Statement for further information with respect to the Funds and the securities offered hereby. The Registration Statement is available for inspection by the public at the SEC in Washington, D.C. 62 106 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-1 107 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-2 108 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-3 109 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-4 110 APPENDIX B - -------------------------------------------------------------------------------- DESCRIPTION OF OBLIGATIONS ISSUED OR GUARANTEED BY U.S. GOVERNMENT AGENCIES OR INSTRUMENTALITIES The following list includes certain common Agency Securities, as defined in the Prospectus, and does not purport to be exhaustive. EXPORT-IMPORT BANK CERTIFICATES -- are certificates of beneficial interest and participation certificates issued and guaranteed by the Export-Import Bank of the United States. FEDERAL FARM CREDIT SYSTEM NOTES AND BONDS -- are bonds issued by a cooperatively owned, nationwide system of banks and associations supervised by the Farm Credit Administration, an independent agency of the U.S. Government. FEDERAL HOME LOAN BANK NOTES AND BONDS -- are notes and bonds issued by the Federal Home Loan Bank System. FHA DEBENTURES -- are debentures issued by the Federal Housing Authority of the U.S. Government. FHA INSURED NOTES -- are bonds issued by the Farmers Home Administration of the U.S. Government. FEDERAL HOME LOAN MORTGAGE CORPORATION ("FHLMC") BONDS -- are bonds issued and guaranteed by FHLMC, a corporate instrumentality of the U.S. Government. The Federal Home Loan Banks own all the capital stock of FHLMC, which obtains its funds by selling mortgages (as well as participation interests in the mortgages) and by borrowing funds through the issuance of debentures and otherwise. FHLMC PARTICIPATION CERTIFICATES OR "FREDDIE MACS" -- represent undivided interests in specified groups of conventional mortgage loans (and/or participation interests in those loans) underwritten and owned by FHLMC. At least 95% of the aggregate principal balance of the whole mortgage loans and/or participations in a group formed by FHLMC typically consists of single-family mortgage loans, and not more than 5% consists of multi-family loans. FHLMC Participation Certificates are not guaranteed by, and do not constitute a debt or obligation of, the U.S. Government or any Federal Home Loan Bank. FHLMC Participation Certificates are issued in fully registered form only, in original unpaid principal balances of $25,000, $100,000, $200,000, $500,000, $1 million and $5 million. FHLMC guarantees to each registered holder of a Participation Certificate, to the extent of such holder's pro rata share (i) the timely payment of interest accruing at the applicable certificate rate on the unpaid principal balance outstanding on the mortgage loans, and (ii) collection of all principal on the mortgage loans without any offset or deductions. Pursuant to these guaranties, FHLMC indemnifies holders of Participation Certificates against any reduction in principal by reason of charges for property repairs, maintenance, and foreclosure. FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") BONDS -- are bonds issued and guaranteed by FNMA, a federally chartered and privately-owned corporation. FNMA PASS-THROUGH CERTIFICATES OR "FANNIE MAES" -- are mortgage pass-through certificates issued and guaranteed by FNMA. FNMA Certificates represent a fractional undivided ownership interest in a pool of mortgage loans either provided from FNMA's own portfolio or purchased from primary lenders. The mortgage loans included in the pool are conventional, insured by the Federal Housing Administration or guaranteed by the Veterans Administration. FNMA Certificates are not backed by, nor entitled to, the full faith and credit of the U.S. Government. Loans not provided from FNMA's own portfolio are purchased only from primary lenders that satisfy certain criteria developed by FNMA, including depth of mortgage origination experience, servicing experience and financial capacity. FNMA may purchase an entire loan pool from a single lender, and issue Certificates B-1 111 backed by that loan pool alone, or may package a pool made up of loans purchased from various lenders. Various types of mortgage loans, and loans with varying interest rates, may be included in a single pool, although each pool will consist of mortgage loans related to one-family or two-to-four family residential properties. Substantially all FNMA mortgage pools currently consist of fixed interest rate and growing equity mortgage loans, although FNMA mortgage pools may also consist of adjustable interest rate mortgage loans or other types of mortgage loans. Each mortgage loan must conform to FNMA's published requirements or guidelines with respect to maximum principal amount, loan-to-value ratio, loan term, underwriting standards and insurance coverage. All mortgage loans are held by FNMA as trustee pursuant to a trust indenture for the benefit of Certificate holders. The trust indenture gives FNMA responsibility for servicing and administering the loans in a pool. FNMA contracts with the lenders or other servicing institutions to perform all services and duties customary to the servicing of mortgages, as well as duties specifically prescribed by FNMA, all under FNMA supervision. FNMA may remove service providers for cause. The pass-through rate on FNMA Certificates is the lowest annual interest rate borne by an underlying mortgage loan in the pool, less a fee to FNMA as compensation for servicing and for FNMA's guarantee. Lenders servicing the underlying mortgage loans receive as compensation a portion of the fee paid to FNMA, the excess yields on pooled loans with coupon rates above the lowest rate borne by any mortgage loan in the pool and certain other amounts collected, such as late charges. The minimum size of a FNMA pool is $1 million of mortgage loans. Registered holders purchase Certificates in amounts not less than $25,000. FNMA Certificates are marketed by the servicing lender banks, usually through securities dealers. The lender of a single lender pool typically markets all Certificates based on that pool, and lenders of multiple lender pools market Certificates based on a pro rata interest in the aggregate pool. The amount of FNMA Certificates currently outstanding is limited. GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") CERTIFICATES OR "GINNIE MAES" -- are mortgage-backed securities which represent a partial ownership interest in a pool of mortgage loans issued by lenders such as mortgage bankers, commercial banks and savings and loan associations. Each mortgage loan included in the pool is either insured by the Federal Housing Administration or guaranteed by the Veterans Administration. A "pool" or group of such mortgages is assembled, and, after being approved by GNMA, is offered to investors through securities dealers. GNMA is a U.S. Government corporation within the Department of Housing and Urban Development. GNMA Certificates differ from bonds in that the principal is paid back monthly by the borrower over the term of the loan rather than returned in a lump sum at maturity. GNMA Certificates are called "modified pass-through" securities because they entitle the holder to receive its proportionate share of all interest and principal payments owed on the mortgage pool, net of fees paid to the issuer and GNMA, regardless of whether or not the mortgagor actually makes the payment. Payment of principal of and interest on GNMA Certificates of the "modified pass-through" type is guaranteed by GNMA and backed by the full faith and credit of the U.S. Government. The average life of a GNMA Certificate is likely to be substantially less than the original maturity of the mortgage pools underlying the securities. Prepayments of principal by mortgagors and mortgage foreclosures will usually result in the return on the greater part of principal invested far in advance of the maturity of the mortgages in the pool. Foreclosures impose little risk to principal investment because of the GNMA guarantee. As the prepayment rates of individual mortgage pools will vary widely, it is not possible to accurately predict the average life of a particular issue of GNMA Certificates. However, statistics published by the FHA indicate that the average life of a single family dwelling mortgage with 25- to 30-year maturity, the type of mortgage which backs the vast majority of GNMA Certificates, is approximately 12 years. It is therefore customary practice to treat GNMA Certificates as 30-year mortgage-backed securities which prepay fully in the twelfth year. B-2 112 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-3 113 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-1 114 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-2 115 FINANCIAL STATEMENTS FS 116 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Aggressive Growth Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Aggressive Growth Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. AGGRESSIVE GROWTH FUND FS-1 117 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ---------------------------------------------------------------------
MARKET SHARES VALUE 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 - -----------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH FUND FS-2 118
MARKET SHARES VALUE 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 - ------------------------------------------------------------------
MARKET SHARES VALUE 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 - ----------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH FUND FS-3 119
MARKET SHARES VALUE 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 - -----------------------------------------------------------------
MARKET SHARES VALUE 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 - --------------------------------------------------------------------
AIM V.I. AGGRESSIVE GROWTH FUND FS-4 120
MARKET SHARES VALUE 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 ====================================================================
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-5 121 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ======================================================================
See Notes to Financial Statements. AIM V.I. AGGRESSIVE GROWTH FUND FS-6 122 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
1999 1998 ----------- ---------- 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 ================================================================================
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-7 123 B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $28,394 and paid-in capital decreased by $28,394 as a result of net operating loss reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund has a capital loss carryforward of $398,627 as of December 31, 1999 which may be carried forward to offset future taxable gains, if any, which expires in varying increments, if not previously utilized, in the year 2007. E. Futures Contracts - The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks include the possibility of an illiquid market and that a change in value of the contracts may not correlate with changes in the value of the securities being hedged. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.80% of the first $150 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $150 million. During the year ended December 31, 1999, AIM waived fees of $103,002 and reimbursed expenses of $36,238. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $46,310 of which AIM retained $0 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,440 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - INDIRECT EXPENSES During the year ended December 31, 1999, the Fund received reductions in custodian fees of $98 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $98 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 5 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. NOTE 6 - INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the year ended December 31, 1999 was $13,798,559 and $6,568,379, respectively. The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 1999 is as follows: 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 =========================================================================
Cost of investments for tax purposes is $12,125,664. AIM V.I. AGGRESSIVE GROWTH FUND FS-8 124 NOTE 7 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ---------------------- ------------------- SHARES AMOUNT SHARES AMOUNT --------- ----------- ------- ---------- 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 =======================================================================
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.
1999(a) 1998 ------- ------ 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% =============================================================================
(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-9 125 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Balanced Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Balanced Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. BALANCED FUND FS-10 126 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-11 127
PRINCIPAL MARKET AMOUNT VALUE 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 - --------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-12 128
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
SHARES VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-13 129
MARKET SHARES VALUE 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 - --------------------------------------------------------------
MARKET SHARES VALUE 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 - --------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-14 130
MARKET SHARES VALUE 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 - -------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-15 131
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE NEW ZEALAND - (CONTINUED) New Zealand Government - NZD Series 302 (Sovereign Debt), Bonds, 10.00%, 03/15/02 $ 20,000 $ 11,155 - ------------------------------------------------------------------------------- Series 404 (Sovereign Debt), Bonds, 8.00%, 04/15/04 NZD 15,000 8,098 - ------------------------------------------------------------------------------- 116,035 - ------------------------------------------------------------------------------- SWEDEN - 0.37% Stadshypotek A.B. - Series 1562 (Banks-Regional), Bonds, 3.50%, 09/15/04 SEK 1,000,000 105,693 - ------------------------------------------------------------------------------- Swedish Government - Series 1035 (Sovereign Debt), Bonds, 6.00%, 02/09/05 SEK 600,000 72,191 - ------------------------------------------------------------------------------- 177,884 - ------------------------------------------------------------------------------- UNITED KINGDOM - 0.46% Lloyds Bank PLC-Series E (Banks-Major Regional), Medium Term Sub. Notes, 5.25%, 07/14/08 DEM 50,000 24,449 - ------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. - Series E (Investment Banking/Brokerage), Sr. Unsec. Unsub. Medium Term Notes, 7.38%, 12/17/07 GBP 55,000 90,047 - ------------------------------------------------------------------------------- National Power PLC (Electric Companies), Sr. Unsec. Unsub. Bonds, 8.00%, 02/21/07 AUD 100,000 64,916 - ------------------------------------------------------------------------------- National Westminster Bank PLC - Series E (Banks-Money Center), Unsec. Unsub. Medium Term Bonds, 5.13%, 06/30/11 EUR 30,000 27,066 - ------------------------------------------------------------------------------- Union Bank Switzerland London, (Banks-Major Regional), Unsec. Sub. Notes, 7.38%, 11/26/04 GBP 10,000 16,372 - ------------------------------------------------------------------------------- 222,850 - ------------------------------------------------------------------------------- Total Non-U.S. Dollar Denominated Bonds & Notes (Cost $1,108,644) 1,054,928 - ------------------------------------------------------------------------------- SHARES 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 - -------------------------------------------------------------------------------
AIM V.I. BALANCED FUND FS-16 132
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT 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 - -------------------------------------------------------------------------------
NUMBER OF EXERCISE EXPIRATION CONTRACTS PRICE DATE OPTIONS PURCHASED - 0.01% ELECTRONICS (DEFENSE) - 0.01% General Motors Corp. - Class H (Cost $5,886) 12 90 Jan-00 2,475 - -------------------------------------------------------------------------
SHARES 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 =========================================================================
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-17 133 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 INVESTMENT INCOME: Interest $ 948,294 - ---------------------------------------------------------------------------- Dividends (net of foreign withholding tax $799) 137,885 - ---------------------------------------------------------------------------- Total investment income 1,086,179 - ---------------------------------------------------------------------------- EXPENSES: Advisory fees 210,282 - ---------------------------------------------------------------------------- Administrative services fees 59,327 - ---------------------------------------------------------------------------- Printing fees 18,702 - ---------------------------------------------------------------------------- Professional fees 28,407 - ---------------------------------------------------------------------------- Custodian fees 34,382 - ---------------------------------------------------------------------------- Directors' fees 7,352 - ---------------------------------------------------------------------------- Other 8,631 - ---------------------------------------------------------------------------- Total expenses 367,083 - ---------------------------------------------------------------------------- Less: Fees waived by advisor (26,814) - ---------------------------------------------------------------------------- Expenses paid indirectly (529) - ---------------------------------------------------------------------------- Net expenses 339,740 - ---------------------------------------------------------------------------- Net investment income 746,439 - ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES, FORWARD CONTRACTS AND FUTURES AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities (565,510) - ---------------------------------------------------------------------------- Foreign currencies 2,366 - ---------------------------------------------------------------------------- Forward contracts (3,513) - ---------------------------------------------------------------------------- Futures contracts 574,474 - ---------------------------------------------------------------------------- Option contracts written 893 - ---------------------------------------------------------------------------- 8,710 - ---------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 5,583,828 - ---------------------------------------------------------------------------- Foreign currencies (3,959) - ---------------------------------------------------------------------------- Forward contracts 8,768 - ---------------------------------------------------------------------------- Futures contracts (15,441) - ---------------------------------------------------------------------------- Option contracts written 3,920 - ---------------------------------------------------------------------------- 5,577,116 - ---------------------------------------------------------------------------- Net gain from investment securities, foreign currencies, forward contracts and futures and option contracts 5,585,826 - ---------------------------------------------------------------------------- Net increase in net assets resulting from operations $6,332,265 ============================================================================
See Notes to Financial Statements. AIM V.I. BALANCED FUND FS-18 134 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
1999 1998 ----------- ----------- OPERATIONS: Net investment income $ 746,439 $ 105,191 - --------------------------------------------------------------------------------- Net realized gain from investment securities, foreign currencies, forward contracts and futures and option contracts 8,710 135,495 - --------------------------------------------------------------------------------- Change in net unrealized appreciation of investment securities, foreign currencies, forward contracts and futures and option contracts 5,577,116 700,688 - --------------------------------------------------------------------------------- Net increase in net assets resulting from operations 6,332,265 941,374 - --------------------------------------------------------------------------------- Dividends to Shareholders from net investment income (600,086) (115,294) - --------------------------------------------------------------------------------- Distributions to Shareholders from net realized gains (230,004) (20,295) - --------------------------------------------------------------------------------- Net increase from capital stock transactions 32,461,559 9,537,551 - --------------------------------------------------------------------------------- Net increase in net assets 37,963,734 10,343,336 - --------------------------------------------------------------------------------- NET ASSETS: Beginning of period 10,343,336 -- - --------------------------------------------------------------------------------- End of period $48,307,070 $10,343,336 ================================================================================= NET ASSETS CONSIST OF: Capital (par value and additional paid-in) $41,997,980 $ 9,536,421 - --------------------------------------------------------------------------------- Undistributed net investment income (loss) 122,628 (2,790) - --------------------------------------------------------------------------------- Undistributed net realized gain (loss) from investment securities, foreign currencies, forward contracts and futures and option contracts (91,342) 109,017 - --------------------------------------------------------------------------------- Unrealized appreciation of investment securities, foreign currencies, forward contracts and futures and option contracts 6,277,804 700,688 - --------------------------------------------------------------------------------- $48,307,070 $10,343,336 =================================================================================
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-19 135 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:
Contract to Settlement ------------------ Unrealized Date Currency Deliver Receive Value Appreciation ---------- -------- --------- -------- -------- ------------ 01/24/00 SEK 1,500,000 $184,884 $176,563 $8,321 ===============================================================
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-20 136 J. Bond Premiums--It is the policy of the Fund not to amortize market premiums on bonds for financial reporting purposes. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $150 million of the Fund's average daily net assets, plus 0.50% of the Fund's average daily net assets in excess of $150 million. During the year ended December 31, 1999, AIM waived fees of $26,814. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $59,327 of which AIM retained $17,161 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,358 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - INDIRECT EXPENSES During the year ended December 31, 1999, the Fund received reductions in custodian fees of $529 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $529 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 5 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. NOTE 6 - CALL OPTION CONTRACTS Transactions in call options written during the year ended December 31, 1999 are summarized as follows:
CALL OPTION CONTRACTS -------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- -------- Beginning of period -- $ -- - -------------------------------------------------------------------------------------- Written 71 52,994 - -------------------------------------------------------------------------------------- Closed (24) (32,736) - -------------------------------------------------------------------------------------- End of period 47 $ 20,258 ======================================================================================
Open call option contracts written at December 31, 1999 were as follows:
DECEMBER 31, UNREALIZED CONTRACT STRIKE NUMBER OR PREMIUMS 1999 MARKET APPRECIATION ISSUE MONTH PRICE CONTRACTS RECEIVED VALUE (DEPRECIATION) - ---------------------- -------- ------ --------- -------- ------------ ------------- America Online Inc. Jan-00 $88 30 $11,565 $ 5,625 $ 5,940 - -------------------------------------------------------------------------------------- General Motors Corp. Jan-00 100 12 5,213 3,525 1,688 - -------------------------------------------------------------------------------------- Int'l Business Machine Corp. Jan-00 95 5 3,480 7,188 (3,708) - -------------------------------------------------------------------------------------- 47 $20,258 $16,338 $ 3,920 ======================================================================================
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:
No. of Month/ Unrealized Contract Contracts Commitment Appreciation - -------- --------- ---------- ------------ S&P 500 Index 9 Mar-00/Buy $104,334 - --------------------------------------------------------------------------------------
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: 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 =========================================================================
Cost of investments for tax purposes is $41,667,770. AIM V.I. BALANCED FUND FS-21 137 NOTE 9--CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ---------------------- ------------------- Shares Amount Shares Amount --------- ----------- ------- ---------- 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 =======================================================================
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.
1999(a) 1998 ------- ------- 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% ======================================================================
(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-22 138 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Blue Chip Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations, the statement of changes in net assets and the financial highlights for the period December 29, 1999 (date operations commenced) through December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Blue Chip Fund, as of December 31, 1999, the results of its operations, the changes in its net assets and the financial highlights for the period December 29, 1999 (date operations commenced) through December 31, 1999 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. BLUE CHIP FUND FS-23 139 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE U.S. GOVERNMENT AGENCY SECURITIES - 16.50% FEDERAL HOME LOAN BANK - 16.50% Disc. Notes, 1.50%, 01/03/00 (Cost $164,986)(a) $ 165,000 $164,986 - -------------------------------------------------------------------------- U.S. TREASURY SECURITIES - 8.40% U.S. TREASURY BILLS - 8.40% 4.95%, 03/30/00 (Cost $83,960)(a) 85,000(b) 83,964 - -------------------------------------------------------------------------- REPURCHASE AGREEMENTS - 53.89% Bank of America Securities, 3.15%, 01/03/00(c)(d) 38,701 38,701 - -------------------------------------------------------------------------- Bank One Capital Markets, Inc., 3.25%, 01/03/00(e) 230,000 230,000 - -------------------------------------------------------------------------- CIBC Oppenheimer Corp., 3.25%, 01/30/00(f) 230,000 230,000 - -------------------------------------------------------------------------- Greenwich Capital Markets, Inc., 3.30%, 01/03/00(g) 40,000 40,000 - -------------------------------------------------------------------------- Total Repurchase Agreements (Cost $538,701) 538,701 - -------------------------------------------------------------------------- SHARES 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 ==========================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Interest rate shown represents the rate of discount paid or received at the time of purchase by the Fund. (b) A portion of the principal balance was pledged as collateral to cover margin requirements for open futures contracts. See Note 5. (c) Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements is taken into possession by the Fund upon entering into the repurchase agreement. The collateral is marked to market daily to ensure its market value is at least 102% of the sales price of the repurchase agreement. The investments in some repurchase agreements are through participation in joint accounts with other mutual funds, private accounts, and certain non-registered investment companies managed by the investment advisor or its affiliates. (d) Joint repurchase agreement entered into 06/30/99 with a maturing value of $470,258,225 and collateralized by $470,134,815 U.S. Government obligations, 4.75% to 5.25% due on 02/01/01 to 11/14/03 with an aggregate market value at 12/31/99 of $510,000,998. (e) Joint repurchase agreement entered into 12/31/99 with a maturing value of $300,081,250 and collateralized by $304,417,000 U.S. Government obligations, 0% to 8.125% due 01/30/00 to 05/15/21 with an aggregate market value at 12/31/99 of $303,690,194. (f) Joint repurchase agreement entered into 12/31/99 with a maturing value of $285,077,188 and collateralized by $285,000,000 U.S. Government obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an aggregate market value at 12/31/99 of $290,700,000. (g) Joint repurchase agreement entered into 12/31/99 with a maturing value of $240,066,000 and collateralized by $343,554,149 U.S. Government obligations, 5.00% to 10.00% due 03/01/01 to 12/01/29 with an aggregate market value at 12/31/99 of $244,803,339. (h) The security shares the same investment advisor as the Fund. (i) Also represents cost for federal income tax purposes. Investment Abbreviations: Disc.- Discounted See Notes to Financial Statements. AIM V.I. BLUE CHIP FUND FS-24 140 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 ASSETS: Investments, at market value (cost $997,645) $ 997,649 - --------------------------------------------------------------------- Receivables for: Dividends and interest 157 - --------------------------------------------------------------------- Variation margin 1,870 - --------------------------------------------------------------------- Due from Advisor 613 - --------------------------------------------------------------------- Total assets 1,000,289 - --------------------------------------------------------------------- LIABILITIES: Accrued administrative services fees 274 - --------------------------------------------------------------------- Accrued advisory fees 41 - --------------------------------------------------------------------- Accrued operating expenses 370 - --------------------------------------------------------------------- Total liabilities 685 - --------------------------------------------------------------------- Net assets applicable to shares outstanding $ 999,604 ===================================================================== CAPITAL STOCK, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 - --------------------------------------------------------------------- Outstanding 100,001 - --------------------------------------------------------------------- Net asset value, offering and redemption price per share $ 10.00 =====================================================================
STATEMENT OF OPERATIONS For the period December 29, 1999 (date operations commenced) through December 31, 1999 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) =======================================================================
See Notes to Financial Statements. AIM V.I. BLUE CHIP FUND FS-25 141 STATEMENT OF CHANGES IN NET ASSETS For the period December 29, 1999 (date operations commenced) through December 31, 1999
1999 --------- 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 ==============================================================================
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-26 142 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:
UNREALIZED NO. OF APPRECIATION CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION) - -------- --------- ---------------- -------------- S&P 500 Mini 11 Mar-00/Buy $(578)
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:
1999 ------------------ SHARES AMOUNT ------- ---------- Sold 100,001 $1,000,010 ======================================================================
AIM V.I. BLUE CHIP FUND FS-27 143 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.
1999 ------ 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 -- =========================================================================
(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-28 144 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Capital Appreciation Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Capital Appreciation Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. CAPITAL APPRECIATION FUND FS-29 145 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ----------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -----------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND FS-30 146
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND FS-31 147
MARKET SHARES VALUE 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 - -------------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND FS-32 148
MARKET SHARES VALUE 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 ================================================================
Investment Abbreviations: ADR - American Depositary Receipt Conv. - Convertible Pfd. - Preferred NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) A portion of this security is subject to call options written. See note 7. (c) The money market fund has the same investment advisor as the Fund. See Notes to Financial Statements. AIM V.I. CAPITAL APPRECIATION FUND FS-33 149 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ========================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ==============================================================================
See Notes to Financial Statements. AIM V.I. CAPITAL APPRECIATION FUND FS-34 150 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 -------------- ------------ 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Capital Appreciation Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek capital appreciation through investments in common stocks, with emphasis on medium-sized and smaller emerging growth companies. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also AIM V.I. CAPITAL APPRECIATION FUND FS-35 151 generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $432,717, undistributed net realized gains decreased by $435,108 and paid- in capital increased by $2,391 as a result of differing book/tax treatment of net operating loss reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Foreign Currency Translations - Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. Covered Call Options - The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written. H. Put Options - The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of the first $250 million of the Fund's average daily net assets, plus 0.60% of the Fund's average daily net assets in excess of $250 million. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $578,362 of which AIM retained $78,369 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. AIM V.I. CAPITAL APPRECIATION FUND FS-36 152 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: 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 ===========================================================================
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:
CALL OPTION CONTRACTS ------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- --------- 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 ===========================================================================
Open call option contracts written as of December 31, 1999 were as follows:
DECEMBER 31, UNREALIZED CONTRACT STRIKE NUMBER OF PREMIUMS 1999 APPRECIATION ISSUE MONTH PRICE CONTRACTS RECEIVED MARKET VALUE (DEPRECIATION) - --------- -------- ------ --------- -------- ------------ -------------- EMC Corp. January $75 145 $59,230 $502,969 ($443,739) - -------------------------------------------------------------------------
AIM V.I. CAPITAL APPRECIATION FUND FS-37 153 NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------- ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------- ---------- ------------ 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 ===============================================================================
* 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.
DECEMBER 31, ------------------------------------------------------ JANUARY 31, 1999 1998 1997 1996 1995 1995 ---------- -------- -------- -------- -------- ----------- 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% ================================================================================================
(a) Total returns are not annualized for periods less than one year. (b) Ratios are based on average net assets of $784,307,675. (c) Annualized. AIM V.I. CAPITAL APPRECIATION FUND FS-38 154 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. Capital Development Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Capital Development Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. CAPITAL DEVELOPMENT FUND FS-39 155 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------
AIM V.I. CAPITAL DEVELOPMENT FUND FS-40 156
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------
AIM V.I. CAPITAL DEVELOPMENT FUND FS-41 157
MARKET SHARES VALUE 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 - ----------------------------------------------------------------------
MARKET SHARES VALUE 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 - ----------------------------------------------------------------------
AIM V.I. CAPITAL DEVELOPMENT FUND FS-42 158
MARKET SHARES VALUE 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 - --------------------------------------------------------------------
NUMBER OF EXERCISE EXPIRATION CONTRACTS PRICE DATE 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 - --------------------------------------------------------------------
SHARES 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 - ---------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt DECS - Dividend Enhanced Convertible Stock Pfd. - Preferred See Notes to Financial Statements. AIM V.I. CAPITAL DEVELOPMENT FUND FS-43 159 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 INVESTMENT INCOME: Interest $ 18,220 - ---------------------------------------------------------------------- Dividends (net of $63 foreign withholding tax) 25,394 - ---------------------------------------------------------------------- Total investment income 43,614 - ---------------------------------------------------------------------- EXPENSES: Advisory fees 35,726 - ---------------------------------------------------------------------- Administrative services fees 46,126 - ---------------------------------------------------------------------- Custodian fees 38,398 - ---------------------------------------------------------------------- Directors' fees 6,958 - ---------------------------------------------------------------------- Professional fees 22,118 - ---------------------------------------------------------------------- Printing fees 11,728 - ---------------------------------------------------------------------- Other 1,712 - ---------------------------------------------------------------------- Total expenses 162,766 - ---------------------------------------------------------------------- Less: Fees waived and reimbursed by advisor (104,031) - ---------------------------------------------------------------------- Expenses paid indirectly (59) - ---------------------------------------------------------------------- Net expenses 58,676 - ---------------------------------------------------------------------- Net investment income (loss) (15,062) - ---------------------------------------------------------------------- Realized and unrealized gain (loss) from investment securities, foreign currencies and option contracts: Net realized gain (loss) from: Investment securities 9,055 - ---------------------------------------------------------------------- Option contracts written (457) - ---------------------------------------------------------------------- Foreign currencies (150) - ---------------------------------------------------------------------- 8,448 - ---------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 2,014,708 - ---------------------------------------------------------------------- Net gain from investment securities and futures contracts 2,023,156 - ---------------------------------------------------------------------- Net increase in net assets resulting from operations $2,008,094 ======================================================================
See Notes to Financial Statements. AIM V.I. CAPITAL DEVELOPMENT FUND FS-44 160 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 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 ================================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Capital Development Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is long-term capital appreciation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. AIM V.I. CAPITAL DEVELOPMENT FUND FS-45 161 B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $9,833, undistributed net realized gains increased by $150 and paid-in capital decreased by $9,983 as a result of differing book/tax treatment of foreign currency transactions and net operating loss reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund has a capital loss carryforward of $287,192 as of December 31, 1999 which may be carried forward to offset future taxable gains, if any, which expires in varying increments, if not previously utilized, in the year 2007. E. Foreign Currency Translations - Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. Covered Call Options - The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written. H. Put Options - The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.75% of the first $350 million of the Fund's average daily net assets, plus 0.625% of the Fund's average daily net assets in excess of $350 million. During the year ended December 31, 1999, AIM waived fees of $79,627 and reimbursed expenses of $24,404. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $46,126 of which AIM retained $0 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,438 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. AIM V.I. CAPITAL DEVELOPMENT FUND FS-46 162 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: 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 =========================================================================
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:
Call Option Contracts ------------------ Number of Premiums Contracts Received --------- -------- Beginning of year -- $ -- - ------------------------------------------------------------------------- Written 37 10,229 - ------------------------------------------------------------------------- Closed (32) (8,769) - ------------------------------------------------------------------------- Exercised (3) (1,303) - ------------------------------------------------------------------------- Expired (2) (157) - ------------------------------------------------------------------------- End of year -- -- =========================================================================
AIM V.I. CAPITAL DEVELOPMENT FUND FS-47 163 NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 -------------------- ------------------- Shares Amount Shares Amount -------- ---------- ------- ---------- 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 ===============================================================================
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.
1999(a) 1998(a) ------- ------- 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% ===========================================================================
(a) Calculated using average shares outstanding. (b) Total returns is not annualized for periods less than one year. (c) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements were 3.42% and 5.80% (annualized) for 1999 and 1998, respectively. (d) Ratios are based on average net assets of $4,763,466. (e) Annualized. (f) After fee waivers and/or expense reimbursements. Ratio of net investment income (loss) to average net assets prior to fee waivers and/or expense reimbursement were (2.51)% and (3.97)% (annualized) for 1999 and 1998, respectively. AIM V.I. CAPITAL DEVELOPMENT FUND FS-48 164 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Dent Demographic Trends Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations, the statement of changes in net assets and the financial highlights for the period December 29, 1999 (date operations commenced) through December 31, 1999. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Dent Demographic Trends Fund, as of December 31, 1999, the results of its operations, the changes in its net assets and the financial highlights for the period December 29, 1999 (date operations commenced) through December 31, 1999 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-49 165 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE 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 - ----------------------------------------------------------------------------- SHARES 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 =============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Interest rate shown represents the rate of discount paid or received at the time of purchase by the Fund. (b) A portion of the principal balance was pledged as collateral to cover margin requirements for open futures contracts. See Note 5. (c) Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements is taken into possession by the Fund upon entering into the repurchase agreement. The collateral is marked to market daily to ensure its market value is at least 102% of the sale price of the repurchase agreement. The investments in some repurchase agreements are through participation in joint accounts with other mutual funds, private accounts, and certain non-registered investment companies managed by the investment advisor or its affiliates. (d) Joint repurchase agreement entered into 12/31/99 with a maturing value of $470,258,225 and collateralized by $470,134,815 U.S. Government obligations, 4.75% to 5.25% due 02/01/01 to 11/14/03 with an aggregate market value at 12/31/99 of $510,000,998. (e) Joint repurchase agreement entered into 12/31/99 with a maturing value of $300,081,250 and collateralized by $304,417,000 U.S. Government obligations, 0% to 8.125% due 01/03/00 to 05/15/21 with an aggregate market value at 12/31/99 of $303,690,194. (f) Joint repurchase agreement entered into 12/31/99 with a maturing value of $285,077,188 and collateralized by $285,000,000 U.S. Government obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an aggregate market value at 12/31/99 of $290,700,000. (g) Joint repurchase agreement entered into 12/31/99 with a maturing value of $240,066,000 and collateralized by $343,554,149 U.S. Government obligations, 5.00% to 10.00% due 03/01/01 to 12/01/29 with an aggregate market value at 12/31/99 of $244,803,339. (h) The security shares the same investment advisor as the Fund. (i) Also represents cost for federal income tax purposes. Investment Abbreviations: Disc.- Discounted See Notes to Financial Statements. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-50 166 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the period December 29, 1999 (date operations commenced) through December 31, 1999 INVESTMENT INCOME: Interest $ 131 - ----------------------------------------------------------------------- Dividends 108 - ----------------------------------------------------------------------- Total investment income 239 - ----------------------------------------------------------------------- EXPENSES: Advisory fees 47 - ----------------------------------------------------------------------- Administrative services fees 274 - ----------------------------------------------------------------------- Custodian fees 170 - ----------------------------------------------------------------------- Directors' fees 43 - ----------------------------------------------------------------------- Other 155 - ----------------------------------------------------------------------- Total expenses 689 - ----------------------------------------------------------------------- Less: Fees waived and reimbursed by Advisor (613) - ----------------------------------------------------------------------- Net expenses 76 - ----------------------------------------------------------------------- Net investment income 163 - ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES: Change in net unrealized appreciation (depreciation) of: Investment securities 4 - ----------------------------------------------------------------------- Futures contracts (578) - ----------------------------------------------------------------------- Net gain (loss) on investment securities (574) - ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(411) =======================================================================
See Notes to Financial Statements. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-51 167 STATEMENT OF CHANGES IN NET ASSETS For the period December 29, 1999 (date operations commenced) through December 31, 1999
1999 --------- 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Dent Demographic Trends Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. The Fund commenced operations December 29, 1999. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve long-term growth of capital. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-52 168 B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $22 and paid-in capital decreased by $22 as a result of differing book/tax treatment of organizational costs reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Futures Contracts - The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks include the possibility of an illiquid market and that a change in value of the contracts may not correlate with changes in the value of the securities being hedged. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). H.S. Dent Advisors, Inc. is the Fund's subadvisor. Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.85% of the first $2 billion of the Fund's average daily net assets, plus 0.80% of the Fund's average daily net assets in excess of $2 billion. During the period December 29, 1999 (date operations commenced) through December 31, 1999, AIM waived fees of $321 and reimbursed expenses of $292. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the period December 29, 1999 (date operations commenced) through December 31, 1999, AIM was paid $0 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. NOTE 3 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 4 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the period December 29, 1999 (date operations commenced) through December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee is allocated among the funds based on their respective average net assets for the period. NOTE 5 - FUTURES CONTRACTS On December 31, 1999, $46,000 principal amount of U.S. Treasury obligations were pledged as collateral to cover margin requirements for open futures contracts. Open futures contracts were as follows:
UNREALIZED NO. OF APPRECIATION CONTRACT CONTRACTS MONTH/COMMITMENT (DEPRECIATION) - ------------ --------- ---------------- ------------- S&P 500 Mini 11 Mar-00/Buy ($578) - -------------------------------------------------------
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-53 169 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:
1999 ------------------ SHARES AMOUNT ------- ---------- Sold 100,001 $1,000,010 ===========================================================================
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.
1999 ------ 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 -- =========================================================================
(a) Total returns are not annualized for periods less than one year. (b) Ratios are annualized and based on average net assets of $666,528. AIM V.I. DENT DEMOGRAPHIC TRENDS FUND FS-54 170 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Diversified Income Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Diversified Income Fund, as of December 31, 1999, the results of its operations for the year ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. DIVERSIFIED INCOME FUND FS-55 171 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE 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 - -----------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME FUND FS-56 172
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME FUND FS-57 173
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME FUND FS-58 174
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT(h) VALUE NON-U.S. DOLLAR DENOMINATED NON-CONVERTIBLE BONDS & NOTES - 20.54% AUSTRALIA - 0.94% New South Wales Treasury Corp. - Series 4 (Sovereign Debt), Gtd. Notes, 7.00%, 04/01/04 AUD 975,000 643,678 - ------------------------------------------------------------------------------ State Bank New South Wales-Series E (Banks-Major Regional), Sr. Unsec. Gtd. Medium Term Notes, 8.63%, 08/20/01 AUD 425,000 288,326 - ------------------------------------------------------------------------------ 932,004 - ------------------------------------------------------------------------------ CANADA - 6.44% AT&T Canada Inc. (Telephone), Sr. Unsec. Notes, 7.15%, 09/23/04 CAD 700,000 479,184 - ------------------------------------------------------------------------------ Bell Mobility Cellular Inc. (Telecommunications - Cellular/Wireless), Deb., 6.55%, 06/02/08 CAD 750,000 497,916 - ------------------------------------------------------------------------------ Canadian Oil Debco Inc. (Oil & Gas - Exploration & Production), Deb., 11.00%, 10/31/00 CAD 450,000 322,308 - ------------------------------------------------------------------------------ Canadian Pacific Ltd. - Series D (Manufacturing-Diversified), Unsec. Medium Term Notes, 5.85%, 03/30/09 (Acquired 03/24/99; Cost $330,724)(a) CAD 500,000 319,958 - ------------------------------------------------------------------------------ Clearnet Communications Inc. (Telecommunications - Cellular/Wireless), Sr. Disc. Notes, - ------------------------------------------------------------------------------ 11.75%, 08/13/07 (Acquired 07/31/97-11/04/97; Cost $799,965)(a)(b) CAD 1,500,000 737,892 - ------------------------------------------------------------------------------ 10.40%, 05/15/08(b) CAD 1,600,000 703,942 - ------------------------------------------------------------------------------ Export Development Corp. (Sovereign Debt), Sr. Unsub. Notes, 6.50%, 12/21/04 NZD 270,000 133,691 - ------------------------------------------------------------------------------ Microcell Telecommunications Inc. (Telecommunications- Cellular/Wireless), Sr. Disc. Notes, 11.13%, 10/15/07(b) CAD 1,000,000 465,946 - ------------------------------------------------------------------------------ Poco Petroleums Ltd. (Oil & Gas - Exploration & Production), Unsec. Deb., 6.60%, 09/11/07 CAD 750,000 491,795 - ------------------------------------------------------------------------------ Province of Ontario (Sovereign Debt), Sr. Unsec. Unsub. Notes, 6.25%, 12/03/08 NZD 1,000,000 456,282 - ------------------------------------------------------------------------------ Rogers Cablesystems (Broadcasting - Television, Radio & Cable), Sr. Sec. Second Priority Deb., 9.65%, 01/15/14 CAD 600,000 434,421 - ------------------------------------------------------------------------------ Teleglobe Canada Inc. (Telephone), Unsec. Deb., 8.35%, 06/20/03 CAD 850,000 603,009 - ------------------------------------------------------------------------------ TransCanada Pipelines - Series Q (Natural Gas), Deb., 10.63%, 10/20/09 CAD 500,000 427,493 - ------------------------------------------------------------------------------ Westcoast Energy Inc. - Series V (Natural Gas), Unsec. Deb., 6.45%, 12/18/06(c) CAD 500,000 339,583 - ------------------------------------------------------------------------------ 6,413,420 - ------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME FUND FS-59 175
PRINCIPAL MARKET AMOUNT(h) VALUE 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 - -------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT(h) VALUE NEW ZEALAND - 0.65% Inter-American Development Bank, (Banks - Money Center), Unsec. Bonds, 5.75%, 04/15/04 NZD 1,000,000 486,467 - -------------------------------------------------------------------------------- New Zealand Government - - -------------------------------------------------------------------------------- Series 302 (Sovereign Debt), Bonds, 10.00%, 03/15/02 NZD 145,000 80,875 - -------------------------------------------------------------------------------- Series 404 (Sovereign Debt), Bonds, 8.00%, 04/15/04 NZD 145,000 78,281 - -------------------------------------------------------------------------------- 645,623 - -------------------------------------------------------------------------------- SWEDEN - 1.17% Stadshypotek A.B. - Series 1562 (Banks-Regional), Bonds, 3.50%, 09/15/04 SEK 7,000,000 739,852 - -------------------------------------------------------------------------------- Swedish Government - Series 1035 (Sovereign Debt), Bonds, 6.00%, 02/09/05 SEK 3,500,000 421,117 - -------------------------------------------------------------------------------- 1,160,969 - -------------------------------------------------------------------------------- UNITED KINGDOM - 2.38% Colt Telecom Group PLC - Series DBC (Telephone), Sr. Notes, 7.63%, 07/31/08 DEM 150,000 76,729 - -------------------------------------------------------------------------------- Jazztel PLC (Telecommunications - Cellular/Wireless), Sr. Notes, 13.25%, 12/15/09 (Acquired 12/09/99; Cost $318,122)(a) EUR 310,000 313,871 - -------------------------------------------------------------------------------- Lloyds Bank PLC - Series E (Banks - Major Regional), Medium Term Sub. Notes, 5.25%, 07/14/08 DEM 850,000 415,639 - -------------------------------------------------------------------------------- National Power PLC (Electric Companies), Sr. Unsec. Unsub. Bonds, 8.00%, 02/21/07 AUD 500,000 324,578 - -------------------------------------------------------------------------------- National Westminster Bank PLC - Series E (Banks - Money Center), Unsec. Unsub. Medium Term Bonds, 5.13%, 06/30/11 EUR 200,000 180,438 - -------------------------------------------------------------------------------- TeleWest Communications PLC (Broadcasting - Television, Radio & Cable), Sr. Unsec. Conv. Notes, 5.25%, 02/19/07 GBP 350,000 647,872 - -------------------------------------------------------------------------------- Union Bank Switzerland London (Banks-Major Regional), Unsec. Sub. Notes, 7.38%, 11/26/04 GBP 250,000 409,305 - -------------------------------------------------------------------------------- 2,368,432 - -------------------------------------------------------------------------------- UNITED STATES - 0.70% General Electric Capital Corp. - Series E (Financial- Diversified), Sr. Unsec. Unsub. Medium Term Notes, 6.00%, 07/27/01 GBP 200,000 317,839 - -------------------------------------------------------------------------------- Merrill Lynch & Co., Inc. - Series E (Investment Banking/Brokerage), Sr. Unsec. Unsub. Medium Term Notes, 7.38%, 12/17/07 GBP 235,000 384,747 - -------------------------------------------------------------------------------- 702,586 - -------------------------------------------------------------------------------- Total Non-U.S. Dollar Denominated Non-Convertible Bonds & Notes (Cost $21,527,812) 20,443,970 - --------------------------------------------------------------------------------
AIM V.I. DIVERSIFIED INCOME FUND FS-60 176
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - ----------------------------------------------------------------------------- SHARES 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 =============================================================================
AIM V.I. DIVERSIFIED INCOME FUND FS-61 177 NOTES TO SCHEDULE OF INVESTMENTS: (a) Restricted security. May be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933, as amended. The valuation of these securities has been determined in accordance with procedures established by the the Board of Directors. The aggregate market value of these securities at 12/31/99 was $7,207,090 which represents 7.24% of the Fund's net assets. (b) Discounted bond at purchase. The interest rate represents the coupon rate at which the bond will accrue at a specified future date. (c) Represents a security sold under Rule 144A, which is exempt from registration and may be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securites Act of 1933, as amended. (d) Issued as a unit. This unit includes 1 Sr. Note plus one warrant to purchase 6.667 shares of common stock. (e) Defaulted security. Currently, the issuer is partially in default with respect to interest payments. (f) This security has matured, but payment has not been received pending outcome of a vote of noteholders and judgement from court on reorganization of the company. If approved noteholders will receive $477 per $1000 principal amount of notes. (g) Non-income producing security. (h) Foreign denominated security. Par value and coupon rate are denominated in currency indicated. (i) Non-income producing security acquired as part of a unit with or in exchange for other securities. (j) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt AUD - Australian Dollar CAD - Canadian Dollars Conv. - Convertible Ctfs. - Certificates Deb. - Debentures DEM - German Deutsche Mark Disc. - Discounted EUR - Euro GBP - British Pound Sterling Gtd. - Guaranteed NZD - New Zealand Dollar Pfd. - Preferred REIT - Real Estate Investment Trust Sec. - Secured SEK - Swedish Krona Sr. - Senior STRYPES - Structured Yield Product Exchangeable for Stock Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated Wts. - Warrants See Notes to Financial Statements. AIM V.I. DIVERSIFIED INCOME FUND FS-62 178 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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) ===============================================================================
See Notes to Financial Statements. AIM V.I. DIVERSIFIED INCOME FUND FS-63 179 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ------------ ----------- 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Diversified Income Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek to achieve a high level of current income. The Fund will seek to achieve its objective by investing primarily in a diversified portfolio of foreign and U.S. government and corporate debt securities, including lower rated high yield debt securities (commonly known as "junk bonds"). These high yield bonds may involve special risks in addition to the risks associated with investment in higher rated debt securities. High yield bonds may be more susceptible to real or perceived adverse economic and competitive industry conditions than higher grade bonds. Also, the secondary market in which high yield bonds are traded may be less liquid than the market for higher grade bonds. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be AIM V.I. DIVERSIFIED INCOME FUND FS-64 180 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:
CONTRACT TO UNREALIZED SETTLEMENT -------------------- APPRECIATION DATE DELIVER RECEIVE VALUE (DEPRECIATION) ---------- --------- ---------- ---------- -------------- 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 ==============================================================
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.60% of the first $250 million of the Fund's average daily net assets, plus 0.55% of the Fund's average daily net assets in excess of $250 million. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $67,038 of which AIM retained $50,901 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,569 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - INDIRECT EXPENSES During the year ended December 31, 1999, the Fund received reductions in custodian fees of $644 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $644 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 5 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. AIM V.I. DIVERSIFIED INCOME FUND FS-65 181 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: 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) ==========================================================================
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:
1999 1998 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ 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 ==============================================================================
* 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.
DECEMBER 31, ---------------------------------------------- JANUARY 31, 1999 1998 1997 1996 1995 1995 ------- ------- ------- ------- ------- ----------- 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% ==========================================================================================
(a) Total returns are not annualized for periods less than one year. (b) Ratios are based on average net assets of $92,736,295. (c) Annualized. (d) After fee waivers and/or expense reimbursement. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.03% and 7.95%, respectively. AIM V.I. DIVERSIFIED INCOME FUND FS-66 182 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. Global Growth and Income Fund (formerly, GT Global Variable Growth and Income Fund), a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations, the statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended December 31, 1998 and the financial highlights for each of the four years in the period then ended were audited by other auditors whose report dated February 19, 1999, expressed an unqualified opinion thereon. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Global Growth and Income Fund, as of December 31, 1999, the results of its operations, the changes in its net assets and the financial highlights for the year then ended in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-67 183 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ---------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-68 184
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------- PRINCIPAL AMOUNT 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 - --------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------- SHARES 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 =========================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) Foreign denominated security. Par value and coupon rate are denominated in currency indicated. (c) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR- American Depositary Receipt Deb.- Debentures Gtd.- Guaranteed Pfd.- Preferred See Notes to Financial Statements. AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-69 185 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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) ===============================================================================
See Notes to Financial Statements. AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-70 186 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ------------ ----------- 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Global Growth and Income Fund (the "Fund"), (formerly named the GT Global Variable Growth & Income Fund), is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Prior to October 18, 1999, the Fund was a series portfolio of GT Global Variable Investment Trust (the "Trust") organized as a Delaware business trust registered under the 1940 Act. Pursuant to an agreement and plan of reorganization between the Company and the Trust, the Fund was reorganized as a portfolio of the Company effective October 18, 1999. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve long-term growth of capital with current income. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-71 187 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:
CONTRACT TO ------------------ SETTLEMENT UNREALIZED DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION - ---------- -------- ------- ---------- ---------- ------------ 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 ===============================================================
NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the Fund's average daily net assets. Under the terms of a sub-advisory agreement between AIM and INVESCO Asset Management Limited ("INVESCO"), AIM pays INVESCO 40% of the amount paid by the Fund to AIM. Effective July 1, 1999, the Company entered into a master administrative services agreement with AIM, replacing the prior pricing and accounting agreement. The Fund, pursuant to the master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. Prior to July 1, 1999, AIM was the pricing and accounting agent for the Fund. The monthly fee for these services paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average daily net assets. The annual fee rate was derived based on the aggregate net assets of the funds which comprised the following investment companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable Investment Trust. The fee was calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An amount was allocated to and paid by each such fund based on its relative average daily net assets. For the year ended December 31, 1999, AIM was paid $32,370 of which AIM retained $20,870 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $153 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - EXPENSE REDUCTIONS During the year ended December 31, 1999, the Fund received reductions in custodian fees of $18 under an expense offset arrangement and AIM directed certain portfolio trades to brokers who then paid $2,538 of the Fund's expenses. The effect of the above arrangements resulted in a reduction of the Fund's total expenses of $2,556 during the year ended December 31, 1999. AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-72 188 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: 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 ==========================================================================
Cost of investments for tax purposes is $24,631,287. AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-73 189 NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ----------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ----------- 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) =============================================================================
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.
1999 1998 1997 1996 1995 ------- ------- ------- ------- ------- Net asset value, beginning of period $ 21.51 $ 18.60 $ 16.51 $ 14.57 $ 12.99 - ------------------------------------------------------------------------------ Income from investment operations: Net investment income 0.57 0.53 0.41 0.53 0.52 - ------------------------------------------------------------------------------ Net gains (losses) on securities (both realized and unrealized) (1.29) 3.08 2.23 1.81 1.46 - ------------------------------------------------------------------------------ Total from investment operations (0.72) 3.61 2.64 2.34 1.98 - ------------------------------------------------------------------------------ Less distributions: Dividends from net investment income (0.61) (0.44) (0.51) (0.35) (0.40) - ------------------------------------------------------------------------------ Distributions from net realized capital gains (6.65) (0.26) (0.04) (0.05) -- - ------------------------------------------------------------------------------ Total distributions (7.26) (0.70) (0.55) (0.40) (0.40) - ------------------------------------------------------------------------------ Net asset value, end of period $ 13.53 $ 21.51 $ 18.60 $ 16.51 $ 14.57 - ------------------------------------------------------------------------------ Total return (0.13)% 19.60% 16.22% 16.33% 15.49% - ------------------------------------------------------------------------------ Ratios/supplemental data: Net assets, end of period (000s omitted) $30,756 $55,580 $50,356 $36,433 $30,565 - ------------------------------------------------------------------------------ Ratio of expenses to average net assets including interest expense: With reimbursement (Note 2) 1.34%(a) 2.53% 1.13% 1.20% 1.23% - ------------------------------------------------------------------------------ Without reimbursement 1.37%(a) 2.53% 1.27% 1.30% 1.44% - ------------------------------------------------------------------------------ Ratio of expenses to average net assets excluding interest expense: With reimbursement 1.33%(a) 2.49% 1.13% 1.20% 1.23% - ------------------------------------------------------------------------------ Without reimbursement 1.36%(a) 2.49% 1.27% 1.30% 1.44% - ------------------------------------------------------------------------------ Ratio of net investment income to average net assets With reimbursement (Note 2) 2.32%(a) 1.22% 2.86% 3.58% 3.87% - ------------------------------------------------------------------------------ Without reimbursement 2.29%(a) 1.22% 2.72% 3.48% 3.66% - ------------------------------------------------------------------------------ Ratio of interest expense to average net assets 0.01%(a) 0.04% -- -- -- - ------------------------------------------------------------------------------ Portfolio turnover rate 91% 72% 60% 57% 73% ==============================================================================
(a) Ratios are based on average net assets of $43,643,834. AIM V.I. GLOBAL GROWTH AND INCOME FUND FS-74 190 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Global Utilities Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995, and the period May 2, 1994 (commencement of operations) through January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Global Utilities Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995, and the period May 2, 1994 (commencement of operations) through January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. GLOBAL UTILITIES FUND FS-75 191 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ------------------------------------------------------------------
MARKET SHARES VALUE 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 - ---------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES FUND FS-76 192
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES FUND FS-77 193
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------- PRINCIPAL AMOUNT 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 - -------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - -----------------------------------------------------------------------------
AIM V.I. GLOBAL UTILITIES FUND FS-78 194
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------ SHARES 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 - ------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS: ADR - American Depository Receipt CAD - Canadian Dollars Conv. - Convertible Deb. - Debentures Disc. - Discounted EUR - Euro FRF - French Franc GBP - British Pound Sterling GDR - Global Depositary Receipt Gtd. - Guaranteed Pfd. - Preferred Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured Unsub. - Unsubordinated NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) Restricted security. May be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933, as amended. The valuation of these securities has been determined in accordance with procedures established by the Board of Directors. The aggregate market value of these securities at 12/31/99 was $1,322,980 which represented 3.33% of the Fund's net assets. (c) Foreign denominated security. Par value and coupon are denominated in currency indicated. (d) Step bond issued at discount. The interest rate represents the coupon rate at which the bond will accrue at a specified future date. (e) The money market fund has the same investment advisor as the Fund. See Notes to Financial Statements. AIM V.I. GLOBAL UTILITIES FUND FS-79 195 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 =====================================================================
See Notes to Financial Statements. AIM V.I. GLOBAL UTILITIES FUND FS-80 196 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ----------- ----------- 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 ================================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Global Utilities Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve a high level of current income, and as a secondary objective the Fund seeks to achieve capital appreciation, by investing primarily in the common stocks of public utility companies (either domestic or foreign). The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). AIM V.I. GLOBAL UTILITIES FUND FS-81 197 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: 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 ==========================================================================
Cost of investments for tax purposes is $24,559,728. AIM V.I. GLOBAL UTILITIES FUND FS-82 198 NOTE 7 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 -------------------- -------------------- SHARES AMOUNT SHARES AMOUNT -------- ---------- -------- ---------- 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 ===================================================================
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.
DECEMBER 31, ------------------------------------------------ JANUARY 31, 1999(a) 1998 1997 1996 1995 1995 ------- ------- ------- ------- ------ ----------- 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% ================================================================================================
(a) Calculated using average shares outstanding. (b) Totals returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $31,098,057. (d) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.55% and 3.42% for 1996 and 2.44% (annualized) and 2.79% (annualized) for 1995. (e) Annualized. (f) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 2.80% (annualized) and 2.90% (annualized), respectively. AIM V.I. GLOBAL UTILITIES FUND FS-83 199 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Government Securities Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Government Securities Fund, as of December 31, 1999, the results of its operations for the year ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. GOVERNMENT SECURITIES FUND FS-84 200 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE 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 - ----------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE FEDERAL NATIONAL MORTGAGE ASSOCIATION ("FNMA") - 27.24% - CONTINUED Medium term notes 6.40%, 05/02/01 1,225,000 $ 1,223,947 - --------------------------------------------------------------------------- 6.69%, 08/07/01 500,000 501,650 - --------------------------------------------------------------------------- 7.38%, 03/28/05 300,000 305,859 - --------------------------------------------------------------------------- Pass through certificates 7.00%, 03/01/04 to 01/01/28 3,697,688 3,633,075 - --------------------------------------------------------------------------- 6.00%, 12/01/08 to 12/01/13 2,886,622 2,745,710 - --------------------------------------------------------------------------- 7.50%, 11/01/09 to 07/01/27 1,624,063 1,626,020 - --------------------------------------------------------------------------- 6.50%, 10/01/10 to 09/01/27 1,489,904 1,441,551 - --------------------------------------------------------------------------- 8.50%, 09/01/24 to 02/01/25 981,400 1,008,697 - --------------------------------------------------------------------------- STRIPS(a) 7.37%, 10/09/19 1,800,000 452,682 - --------------------------------------------------------------------------- 19,274,732 - --------------------------------------------------------------------------- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION ("GNMA") - 12.40% Pass through certificates 9.50%, 08/15/03 to 09/15/16 47,041 50,461 - --------------------------------------------------------------------------- 7.50%, 03/15/08 to 08/15/28 1,992,785 1,976,283 - --------------------------------------------------------------------------- 9.00%, 09/15/08 to 10/15/16 93,366 98,436 - --------------------------------------------------------------------------- 11.00%, 10/15/15 25,601 28,241 - --------------------------------------------------------------------------- 10.50%, 09/15/17 to 11/15/19 21,617 23,637 - --------------------------------------------------------------------------- 10.00%, 06/15/19 628,842 683,080 - --------------------------------------------------------------------------- 6.50%, 12/15/23 370,911 351,783 - --------------------------------------------------------------------------- 8.00%, 07/15/24 to 07/15/26 2,400,291 2,436,443 - --------------------------------------------------------------------------- 7.00%, 04/15/28 to 06/15/28 3,227,603 3,126,740 - --------------------------------------------------------------------------- 8,775,104 - --------------------------------------------------------------------------- PRIVATE EXPORT FUNDING COMPANY - 0.43% Debentures 7.30%, 01/31/02 300,000 303,444 - --------------------------------------------------------------------------- STUDENT LOAN MARKETING ASSOCIATION - 0.71% Debentures 6.50%, 08/01/02 150,000 149,426 - --------------------------------------------------------------------------- Medium term notes 7.50%, 03/08/00 350,000 351,036 - --------------------------------------------------------------------------- 500,462 - --------------------------------------------------------------------------- TENNESSEE VALLEY AUTHORITY - 3.29% Debentures 6.38%, 06/15/05 2,400,000 2,325,696 - --------------------------------------------------------------------------- Total U.S. Government Agency Securities (Cost $46,820,120) 45,533,096 - ---------------------------------------------------------------------------
AIM V.I. GOVERNMENT SECURITIES FUND FS-85 201
PRINCIPAL MARKET AMOUNT VALUE 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 - ---------------------------------------------------------------- SHARES MONEY MARKET FUNDS - 21.04% STIT Government & Agency Portfolio (Cost $14,883,691)(c) 14,883,691 14,883,691 - ---------------------------------------------------------------- TOTAL INVESTMENTS - 104.90% (Cost $76,356,855) 74,225,166 ================================================================ OTHER ASSETS LESS LIABILITIES - (4.90%) (3,463,944) ================================================================ NET ASSETS - 100.00% $70,761,222 ================================================================
Investment Abbreviations: Deb. - Debentures STRIPS - Separately Traded Registered Interest and Principal Security Unsec. - Unsecured Unsub. - Unsubordinated NOTES TO SCHEDULE OF INVESTMENTS: (a) STRIPS are traded on a discount basis. In such cases the interest rate shown represents the rate of discount paid or received at the time of purchase by the Fund. (b) The principal amount has been deposited in escrow with custodian as collateral for reverse repurchase agreements outstanding at 12/31/99. See Note 4. (c) The money market fund has the same investment advisor as the Fund. See Notes to Financial Statements. AIM V.I. GOVERNMENT SECURITIES FUND FS-86 202 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 =====================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 INVESTMENT INCOME: Interest $ 4,021,531 - ----------------------------------------------------------------------------- Dividends 172,285 - ----------------------------------------------------------------------------- Total investment income 4,193,816 - ----------------------------------------------------------------------------- EXPENSES: Advisory fees 315,598 - ----------------------------------------------------------------------------- Administrative services fees 98,225 - ----------------------------------------------------------------------------- Custodian fees 25,266 - ----------------------------------------------------------------------------- Directors' fees 7,693 - ----------------------------------------------------------------------------- Interest expense 61,797 - ----------------------------------------------------------------------------- Other 56,941 - ----------------------------------------------------------------------------- Total expenses 565,520 - ----------------------------------------------------------------------------- Net investment income 3,628,296 - ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES: Net realized gain (loss) from investment securities (1,304,878) - ----------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of investment securities (3,043,863) - ----------------------------------------------------------------------------- Net gain (loss) on investment securities (4,348,741) - ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (720,445) ============================================================================= See Notes to Financial Statements.
AIM V.I. GOVERNMENT SECURITIES FUND FS-87 203 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ----------- ----------- 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Government Securities Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve a high level of current income consistent with reasonable concern for safety of principal by investing in debt securities issued, guaranteed or otherwise backed by the United States Government. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of AIM V.I. GOVERNMENT SECURITIES FUND FS-88 204 the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. The Fund may engage in dollar roll transactions with respect to mortgage backed securities issued by GNMA, FNMA and FHLMC. In a dollar roll transaction, the Fund sells a mortgage backed security held in the Fund to a financial institution such as a bank or broker-dealer, and simultaneously agrees to repurchase a substantially similar security (same type, coupon and maturity) from the institution at a later date at an agreed upon price. The mortgage backed securities that are repurchased will bear the same interest rate as those sold, but generally will be collateralized by different pools of mortgages with prepayment histories. During the period between the sale and repurchase, the Fund will not be entitled to receive interest and principal payments on securities sold. Proceeds of the sale will be invested in short-term instruments, and the income from these investments, together with any additional fee income received on the sale, could generate income for the Fund exceeding the yield on the security sold. Dollar roll transactions involve the risk that the market value of the securities retained by the Fund may decline below the price of the securities that the Fund has sold but is obligated to repurchase under the agreement. In the event the buyer of securities in a dollar roll transaction files for bankruptcy or becomes insolvent, the Fund's use of the proceeds from the sale of the securities may be restricted pending a determination by the other party, or its trustee or receiver, whether to enforce the Fund's obligation to repurchase the securities. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was decreased by $3,206, undistributed net realized gains decreased by $24,263 and paid-in capital increased by $27,469 as a result of differing book/tax treatment of paydown gains (losses) and other reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund has a capital loss carryforward of $1,524,195 as of December 31, 1999 which may be carried forward to offset future taxable gains, if any, which expires in varying increments, if not previously utilized, in the year 2007. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.50% on the first $200 million of the Fund's average daily net assets, plus 0.45% of the Fund's average daily net assets in excess of $250 million. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $98,225 of which AIM retained $44,501 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,666 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 4 - BORROWINGS Reverse repurchase agreements involve the sale of securities held by the Fund, with an agreement that the Fund will repurchase such securities at an agree- upon price and date. Proceeds from reverse repurchase agreements are treated as borrowings. The Fund will use the proceeds of a reverse repurchase agreement (which are considered to be borrowings under the 1940 Act) to purchase other permitted securities either maturing, or under an agreement to resell, at a date simultaneous with or prior to the expiration of the reverse repurchase agreement. The Fund will enter into a reverse repurchase agreement only when the interest income to be earned from the investment of proceeds of the transaction is greater than the interest expense of the transaction. The agreements are collateralized by the underlying securities and are carried at the amount at which the securities will subsequently be repurchased as specified in the agreements. The maximum amount outstanding during the year ended December 31, 1999 was $4,078,750, while borrowings averaged $1,626,949 per day with a weighted average interest rate of 3.77%. The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. AIM V.I. GOVERNMENT SECURITIES FUND FS-89 205 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: 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) ==========================================================================
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:
1999 1998 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ 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 ==============================================================================
* 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.
DECEMBER 31, ---------------------------------------------- JANUARY 31, 1999(a) 1998(a) 1997 1996 1995 1995 ------- ------- ------- ------- ------- ----------- Net asset value, beginning of period $ 11.18 $ 10.67 $ 9.87 $ 10.17 $ 9.39 $ 10.24 - ------------------------------------------------------------------------------------------- Income from investment operations: Net investment income 0.63 0.63 0.59 0.58 0.54 0.53 - ------------------------------------------------------------------------------------------- Net gains (losses) on securities (both realized and unrealized) (0.78) 0.20 0.22 (0.35) 0.74 (0.88) - ------------------------------------------------------------------------------------------- Total from investment operations (0.15) 0.83 0.81 0.23 1.28 (0.35) - ------------------------------------------------------------------------------------------- Less distributions: Dividends from net investment income (0.40) (0.32) (0.01) (0.53) (0.50) (0.50) - ------------------------------------------------------------------------------------------- Net asset value, end of period $ 10.63 $ 11.18 $ 10.67 $ 9.87 $ 10.17 $ 9.39 - ------------------------------------------------------------------------------------------- Total return(b) (1.32)% 7.73% 8.16% 2.29% 13.84% (3.42)% - ------------------------------------------------------------------------------------------- Ratios/supplemental data: Net assets, end of period (000s omitted) $70,761 $58,185 $33,800 $24,527 $19,545 $12,887 - ------------------------------------------------------------------------------------------- Ratio of expenses to average net assets including interest expense 0.90%(c) 0.76% 0.87% 0.91% 1.19%(d) 0.95%(e) - ------------------------------------------------------------------------------------------- Ratio of expenses to average net assets excluding interest expense 0.80%(c) 0.76% 0.87% 0.91% 0.95%(d) 0.95%(e) - ------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 5.75%(c) 5.70% 5.85% 5.80% 5.78%(d) 5.51%(f) - ------------------------------------------------------------------------------------------- Ratio of interest expense to average net assets 0.10%(c) -- -- -- -- -- - ------------------------------------------------------------------------------------------- Portfolio turnover rate 41% 78% 66% 32% 41% 29% ===========================================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $63,119,520. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratio of expenses to average net assets prior to fee waivers and/or expense reimbursements was 1.10% for January 1995. (f) After fee waivers and/or expense reimbursements. Ratio of net investment income to average net assets prior to fee waivers and/or expense reimbursements was 5.35% for January 1995. AIM V.I. GOVERNMENT SECURITIES FUND FS-90 206 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Growth and Income Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (date operations commenced) through January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Growth and Income Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the period May 2, 1994 (date operations commenced) through January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. GROWTH AND INCOME FUND FS-91 207 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - -----------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -----------------------------------------------------------------------------
AIM V.I. GROWTH AND INCOME FUND FS-92 208
MARKET SHARES VALUE 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 - --------------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------ PRINCIPAL AMOUNT 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 - ------------------------------------------------------------------------------ SHARES 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 ==============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) Restricted security. May be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933, as amended. The valuation of this security has been determined in accordance with procedures established by the Board of Directors. The market value of this security at 12/31/99 represents 0.19% of the Fund's net assets. (c) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt Conv. - Convertible Deb. - Debentures Pfd. - Preferred Sr. - Senior Sub. - Subordinate Unsec. - Unsecured See Notes to Financial Statements. AIM V.I. GROWTH AND INCOME FUND FS-93 209 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ========================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ==============================================================================
See Notes to Financial Statements. AIM V.I. GROWTH AND INCOME FUND FS-94 210 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 -------------- -------------- 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 ===============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Growth and Income Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek growth of capital with current income as a secondary objective. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such AIM V.I. GROWTH AND INCOME FUND FS-95 211 securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, paid-in-capital was increased by $795, undistributed net investment income was decreased by $380,389 and undistributed net realized gains increased by $379,594 as a result of differing book/tax treatment of foreign currency transactions and other reclassifications. Net assets of the Fund were unaffected by the reclassifications above. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Foreign Currency Translations--Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. Covered Call Options - The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.65% of the first $250 million of the Fund's average daily net assets, plus 0.60% of the Fund's average daily net assets in excess of $250 million. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $2,156,876 of which AIM retained $102,711 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $6,283 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - INDIRECT EXPENSES During the year ended December 31, 1999, the Fund received reductions in custodian fees of $4,998 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $4,998 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. AIM V.I. GROWTH AND INCOME FUND FS-96 212 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:
CALL OPTION CONTRACTS ---------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ------------ 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 -- $ -- ===============================================================================
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: 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.
NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ 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 ==============================================================================
AIM V.I. GROWTH AND INCOME FUND FS-97 213 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.
DECEMBER 31, --------------------------------------------------- JANUARY 31, 1999(A) 1998(A) 1997 1996 1995 1995 ---------- ---------- -------- -------- ------- ----------- 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% =================================================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $1,718,996,207. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.72% (annualized) and 1.30% (annualized), respectively. AIM V.I. GROWTH AND INCOME FUND FS-98 214 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Growth Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian and brokers. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Growth Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. GROWTH FUND FS-99 215 SCHEDULE OF INVESTMENTS December 31, 1999
SHARES MARKET VALUE 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 - ----------------------------------------------------------------------
SHARES MARKET VALUE 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 - --------------------------------------------------------------------------
AIM V.I. GROWTH FUND FS-100 216
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------- PRINCIPAL AMOUNT 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 - -------------------------------------------------------------------------- SHARES 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 ==========================================================================
Investment Abbreviation: ADR- American Depositary Receipt NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) A portion of this security is subject to call options. See Note 7. (c) Interest rate shown represents the rate of discount paid or received at the time of purchase by the Fund. (d) A portion of the principal balance was pledged as collateral to cover margin requirements for open futures contracts. See Note 8. (e) The money market fund has the same investment advisor as the Fund. See Notes to Financial Statements. AIM V.I. GROWTH FUND FS-101 217 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ==========================================================================
See Notes to Financial Statements. AIM V.I. GROWTH FUND FS-102 218 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ------------ ------------ 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 ==============================================================================
NOTES TO FINANCIAL STATEMENTS. December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Growth Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek growth of capital principally through investment in common stocks of seasoned and better capitalized companies considered by AIM to have strong earnings momentum. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are See Notes to Financial Statements. AIM V.I. GROWTH FUND FS-103 219 determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income decreased by $110,548 and undistributed net realized gains increased by $110,548 as a result of differing book/tax treatment of foreign currency transactions and other reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Foreign Currency Translations - Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. G. Futures Contracts - The Fund may purchase or sell futures contracts as a hedge against changes in market conditions. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities as collateral for the account of the broker (the Fund's agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by "marking to market" on a daily basis to reflect the market value of the contracts at the end of each day's trading. Variation margin payments are made or received depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund's basis in the contract. Risks include the possibility of an illiquid market and that a change in value of the contracts may not correlate with changes in the value of the securities being hedged. H. Covered Call Options - The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written. I. Put Options - The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. AIM V.I. GROWTH FUND FS-104 220 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: 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 ===========================================================================
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:
Call Option Contracts --------------------- Number of Premiums Contracts Received --------- ----------- 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 ===========================================================================
AIM V.I. GROWTH FUND FS-105 221 Open call option contracts written at December 31, 1999 were as follows:
December 31, 1999 Contract Strike Number of Premiums Market Unrealized Issue Month Price Contracts Received Value Depreciation - ----- -------- ------ --------- ---------- ------------ ------------ 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) =====================================================================================
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:
No. of Month/ Unrealized Contract Contracts Commitment Appreciation - -------- --------- ------------ ------------ S&P 500 Index 67 March 00/Buy $714,213 - --------------------------------------------------
NOTE 9 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ----------------------- Shares Amount Shares Amount ---------- ------------ ---------- ----------- 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 =============================================================================
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.
December 31, --------------------------------------------------- January 31, 1999(a) 1998 1997 1996 1995 1995 -------- -------- -------- -------- -------- ----------- 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% =============================================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $483,567,224. (d) Annualized. AIM V.I. GROWTH FUND FS-106 222 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. High Yield Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. High Yield Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets and the financial highlights for the year then ended and for the period May 1, 1998 (commencement of operations) through December 31, 1998 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. HIGH YIELD FUND FS-107 223 SCHEDULE OF INVESTMENTS December 31, 1999
PRINCIPAL MARKET AMOUNT VALUE 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 - -------------------------------------------------------------------------------
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. HIGH YIELD FUND FS-108 224
PRINCIPAL MARKET AMOUNT VALUE 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 - ------------------------------------------------------------------------------ SHARES 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 - ------------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------
NOTES TO SCHEDULE OF INVESTMENTS: (a) Represents a security sold under Rule 144A, which is exempt from registration and may be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1993, as amended. (b) Consists of more than one class of securities traded together as a unit. In addition to the security listed, each unit represents common or preferred shares of the issuer. (c) Step Bond issued at a discount. The interest rate represents the coupon rate at which the bond will accrue at a specified future date. (d) Restricted security. May be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933, as amended. The valuation of these securities has been determined in accordance with procedures established by the Board of Directors. The aggregate market value of these securities at 12/31/99 was $778,075 which represents 3.08% of the Fund's net assets. (e) Non-income producing security. (f) Non-income producing security acquired as part of a unit with or in exchange for other securities. (g) The money market fund has the same investment advisor as the Fund. Abbreviations: Conv. - Convertible Ctfs. - Certificates Disc. - Discounted Gtd. - Guaranteed Pfd. - Preferred Sec. - Secured Sr. - Senior Sub. - Subordinated Unsec. - Unsecured See Notes to Financial Statements. AIM V.I. HIGH YIELD FUND FS-109 225 STATEMENT OF ASSETS AND LIABILITIES December 31 , 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ============================================================================
See Notes to Financial Statements. AIM V.I. HIGH YIELD FUND FS-110 226 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
1999 1998 ----------- ---------- 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 =============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. High Yield Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve a high level of current income by investing primarily in publicly traded non-investment grade debt securities. The Fund will also consider the possibility of capital growth when it purchases and sells securities. Debt securities of less than investment grade are considered "high-risk" securities (commonly referred to as junk bonds). These bonds may involve special risks in addition to the risks associated with investment in higher rated debt securities. High yield bonds may be more susceptible to real or perceived adverse economic conditions than higher grade bonds. Also, the secondary market in which high yield bonds are traded may be less liquid than the market for higher grade bonds. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). AIM V.I. HIGH YIELD FUND FS-111 227 Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $5,886, undistributed net realized gains decreased by $5,900 and paid-in capital increased by $14 as a result of differing book/tax reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. The Fund has a capital loss carryforward of $792,625 as of December 31, 1999 which may be carried forward to offset future taxable gains, if any, which expires in varying increments, if not previously utilized, in the year 2007. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.625% on the first $200 million of the Fund's average daily net assets, plus 0.55% on the next $300 million of the Fund's average daily net assets, plus 0.50% on the next $500 million of the Fund's average daily net assets, plus 0.45% on the Fund's average daily net assets in excess of $1 billion. During the year ended December 31, 1999, AIM waived fees of $45,183. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $61,929 of which AIM retained $0 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,445 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - INDIRECT EXPENSES During the year ended December 31, 1999, the Fund received reductions in custodian fees of $4,800 under an expense offset arrangement. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $4,800 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 5 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. NOTE 6 - INVESTMENT SECURITIES The aggregate amount of investment securities (other than short-term securities) purchased and sold by the Fund during the year ended December 31, 1999 was $34,955,641 and $19,296,933, respectively. The amount of unrealized appreciation (depreciation) of investment securities, for tax purposes, as of December 31, 1999 is as follows: 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) ==========================================================================
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:
1999 1998 ---------------------- ------------------- SHARES AMOUNT SHARES AMOUNT --------- ----------- ------- ---------- 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 =======================================================================
AIM V.I. HIGH YIELD FUND FS-112 228 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.
1999(A) 1998 ------- ------ 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% ===============================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) After fee waivers and/or expense reimbursements. Ratios of expenses to average net assets prior to fee waivers and/or expense reimbursements were 1.42% and 2.50% (annualized) for 1999 and 1998, respectively. (d) Ratios are based on average net assets of $16,571,951. (e) Annualized. (f) After fee waivers and/or expense reimbursements. Ratios of net investment income to average net assets prior to fee waivers and/or expense reimbursements were 10.80% and 8.36% (annualized) for 1999 and 1998, respectively . AIM V.I. HIGH YIELD FUND FS-113 229 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. International Equity Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. International Equity Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. INTERNATIONAL EQUITY FUND FS-114 230 SCHEDULE OF INVESTMENTS December 31, 1999
SHARES MARKET VALUE 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 - -------------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY FUND FS-115 231
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------------
AIM V.I. INTERNATIONAL EQUITY FUND FS-116 232
MARKET SHARES VALUE 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 - ----------------------------------------------------------------------------- PRINCIPAL MARKET AMOUNT VALUE 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 - ----------------------------------------------------------------------------- MARKET SHARES VALUE 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 =============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) The security is managed by an affiliate of the advisor. (c) Restricted security. May be resold to qualified institutional buyers in accordance with the provisions of Rule 144A under the Securities Act of 1933, as amended. The valuation of this security has been determined in accordance with procedures established by the Board of Directors. The market value at 12/31/99 represents 0.23% of the Fund's net assets. (d) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt Conv. - Convertible GDR - Global Depositary Receipt Gtd. - Guaranteed Pfd. - Preferred Wts. - Warrants See Notes to Financial Statements. AIM V.I. INTERNATIONAL EQUITY FUND FS-117 233 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 =============================================================================
See Notes to Financial Statements. AIM V.I. INTERNATIONAL EQUITY FUND FS-118 234 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ------------ ------------ 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 =============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. International Equity Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek to provide long-term growth of capital by investing in a diversified portfolio of international equity securities, the issuers of which are considered by AIM to have strong earnings momentum. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such AIM V.I. INTERNATIONAL EQUITY FUND FS-119 235 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: 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.
AIM V.I. INTERNATIONAL EQUITY FUND FS-120 236 NOTE 7 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ----------------------- Shares Amount Shares Amount ---------- ------------ ---------- ----------- 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 =============================================================================
* 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:
Shares Net Assets Immediately Appreciation/ Variable Funds: Exchanged before acquisitions (Depreciation) Included - ------------------------ --------- ---------------------- ----------------------- 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 - ----------------------------------------------------------------------------------
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.
December 31, ------------------------------------------------- January 31, 1999(a) 1998 1997 1996 1995 1995 -------- -------- -------- -------- ------- ----------- 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% =============================================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $277,307,465. (d) Annualized. (e) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average net assets prior to fee waivers and/or expense reimbursements were 1.28% and 0.59%, respectively. AIM V.I. INTERNATIONAL EQUITY FUND FS-121 237 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Money Market Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Money Market Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. MONEY MARKET FUND FS-122 238 SCHEDULE OF INVESTMENTS December 31, 1999
PAR (000) VALUE 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 - ----------------------------------------------------------------------------
PAR (000) VALUE 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 =============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Some commercial paper is traded on a discount basis. In such cases, the interest rate shown represents the rate of discount paid or received at the time of purchase by the Fund. (b) The coupon rate shown on floating rate notes represents the rate at period end. (c) The investments in master note agreements are through participation in joint accounts with other mutual funds, private accounts, and certain nonregistered investment companies managed by the investment advisor or its affiliates. (d) The portfolio may demand prepayment of notes purchased under the Master Note Purchase Agreement upon one business days notice to the issuer. Interest rates on master notes are redetermined periodically. Rate shown is the rate in effect on 12/31/99. (e) The portfolio may demand prepayment of notes purchased under the Master Note Purchase Agreement upon three business days notice to the issuer. Interest rates on master notes are redetermined periodically. Rate shown is the rate in effect on 12/31/99. (f) Collateral on repurchase agreements, including the Fund's pro-rata interest in joint repurchase agreements, is taken into possession by the Fund upon entering into the repurchase agreement. The collateral is marked to market daily to ensure its market value as being 102% of the sales price of the repurchase agreement. The investments in some repurchase agreements are through participation in joint accounts with other mutual funds, private accounts and certain non-registered investment companies managed by the investment advisor or its affiliates. (g) Joint open repurchase agreement entered into 10/05/98. Either party may terminate the agreement upon demand. Interest rates, par and collateral are redetermined daily. Collateralized by $350,000,000 U.S. Government obligations, 0% to 8.22% due 01/18/00 to 06/11/18 with an aggregate market value at 12/31/99 of $357,624,183. (h) Joint repurchase agreement entered into 12/31/99 with a maturing value of $285,077,188 and collateralized by $285,000,000 U.S. Government and Treasury obligations, 5.812% to 8.023% due 04/01/19 to 05/01/35 with an aggregate market value at 12/31/99 of $290,700,000. (i) Joint repurchase agreement entered into 12/31/99 with a maturing value of $100,501,333 and collateralized by $100,000,000 U.S. Government and Treasury obligations, 0% to 8.625% due 06/30/00 to 12/15/43 with an aggregate market value at 12/31/99 of $102,004,901. (j) Joint repurchase agreement entered into 12/31/99 with a maturing value of $240,066,000 and collateralized by $240,000,000 U.S. Government and Treasury obligations, 5% to 10% due 02/01/00 to 12/01/29 with an aggregate market value at 12/31/99 of $244,803,339. (k) Also represents cost for federal income tax purposes. See Notes to Financial Statements. AIM V.I. MONEY MARKET FUND FS-123 239 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ==========================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 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 ================================================================
See Notes to Financial Statements. AIM V.I. MONEY MARKET FUND FS-124 240 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ----------- ----------- 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 ===========================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Money Market Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to seek to provide as high a level of current income as is consistent with the preservation of capital and liquidity. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - The Fund's securities are valued on the basis of amortized cost which approximates market value. This method values a security at its cost on the date of purchase and thereafter, assumes a constant amortization to maturity of any discount or premiums. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income, adjusted for amortization of premiums and discounts on investments, is recorded as earned from settlement date and is recorded on the accrual basis. C. Distributions - It is the policy of the Fund to declare and pay dividends from net investment income daily. Such distributions are paid daily. Distributions from net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 0.40% on the first $200 million of the Fund's average daily net assets, plus 0.35% of the Fund's average daily net assets in excess of $250 million. The Fund, pursuant to a master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. For the year ended December 31, 1999, the Fund paid AIM $70,016 of which AIM retained $44,311 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for AIM V.I. MONEY MARKET FUND FS-125 241 the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $3,541 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 4 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. During the year ended December 31, 1999, the Fund did not borrow under the line of credit agreement. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. Prior to May 28, 1999, the commitment fee rate was 0.05%. The commitment fee is allocated among the funds based on their respective average net assets for the period. AIM V.I. MONEY MARKET FUND FS-126 242 NOTE 5 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 --------------------------- ------------------------- SHARES AMOUNT SHARES AMOUNT ------------ ------------- ----------- ------------ 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 ===============================================================================
* As of the close of business on October 15, 1999, the Fund acquired all the net assets GT Global Variable Money Market Fund ("Variable Money Market Fund") pursuant to a plan of reorganization approved by Variable Money Market Fund's shareholders on August 25, 1999. The acquisition was accomplished by a tax-free exchange of 29,800,869 shares of the Fund for 29,800,869 shares of Variable Money Market Fund outstanding as of the close of business on October 15, 1999. Variable Money Market Fund net assets at that date of $29,800,869 were combined with those of the Fund. The net assets of the Fund immediately before the acquisition were $80,730,864. NOTE 6 - FINANCIAL HIGHLIGHTS Shown below are the financial highlights for a share outstanding of the Fund during each of the years in the four-year period ended December 31, 1999, the eleven months ended December 31, 1995 and the year ended January 31, 1995.
DECEMBER 31, ---------------------------------------------- JANUARY 31, 1999 1998 1997 1996 1995 1995 ------- ------- ------- ------- ------- ----------- 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) - -----------------------------------------------------------------------------------------
(a) Ratios are based on average net assets of $79,257,738. (b) Annualized. (c) After fee waivers and/or expense reimbursements. Ratios of expenses and net investment income to average daily net assets prior to fee waivers and/or expense reimbursements were 0.70% and 4.07%, respectively. AIM V.I. MONEY MARKET FUND FS-127 243 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Telecommunications Fund (formerly, GT Global Variable Telecommunications Fund), a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations, the statement of changes in net assets and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets for the year ended December 31, 1998 and the financial highlights for each of the four years in the period then ended were audited by other auditors whose report dated February 19, 1999, expressed an unqualified opinion thereon. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999, by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Telecommunications Fund, as of December 31, 1999, the results of its operations, the changes in its net assets and the financial highlights for the year then ended in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. TELECOMMUNICATIONS FUND FS-128 244 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - ----------------------------------------------------------------
MARKET SHARES VALUE 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 - ------------------------------------------------------------------------------
AIM V.I. TELECOMMUNICATIONS FUND FS-129 245
MARKET SHARES VALUE 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 ===============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: a) Non-income producing security. b) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt See Notes to Financial Statements. AIM V.I. TELECOMMUNICATIONS FUND FS-130 246 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 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 ======================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 INVESTMENT INCOME: Dividends (net of $11,255 foreign withholding tax) $ 262,469 - ----------------------------------------------------------------------------- Interest 170,817 - ----------------------------------------------------------------------------- Security lending 52,600 - ----------------------------------------------------------------------------- Total investment income 485,886 - ----------------------------------------------------------------------------- EXPENSES: Advisory fees 756,068 - ----------------------------------------------------------------------------- Administrative services fees 34,698 - ----------------------------------------------------------------------------- Custodian fees 34,246 - ----------------------------------------------------------------------------- Directors' fees 8,147 - ----------------------------------------------------------------------------- Printing fees 54,930 - ----------------------------------------------------------------------------- Interest expense 4,428 - ----------------------------------------------------------------------------- Other 62,933 - ----------------------------------------------------------------------------- Total expenses 955,450 - ----------------------------------------------------------------------------- Less: Expense reductions (650) - ----------------------------------------------------------------------------- Net expenses 954,800 - ----------------------------------------------------------------------------- Net investment income (loss) (468,914) - ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES AND FORWARD CURRENCY CONTRACTS: Net realized gain (loss) from: Investment securities 21,278,655 - ----------------------------------------------------------------------------- Foreign currencies (240,556) - ----------------------------------------------------------------------------- Forward currency contracts 26,029 - ----------------------------------------------------------------------------- 21,064,128 - ----------------------------------------------------------------------------- Change in net unrealized appreciation of: Investment securities 36,821,340 - ----------------------------------------------------------------------------- Foreign currencies 325 - ----------------------------------------------------------------------------- Forward currency contracts 44,287 - ----------------------------------------------------------------------------- 36,865,952 - ----------------------------------------------------------------------------- Net gain on investment securities, foreign currencies and forward currency contracts 57,930,080 - ----------------------------------------------------------------------------- Net increase in net assets resulting from operations $57,461,166 =============================================================================
See Notes to Financial Statements. AIM V.I. TELECOMMUNICATIONS FUND FS-131 247 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 ------------ ----------- OPERATIONS: Net investment income (loss) $ (468,914) $ (37,295) - ------------------------------------------------------------------------------ Net realized gain from investment securities, foreign currencies and forward currency contracts 21,064,128 6,543,917 - ------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities, foreign currencies and forward currency contracts 36,865,952 6,878,850 - ------------------------------------------------------------------------------ Net increase in net assets resulting from operations 57,461,166 13,385,472 - ------------------------------------------------------------------------------ Distributions to shareholders from net realized gains (15,618,065) (5,760,403) - ------------------------------------------------------------------------------ Net increase (decrease) from capital stock transactions (2,874,672) (6,351,877) - ------------------------------------------------------------------------------ Net increase in net assets 38,968,429 1,273,192 - ------------------------------------------------------------------------------ NET ASSETS: Beginning of year 69,459,335 68,186,143 - ------------------------------------------------------------------------------ End of year $108,427,764 $69,459,335 ============================================================================== NET ASSETS CONSIST OF: Capital (par value and additional paid-in) $ 44,082,800 $46,957,472 - ------------------------------------------------------------------------------ Undistributed net realized gain from investment securities, foreign currencies and forward currency contracts 11,463,291 6,486,142 - ------------------------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies and forward currency contracts 52,881,673 16,015,721 - ------------------------------------------------------------------------------ $108,427,764 $69,459,335 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1--SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Telecommunications Fund (the "Fund"), (formerly named the GT Global Variable Telecommunications Fund),is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Prior to October 18, 1999, the Fund was a series portfolio of GT Global Variable Investment Trust (the "Trust") organized as a Delaware business trust registered under the 1940 Act. Pursuant to an agreement and plan of reorganization between the Company and the Trust, the Fund was reorganized as a portfolio of the Company effective October 18, 1999. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve long-term growth of capital. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). AIM V.I. TELECOMMUNICATIONS FUND FS-132 248 Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was increased by $468,914 and undistributed net realized gains decreased by $468,914 as a result of differing book/tax treatment of foreign currency transactions and other reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Foreign Currency Translations - Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. NOTE 2 - ADVISORY FEES AND OTHER TRANSACTIONS WITH AFFILIATES The Company has entered into a master investment advisory agreement with A I M Advisors, Inc. ("AIM"). Under the terms of the master investment advisory agreement, the Fund pays an advisory fee to AIM at the annual rate of 1.00% of the Fund's average daily net assets. Effective July 1, 1999, the Company entered into a master administrative services agreement with AIM, replacing the prior pricing and accounting agreement. The Fund, pursuant to the master administrative services agreement with AIM, has agreed to pay AIM for certain administrative costs incurred in providing accounting services and other administrative services to the Fund. Prior to July 1, 1999, AIM was the pricing and accounting agent for the Fund. The monthly fee for these services paid to AIM was a percentage, not to exceed 0.03% annually, of a Fund's average daily net assets. The annual fee rate was derived based on the aggregate net assets of the funds which comprised the following investment companies: AIM Growth Series, AIM Investment Funds, AIM Series Trust, G.T. Global Variable Investment Series and G.T. Global Variable Investment Trust. The fee was calculated at the rate of 0.03% of the first $5 billion of assets and 0.02% to the assets in excess of $5 billion. An amount is allocated to and paid by each such fund based on its relative average daily net assets. For the year ended December 31, 1999, AIM was paid $34,698 of which AIM retained $34,698 for such services. The Company has entered into a master distribution agreement with A I M Distributors, Inc. ("AIM Distributors") to serve as the distributor for the Fund. Certain officers and directors of the Company are officers of AIM and AIM Distributors. During the year ended December 31, 1999, the Fund paid legal fees of $156 for services rendered by Kramer, Levin, Naftalis & Frankel LLP as counsel to the Company's directors. A member of that firm is a director of the Company. NOTE 3 - EXPENSE REDUCTIONS During the year ended December 31, 1999, the Fund received reductions in custodian fees of $18 under an expense offset arrangement and AIM directed certain portfolio trades to brokers who then paid $632 of the Fund's expenses. The effect of the above arrangement resulted in a reduction of the Fund's total expenses of $650 during the year ended December 31, 1999. NOTE 4 - DIRECTORS' FEES Directors' fees represent remuneration paid to directors who are not an "interested person" of AIM. The Company invests directors' fees, if so elected by a director, in mutual fund shares in accordance with a deferred compensation plan. NOTE 5 - BANK BORROWINGS The Fund is a participant in a committed line of credit facility with a syndicate administered by The Chase Manhattan Bank. The Fund may borrow up to the lesser of (i) $1,000,000,000 or (ii) the limits set by its prospectus for borrowings. The Fund and other funds advised by AIM which are parties to the line of credit may borrow on a first come, first served basis. The funds which are party to the line of credit are charged a commitment fee of 0.09% on the unused balance of the committed line. The commitment fee is allocated among the funds based on their respective average net assets for the period. Prior to May 28, 1999, the Fund, along with certain other funds advised and/or administered by AIM, had a line of credit with BankBoston and State Street Bank & Trust Company. The arrangements with the banks allowed the Fund and certain other funds to borrow, on a first come, first served basis, an aggregate maximum amount of $250,000,000. During the year ended December 31, 1999, the average outstanding daily balance of bank loans for the Fund was $79,497 with a weighted average interest rate of 5.57%. Interest expense for the Fund for the year ended December 31, 1999 was $4,428. AIM V.I. TELECOMMUNICATIONS FUND FS-133 249 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: 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 ==========================================================================
Cost of investments for tax purposes is $55,822,372. AIM V.I. TELECOMMUNICATIONS FUND FS-134 250 NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ----------------------- SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ----------- 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) =============================================================================
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.
1999 1998 1997 1996 1995 -------- ------- ------- ------- ------- 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% ===============================================================================
(a) Ratios are based on average net assets of $75,606,845. AIM V.I. TELECOMMUNICATIONS FUND FS-135 251 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors AIM Variable Insurance Funds, Inc. We have audited the accompanying statement of assets and liabilities of AIM V.I. Value Fund, a series of shares of common stock of AIM Variable Insurance Funds, Inc. including the schedule of investments as of December 31, 1999, the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of December 31, 1999 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of AIM V.I. Value Fund, as of December 31, 1999, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and the financial highlights for each of the four years in the period then ended, the eleven month period ended December 31, 1995 and the year ended January 31, 1995 in conformity with generally accepted accounting principles. /s/ TAIT, WELLER & BAKER TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 4, 2000 AIM V.I. VALUE FUND FS-136 252 SCHEDULE OF INVESTMENTS December 31, 1999
MARKET SHARES VALUE 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 - -------------------------------------------------------------------------
MARKET SHARES VALUE 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 - --------------------------------------------------------------------
AIM V.I. VALUE FUND FS-137 253
MARKET SHARES VALUE 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 ==============================================================================
NOTES TO SCHEDULE OF INVESTMENTS: (a) Non-income producing security. (b) The money market fund has the same investment advisor as the Fund. Investment Abbreviations: ADR - American Depositary Receipt See Notes to Financial Statements. AIM V.I. VALUE FUND FS-138 254 STATEMENT OF ASSETS AND LIABILITIES December 31, 1999 ASSETS: Investments, at market value (cost $1,690,921,202) $2,377,205,294 - ------------------------------------------------------------------------ Receivables for: Capital stock sold 2,728,571 - ------------------------------------------------------------------------ Dividends and interest 1,462,392 - ------------------------------------------------------------------------ Forward currency contracts 5,679,138 - ------------------------------------------------------------------------ Investment for deferred compensation plan 37,479 - ------------------------------------------------------------------------ Other assets 7,519 - ------------------------------------------------------------------------ Total assets 2,387,120,393 - ------------------------------------------------------------------------ LIABILITIES: Payables for: Capital stock reacquired 1,689,552 - ------------------------------------------------------------------------ Deferred compensation 37,479 - ------------------------------------------------------------------------ Accrued administrative services fee 761,567 - ------------------------------------------------------------------------ Accrued advisory fees 1,175,738 - ------------------------------------------------------------------------ Accrued directors' fees 3,466 - ------------------------------------------------------------------------ Accrued operating expenses 86,020 - ------------------------------------------------------------------------ Total liabilities 3,753,822 - ------------------------------------------------------------------------ Net assets applicable to shares outstanding $2,383,366,571 ======================================================================== CAPITAL SHARES, $0.001 PAR VALUE PER SHARE: Authorized 250,000,000 - ------------------------------------------------------------------------ Outstanding 71,145,803 - ------------------------------------------------------------------------ Net asset value, offering and redemption price per share $ 33.50 ========================================================================
STATEMENT OF OPERATIONS For the year ended December 31, 1999 INVESTMENT INCOME: Dividends (net of $71,503 foreign withholding tax) $ 10,174,160 - ----------------------------------------------------------------------------- Interest 6,250,806 - ----------------------------------------------------------------------------- Total investment income 16,424,966 - ----------------------------------------------------------------------------- EXPENSES: Advisory fees 10,380,472 - ----------------------------------------------------------------------------- Administrative services fees 2,155,772 - ----------------------------------------------------------------------------- Custodian fees 187,195 - ----------------------------------------------------------------------------- Directors' fees 18,731 - ----------------------------------------------------------------------------- Other 243,466 - ----------------------------------------------------------------------------- Total expenses 12,985,636 - ----------------------------------------------------------------------------- Less: Expenses paid indirectly (1,407) - ----------------------------------------------------------------------------- Net expenses 12,984,229 - ----------------------------------------------------------------------------- Net investment income 3,440,737 - ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENT SECURITIES, FOREIGN CURRENCIES, FORWARD CURRENCY CONTRACTS AND OPTION CONTRACTS: Net realized gain (loss) from: Investment securities 107,241,613 - ----------------------------------------------------------------------------- Foreign currencies (13,279) - ----------------------------------------------------------------------------- Forward currency contracts 3,016,134 - ----------------------------------------------------------------------------- Option contracts 1,566,750 - ----------------------------------------------------------------------------- 111,811,218 - ----------------------------------------------------------------------------- Change in net unrealized appreciation (depreciation) of: Investment securities 355,199,826 - ----------------------------------------------------------------------------- Foreign currencies 404 - ----------------------------------------------------------------------------- Forward currency contracts 5,354,529 - ----------------------------------------------------------------------------- Option contracts (7,521) - ----------------------------------------------------------------------------- 360,547,238 - ----------------------------------------------------------------------------- Net gain on investment securities, foreign currencies, forward currency contracts and option contracts 472,358,456 - ----------------------------------------------------------------------------- Net increase in net assets resulting from operations $475,799,193 ========================================================================
See Notes to Financial Statements. AIM V.I. VALUE FUND FS-139 255 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 1999 and 1998
1999 1998 -------------- -------------- OPERATIONS: Net investment income $ 3,440,737 $ 6,184,686 - ------------------------------------------------------------------------------ Net realized gain from investment securities, foreign currencies, forward currency contracts and futures and option contracts 111,811,218 30,475,488 - ------------------------------------------------------------------------------ Change in net unrealized appreciation of investment securities, foreign currencies, forward currency contracts and futures and option contracts 360,547,238 230,113,292 - ------------------------------------------------------------------------------ Net increase in net assets resulting from operations 475,799,193 266,773,466 - ------------------------------------------------------------------------------ Distributions to shareholders from net investment income (6,235,364) (5,622,957) - ------------------------------------------------------------------------------ Distributions to shareholders from net realized gains (32,606,763) (49,732,413) - ------------------------------------------------------------------------------ Net increase from capital stock transactions 725,025,960 319,123,956 - ------------------------------------------------------------------------------ Net increase in net assets 1,161,983,026 530,542,052 - ------------------------------------------------------------------------------ NET ASSETS: Beginning of year 1,221,383,545 690,841,493 - ------------------------------------------------------------------------------ End of year $2,383,366,571 $1,221,383,545 ============================================================================== NET ASSETS CONSIST OF: Capital (par value and additional paid-in) $1,579,989,967 $ 855,502,720 - ------------------------------------------------------------------------------ Undistributed net investment income 3,383,602 6,191,169 - ------------------------------------------------------------------------------ Undistributed net realized gain from investment securities, foreign currencies, forward currency contracts and futures and option contracts 108,030,109 28,274,001 - ------------------------------------------------------------------------------ Unrealized appreciation of investment securities, foreign currencies, forward currency contracts and futures and option contracts 691,962,893 331,415,655 - ------------------------------------------------------------------------------ $2,383,366,571 $1,221,383,545 ==============================================================================
NOTES TO FINANCIAL STATEMENTS December 31, 1999 NOTE 1 - SIGNIFICANT ACCOUNTING POLICIES AIM V.I. Value Fund (the "Fund") is a series portfolio of AIM Variable Insurance Funds, Inc. (the "Company"). The Company is a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end series management investment company consisting of seventeen separate portfolios. Matters affecting each portfolio will be voted on exclusively by the shareholders of such portfolio. The assets, liabilities and operations of each portfolio are accounted for separately. Information presented in these financial statements pertains only to the Fund. Currently, shares of the Fund are sold only to insurance company separate accounts to fund the benefits of variable annuity contracts and variable life insurance policies. The Fund's investment objective is to achieve long-term growth of capital by investing primarily in equity securities judged by the Fund's investment advisor to be undervalued relative to the investment advisor's appraisal of the current or projected earnings of the companies issuing the securities or relative to current market values of assets owned by the companies issuing the securities or relative to the equity market generally. Income is a secondary objective. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. A. Security Valuations - A security listed or traded on an exchange (except convertible bonds) is valued at its last sales price on the exchange where the security is principally traded, or lacking any sales on a particular day, the security is valued at the closing bid price on that day. Each security reported on the NASDAQ National Market System is valued at the last sales price on the valuation date or absent a last sales price, at the closing bid price. Debt obligations (including convertible bonds) are valued on the basis of prices provided by an independent pricing service. Prices provided by the pricing service may be determined without exclusive reliance on quoted prices, and may reflect appropriate factors such as yield, type of issue, coupon rate and maturity date. Securities for which market prices are not provided by any of the above methods are valued based upon quotes furnished by independent sources and are valued at the last bid price in the case of equity securities and in the case of debt obligations, the mean between the last bid and asked prices. Securities for which market quotations are not readily available or are questionable are valued at fair value as determined in good faith by or under the supervision of the Company's officers in a manner specifically authorized by the Board of Directors of the Company. Short-term obligations having 60 days or less to maturity are valued at amortized cost which approximates market value. For purposes of determining net asset value per share, futures and options contracts generally will be valued 15 minutes after the close of trading of the New York Stock Exchange ("NYSE"). AIM V.I. VALUE FUND FS-140 256 Generally, trading in foreign securities is substantially completed each day at various times prior to the close of the NYSE. The values of such securities used in computing the net asset value of the Fund's shares are determined as of such times. Foreign currency exchange rates are also generally determined prior to the close of the NYSE. Occasionally, events affecting the values of such securities and such exchange rates may occur between the times at which they are determined and the close of the NYSE which would not be reflected in the computation of the Fund's net asset value. If events materially affecting the value of such securities occur during such period, then these securities will be valued at their fair value as determined in good faith by or under the supervision of the Board of Directors. B. Securities Transactions and Investment Income - Securities transactions are accounted for on a trade date basis. Realized gains or losses on sales are computed on the basis of specific identification of the securities sold. Interest income is recorded as earned from settlement date and is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. On December 31, 1999, undistributed net investment income was decreased by $12,940, undistributed net realized gains increased by $551,653 and paid-in capital increased by $538,713 as a result of differing book/tax treatment of foreign currency transactions and other reclassifications. Net assets of the Fund were unaffected by the reclassifications. C. Distributions - Distributions from income and net realized capital gains, if any, are generally paid annually and recorded on ex-dividend date. D. Federal Income Taxes - The Fund intends to comply with the requirements of the Internal Revenue Code necessary to qualify as a regulated investment company and, as such, will not be subject to federal income taxes on otherwise taxable income (including net realized capital gains) which is distributed to shareholders. Therefore, no provision for federal income taxes is recorded in the financial statements. E. Foreign Currency Translations - Portfolio securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at date of valuation. Purchases and sales of portfolio securities and income items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not separately account for that portion of the results of operations resulting from changes in foreign exchange rates on investments and the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. F. Foreign Currency Contracts - A foreign currency contract is an obligation to purchase or sell a specific currency for an agreed-upon price at a future date. The Fund may enter into a foreign currency contract to attempt to minimize the risk to the Fund from adverse changes in the relationship between currencies. The Fund may also enter into a foreign currency contract for the purchase or sale of a security denominated in a foreign currency in order to "lock in" the U.S. dollar price of that security. The Fund could be exposed to risk if counterparties to the contracts are unable to meet the terms of their contracts or if the value of the foreign currency changes unfavorably. Outstanding foreign currency contracts at December 31, 1999 were as follows:
CONTRACT TO SETTLEMENT ------------------------ DATE CURRENCY DELIVER RECEIVE VALUE APPRECIATION ---------- -------- ----------- ------------ ------------ ------------ 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 =======================================================================
G. Covered Call Options - The Fund may write call options, on a covered basis; that is, the Fund will own the underlying security. Options written by the Fund normally will have expiration dates between three and nine months from the date written. The exercise price of a call option may be below, equal to, or above the current market value of the underlying security at the time the option is written. When the Fund writes a covered call option, an amount equal to the premium received by the Fund is recorded as an asset and an equivalent liability. The amount of the liability is subsequently "marked-to-market" to reflect the current market value of the option written. The current market value of a written option is the mean between the last bid and asked prices on that day. If a written call option expires on the stipulated expiration date, or if the Fund enters into a closing purchase transaction, the Fund realizes a gain (or a loss if the closing purchase transaction exceeds the premium received when the option was written) without regard to any unrealized gain or loss on the underlying security, and the liability related to such option is extinguished. If a written option is exercised, the Fund realizes a gain or a loss from the sale of the underlying security and the proceeds of the sale are increased by the premium originally received. A call option gives the purchaser of such option the right to buy, and the writer (the Fund) the obligation to sell, the underlying security at the stated exercise price during the option period. The purchaser of a call option has the right to acquire the security which is the subject of the call option at any time during the option period. During the option period, in return for the premium paid by the purchaser of the option, the Fund has given up the opportunity for capital appreciation above the exercise price should the market price of the underlying security increase, but has retained the risk of loss should the price of the underlying security decline. During the option period, the Fund may be required at any time to deliver the underlying security against payment of the exercise price. This obligation is terminated upon the expiration of the option period or at such earlier time at which the Fund effects a closing purchase transaction by purchasing (at a price which may be higher than that received when the call option was written) a call option identical to the one originally written. H. Put Options - The Fund may purchase put options. By purchasing a put option, the Fund obtains the right (but not the obligation) to sell the option's underlying instrument at a fixed strike price. In return for this right, the Fund pays an option premium. The option's underlying instrument may be a security or a futures contract. Put options may be used by the Fund to hedge securities it owns by locking in a minimum price at which the Fund can sell. If security prices fall, the put option could be exercised to offset all or a portion of the Fund's resulting losses. At the same time, because the maximum the Fund has at risk is the cost of the option, purchasing put options does not eliminate the potential for the Fund to profit from an increase in the value of the securities hedged. AIM V.I. VALUE FUND FS-141 257 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: 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 ===========================================================================
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:
CALL OPTION CONTRACTS -------------------- NUMBER OF PREMIUMS CONTRACTS RECEIVED --------- ---------- 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 -- -- ==========================================
AIM V.I. VALUE FUND FS-142 258 NOTE 8 - CAPITAL STOCK Changes in capital stock outstanding during the years ended December 31, 1999 and 1998 were as follows:
1999 1998 ------------------------ ------------------------ SHARES AMOUNT SHARES AMOUNT ---------- ------------ ---------- ------------ 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 ==============================================================================
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.
DECEMBER 31, ------------------------------------------------------- JANUARY 31, 1999(A) 1998 1997 1996 1995 1995 ---------- ---------- -------- -------- -------- ----------- 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% =================================================================================================
(a) Calculated using average shares outstanding. (b) Total returns are not annualized for periods less than one year. (c) Ratios are based on average net assets of $1,709,245,315. (d) Annualized. AIM V.I. VALUE FUND FS-143 259 PART C OTHER INFORMATION Item 23. Exhibits
Exhibit Number Description - ------- ----------- a(1) - (a) Articles of Incorporation of Registrant, as filed with the State of Maryland on January 22, 1993, were filed as an Exhibit to Registrant's Initial Registration Statement on January 25, 1993, and were filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and are incorporated herein by reference. - (b) Amendment to Articles of Incorporation of Registrant, as filed with the State of Maryland on April 13, 1993, was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (c) Amendment to Articles of Incorporation of Registrant, as filed with the State of Maryland on April 15, 1993, was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (d) Amendment to Articles of Incorporation of Registrant, as filed with the State of Maryland on April 12, 1995, was filed as an Exhibit to Registrant's Post-Effective Amendment No. 6 on April 26, 1995, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (e) Articles Supplementary to Articles of Incorporation of Registrant, as filed with the State of Maryland on April 12, 1994, were filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and were filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and are incorporated herein by reference. - (f) Articles Supplementary to Articles of Incorporation of Registrant, as filed with the State of Maryland on February 4, 1998 was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (g) Articles Supplementary to Articles of Incorporation of Registrant, as filed with the State of Maryland on September 30, 1998, was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (h) Articles Supplementary to Articles of Incorporation of Registrant, as filed with the State of Maryland on July 8, 1999, was filed electronically
C-1 260 as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999, and is incorporated herein by reference. - (i) Articles Supplementary to Articles of Incorporation of Registrant, as filed with the State of Maryland on September 27, 1999 was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999, and is incorporated herein by reference. b (1) - (a) By-Laws of Registrant were filed as an Exhibit to Registrant's Initial Registration Statement on January 25, 1993 and were filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. - (b) First Amendment, dated March 14, 1995, to By-Laws of Registrant was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. (2) - Amended and Restated Bylaws, dated effective December 11, 1996, were filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997 and are incorporated herein by reference. c - Instruments Defining Rights of Security Holders - None. d (1) - Investment Advisory Agreement, dated March 31, 1993, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993. (2) - (a) Master Investment Advisory Agreement, dated October 18, 1993, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. - (b) Amendment, dated April 28, 1994, to Master Investment Advisory Agreement, dated October 18, 1993, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. (3) - (a) Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997 and incorporated herein by reference. - (b) Amendment No. 1, dated April 15, 1998, to Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998 and incorporated herein by reference.
C-2 261 - (c) Amendment No. 2, dated December 14, 1998, to Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. - (d) Amendment No. 3, dated September 24, 1999, to Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999, and is incorporated herein by reference. - (e) Amendment No. 4, dated December 29, 1999, to Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. is hereby filed electronically. (4) - Form of Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc. is hereby filed electronically. (5) - Sub-Advisory Agreement, dated December 14, 1998, between A I M Advisors, Inc. and INVESCO Asset Management Limited is hereby filed electronically. (6) - Form of Sub-Advisory Agreement between A I M Advisors, Inc. and INVESCO Asset Management Limited is hereby filed electronically. (7) - Sub-Advisory Agreement, dated December 29, 1999, between A I M Advisors, Inc. and H.S. Dent Advisors, Inc. is hereby filed electronically. (8) - (a) Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation Agreement, dated September 9, 1998, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and incorporated herein by reference. - (b) Amendment No. 1, dated September 28, 1998, to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation Agreement between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. - (c) Amendment No. 2, dated December 14, 1998, to Foreign Country Selection and Mandatory Securities Depository Responsibilities Delegation Agreement between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. e (1) - (a) Master Distribution Agreement, dated October 18, 1993, between Registrant and A I M Distributors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993,
C-3 262 and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996. - (b) Amendment, dated April 28, 1994, to Master Distribution Agreement, dated October 18, 1993, between Registrant and AIM Distributors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996. (2) - (a) Master Distribution Agreement, dated February 28, 1997, between Registrant and A I M Distributors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997 was filed electronically as an Exhibit to Post-Effective Amendment No. 10 on October 2, 1998 and incorporated herein by reference. - (b) Amendment No. 1, dated April 15, 1998, to Master Distribution Agreement, dated February 28, 1997, between Registrant and A I M Distributors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998 and incorporated herein by reference. - (c) Amendment No. 2, dated December 14, 1998, to Master Distribution Agreement, dated February 28, 1997, between Registrant and A I M Distributors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999 and is incorporated herein by reference. - (d) Amendment No. 3, dated September 24, 1999, to Master Distribution Agreement, dated February 28, - 1997, between Registrant and A I M Distributors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and incorporated herein by reference. - (e) Amendment No. 4, dated December 29, 1999, to Master Distribution Agreement, dated February 28, 1997, between Registrant and A I M Distributors, Inc. is hereby filed electronically. (3) - Distribution Agreement, dated March 31, 1993, between Registrant and A I M Distributors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993. f (1) - Retirement Plan of Registrant's Non-Affiliated Directors, effective March 8, 1994, was filed as an Exhibit to Registrant's Post-Effective Amendment No. 4 on November 3, 1994. (2) - Retirement Plan of Registrant's Non-Affiliated Directors, effective March 8, 1994, as restated September 18, 1995, was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. (3) - Form of Deferred Compensation Agreement of Registrant's Non-Affiliated Directors was filed as an Exhibit to Registrant's Post-Effective Amendment No. 4 on November 3, 1994.
C-4 263 (4) - Form of Deferred Compensation Agreement of Registrant's Non-Affiliated Directors, as approved on December 5, 1995, was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. (5) - Form of Deferred Compensation Agreement was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. g (1) - (a) Custodian Agreement, dated March 31, 1993, between Registrant and State Street Bank and Trust Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (b) Amendment No.1, dated April 25, 1994, to Custodian Agreement, dated March 31, 1993, between Registrant and State Street Bank and Trust Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (c) Amendment No. 2, dated September 19, 1995, to Custodian Agreement, dated March 31, 1993, between Registrant and State Street Bank and Trust Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (d) Amendment, dated September 9, 1998, to Custodian Agreement, dated March 31, 1993, between Registrant and State Street Bank and Trust Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. h (1) - Administrative Services Agreement, dated March 31, 1993, between the Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993. (2) - (a) Master Administrative Services Agreement, dated October 18, 1993, between the Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. - (b) Amendment No.1, dated April 28, 1994, to Master Administrative Services Agreement, dated October 18, 1993, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996.
C-5 264 (3) - Master Administrative Services Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997. (4) - (a) Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated December 14, 1998, to Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. - (c) Amendment No. 2, dated September 24, 1999, to Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 23, 1999, and is incorporated herein by reference. - (d) Amendment No. 3, dated November 15, 1999, to Master Administrative Services Agreement, as amended, May 1, 1998, between Registrant and A I M Advisors, Inc. is hereby filed electronically. - (e) Amendment No. 4, dated December 29, 1999, to Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and A I M Advisors, Inc. is hereby filed electronically. (5) - (a) Transfer Agency Agreement, dated March 19, 1993, between Registrant and State Street Bank and Trust Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (b) Amendment No. 1, dated April 25, 1994, to Transfer Agency Agreement, dated March 19, 1993, between Registrant and State Street Bank and Trust Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 3 on May 2, 1994, and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. (6) - Participation Agreement, dated February 25, 1993, between Registrant, Connecticut General Life Insurance Company and A I M Distributors, Inc. was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. (7) - (a) Participation Agreement, dated February 10, 1995, between Registrant and Citicorp Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 5 on February 28, 1995, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference.
C-6 265 - (b) Amendment No. 1, dated February 3, 1997, to Participation Agreement dated February 10, 1995, between Registrant and Citicorp Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (8) - (a) Participation Agreement, dated February 10, 1995, between Registrant and First Citicorp Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 5 on February 28, 1995 and was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (b) Amendment No. 1, dated February 3, 1997, to Participation Agreement, dated February 10, 1995, between Registrant and First Citicorp Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (9) - (a) Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. - (a)(i) Side Letter Agreement, dated December 1, 1995, among Registrant and Glenbrook Life and Annuity Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8, and is incorporated herein by reference. - (b) Amendment No. 1, dated November 7, 1997, to Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (c) Amendment No. 2, dated September 2, 1997, to Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (d) Amendment No. 3, dated January 26, 1998, to Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (e) Amendment No. 4, dated May 1, 1998, to Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference.
C-7 266 - (f) Amendment No. 5, dated January 12, 1999, to the Participation Agreement, dated December 19, 1995, between Registrant and Glenbrook Life and Annuity Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is hereby incorporated by reference. (10) - Participation Agreement, dated March 4, 1996, between Registrant and IDS Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996. (11) - (a) Participation Agreement, dated October 7, 1996, between Registrant and IDS Life Insurance Company (supersedes and replaces Participation Agreement dated March 4, 1996) was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. - (a)(i) Side Letter Agreement, dated September 27, 1996, between Registrant, IDS Life Insurance Company and IDS Life Insurance Company of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (b) Amendment 1, dated November 11, 1997, the Participation Agreement, dated October 7, 1996, between registrant and IDS Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (12) - (a) Participation Agreement, dated October 7, 1996, between Registrant and IDS Life Insurance Company of New York was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. (b) Amendment No. 1, dated November 11, 1997, to the Participation Agreement, dated October 7, 1996 between registrant and IDS Life Insurance Company of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (13) - Participation Agreement, dated April 8, 1996, between Registrant and Connecticut General Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and is incorporated herein by reference. (14) - (a) Participation Agreement, dated September 21, 1996, between Registrant and Pruco Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. - (b) Amendment No. 1, dated July 1, 1997, to Participation Agreement, dated September 21, 1996, between Registrant and Pruco Life Insurance Company was filed electronically as an Exhibit to
C-8 267 Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (c) Amendment No. 2, dated August 1, 1998, to Participation Agreement, dated September 21, 1996, between Registrant and Pruco Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (15) - (a) Participation Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance Company of New York was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. - (a)(i) Side Letter Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance Company of New York was filed as Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated November 7, 1997, to Participation Agreement, dated October 1, 1996, between Registrant and Allstate Life Insurance Company of New York was filed as an Exhibit to Registrant's Post-Effective Amendment No. 12 on April 29, 1999, and is incorporated herein by reference. (16) - (a) Participation Agreement, dated December 18, 1996, between Registrant and Merrill Lynch Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997 and is incorporated herein by reference. - (a)(i) Side Letter Agreement, dated December 18, 1996, between Registrant and Merrill, Lynch, Pierce, Fenner & Smith, Incorporated was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. - (b) Amendment No. 1, dated May 1, 1997, to Participation Agreement, dated December 18, 1996, between Registrant and Merrill Lynch Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (17) - (a) Participation Agreement, dated December 18, 1996, between Registrant and ML Life Insurance Company of New York was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. - (b) Amendment No. 1, dated May 1, 1997, to Participation Agreement, dated December 18, 1996, by and between Registrant and ML Life Insurance Company of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
C-9 268 (18) - Participation Agreement, dated February 14, 1997, between Registrant and Pruco Life Insurance Company of New Jersey was filed as an Exhibit to Registrant's Post-Effective Amendment No. 8 on April 23, 1997, and is incorporated herein by reference. (19) - Participation Agreement, dated April 30, 1997, between Registrant and Prudential Insurance Company of America was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (20) - Participation Agreement, dated October 30, 1997, between Registrant and American Centurion Life Assurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (21) - (a) Participation Agreement, dated October 30, 1997, between Registrant and American Enterprise Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (a)(i) Letter Agreement, dated October 30, 1997, between American Enterprise Life Insurance Company and American Centurion Life Assurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (22) - Participation Agreement, dated November 20, 1997, between Registrant and AIG Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (23) - Participation Agreement, dated November 20, 1997, between Registrant and American International Life Assurance Company of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. (24) - (a) Participation Agreement, dated November 4, 1997, between Registrant and Nationwide Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated June 15, 1998, to Participation Agreement, dated November 4, 1997, between Registrant and Nationwide Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (25) - (a) Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference.
C-10 269 - (b) Amendment No. 1, dated June 23, 1998, to Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (c) Amendment No. 2, dated May 20, 1999, to the Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. - (d) Amendment No. 3 dated November 1, 1999, between Registrant and Security Life of Denver Insurance Company is hereby filed electronically. (26) - (a) Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Services Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (b) Amendment No. 1 dated April 23, 1999, between Registrant and Cova Financial Services Life Insurance Company is hereby filed electronically. (27) - (a) Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 9 on February 13, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated April 23, 1999, to the Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. (28) - (a) Participation Agreement, dated February 2, 1998, between Registrant and The Guardian Insurance & Annuity Company, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated July 1, 1999, between Registrant and The Guardian Life Insurance & Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999, and is incorporated herein by reference. (29) - (a) Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada (U.S.) was filed electronically as an Exhibit to Registrant's Post-Effective
C-11 270 Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (b) Amendment No. 1, dated December 11, 1998, to the Participation Agreement, dated February 17, 1998, between Registrant and Sun Life Assurance Company of Canada (U.S.) was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (30) - Participation Agreement, dated April 1, 1998, between Registrant and United Life & Annuity Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (31) - (a) Participation Agreement, dated April 21, 1998, between Registrant and Keyport Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (b) Amendment No. 1, dated December 28, 1998, to the Participation Agreement, dated April 21, 1998, between Registrant and Keyport Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (32) - (a) Participation Agreement, dated May 1, 1998, between Registrant and PFL Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated June 30, 1998, to Participation Agreement, dated May 1, 1998, between Registrant and PFL Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (c) Amendment No. 2, dated November 27, 1998, to the Participation Agreement, dated May 1, 1998, between Registrant and PFL Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999 and is incorporated herein by reference. (33) - Participation Agreement, dated May 1, 1998, between Registrant and Fortis Benefits Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (34) - (a) Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference.
C-12 271 - (b) Amendment No. 1, dated January 1, 1999, to the Participation Agreement, dated June 1, 1998, between Registrant and American General Life Insurance Company was filed as an Exhibit to Registrant's Post-Effective Amendment No. 12 on April 29, 1999, and is incorporated herein by reference. (35) - (a) Participation Agreement, dated June 16, 1998, between Registrant and Lincoln National Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (b) Amendment No. 1, dated November 20, 1998, to the Participation Agreement, dated June 16, 1998, between Registrant and Lincoln National Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (36) - Participation Agreement, dated June 30, 1998, between Registrant and Aetna Life Insurance and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (37) - Participation Agreement, dated July 1, 1998, between Registrant and The Union Central Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (38) - Participation Agreement, dated July 1, 1998, between Registrant and United Investors Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999, and is incorporated herein by reference. (39) - Participation Agreement, dated July 2, 1998, between Registrant and Hartford Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (40) - (a) Participation Agreement, dated July 13, 1998, between Registrant and Keyport Benefit Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (b) Amendment No. 1, dated December 28, 1998 to the Participation Agreement, dated July 13, 1998, between Registrant and Keyport Benefit Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999 and is incorporated herein by reference. (41) - Participation Agreement, dated July 27, 1998, between Registrant and Allmerica Financial Life Insurance and Annuity Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference.
C-13 272 (42) - Participation Agreement, dated July 27, 1998, between Registrant and First Allmerica Financial Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. (43) - Participation Agreement, dated October 15, 1998, between Registrant and Lincoln Life & Annuity Insurance Company of New York was filed as an Exhibit to Registrant's Post-Effective Amendment No. 12 on April 29, 1999, and is incorporated herein by reference. (44) - (a) Participation Agreement, dated November 23, 1998, between Registrant and American General Annuity Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999 and is incorporated herein by reference. - (b) Amendment No. 1, dated July 1, 1999, to the Participation Agreement, dated November 23, 1998, between Registrant and American General Annuity Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and incorporated herein by reference. (45) - Participation Agreement, dated December 1, 1998, between Registrant and the Prudential Insurance Company of America was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 11 on February 18, 1999 and is incorporated herein by reference. (46) - Participation Agreement, dated February 1, 1999, between Registrant and Sage Life Assurance of America, Inc. was filed as an Exhibit to Registrant's Post-Effective Amendment No. 12 on April 29, 1999, and is incorporated herein by reference. (47) - Participation Agreement, dated April 1, 1999, between Registrant and Liberty Life Assurance Company of Boston was filed as an Exhibit to Registrant's Post-Effective Amendment No. 12 on April 29, 1999, and is incorporated herein by reference. (48) - Participation Agreement, dated April 13, 1999, between Registrant and Western-Southern Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. (49) - Participation Agreement, dated May 1, 1999, between Registrant and Columbus Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. (50) - Participation Agreement, dated April 26, 1999, between Registrant and First Variable Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference.
C-14 273 (51) - Participation Agreement, dated August 21, 1999, between Registrant and Life Investors Insurance Company of America was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and incorporated herein by reference. (52) - Participation Agreement, dated June 8, 1999, between Registrant and The Principal Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. (53) - Participation Agreement dated June 8, 1999, between Registrant and Principal Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (54) - Participation Agreement, dated June 14, 1999, between Registrant and Security First Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (55) - Participation Agreement, dated July 1, 1999, between Registrant and Allstate Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (56) - Participation Agreement, dated July 27, 1999, between Registrant and Allianz Life Insurance Company of North America was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (57) - Participation Agreement, dated July 27, 1999, between Registrant and Preferred Life Insurance Company of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (58) - Participation Agreement dated August 31, 1999, between Registrant and John Hancock Mutual Life Insurance Company was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (59) - Participation Agreement, dated August 31, 1999, between Registrant and The United States Life Insurance Company in the City of New York was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (60) - Participation Agreement dated November 1, 1999, between Registrant and AETNA Insurance Company of America is hereby filed electronically. (61) - Accounting Services Agreement, dated March 31, 1993, between the Registrant and State Street Bank and Trust Company was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on
C-15 274 April 19, 1993, and was filed electronically as an Exhibit to Post-Effective Amendment No. 7 on April 29, 1996. (62) - Agreement and Plan of Reorganization, dated December 7, 1999, between Registrant and AIM Variable Insurance Funds is hereby filed electronically. i (1) - (a) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding the AIM V.I. Capital Appreciation Fund, the AIM V.I. Diversified Income Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund and the AIM V.I. Value Fund was filed as an Exhibit to Registrant's Pre-Effective Amendment No. 1 on April 19, 1993 and is incorporated herein by reference. - (b) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding the AIM V.I. Growth and Income Fund and the AIM V.I. Utilities Fund (presently the AIM V.I. Global Utilities Fund) was filed as an Exhibit to Registrant's Post-Effective Amendment No. 4 on November 3, 1994 and is incorporated herein by reference. - (c) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding the AIM V.I. Global Utilities Fund name change was filed as an Exhibit to Registrant's Post-Effective Amendment No. 6 on April 26, 1995 and is incorporated herein by reference. - (d) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Capital Development Fund and AIM V.I. High Yield Fund was filed as an Exhibit to Registrant's Post-Effective Agreement No. 9 on February 13, 1998 and is incorporated herein by reference. - (e) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding AIM V.I. Global Growth and Income Fund and AIM V.I. Telecommunications Fund was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (f) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding AIM V.I. Blue Chip Fund was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 13 on July 13, 1999 and is incorporated herein by reference. - (g) Opinion and Consent of Messrs. Freedman, Levy, Kroll & Simonds regarding AIM V.I. Dent Demographic Trends Fund was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. - (h) Consent of Messrs. Freedman, Levy, Kroll & Simonds is hereby filed electronically. (2) - Consent of Messrs. Tait, Weller & Baker is hereby filed electronically.
C-16 275 j - Other Opinions, Appraisals or Rulings and Consents - None. k - Financial Statements omitted from Item 22 - None. l (1) - (a) Agreements Concerning Initial Capitalization of the AIM V.I. Capital Appreciation Fund, the AIM V.I. Diversified Income Fund, the AIM V.I. Government Securities Fund, the AIM V.I. Growth Fund, the AIM V.I. International Equity Fund, the AIM V.I. Money Market Fund, and the AIM V.I. Value Fund were filed as an Exhibit to Registrant's Post-Effective Amendment No. 1 on November 5, 1993, and were filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and are incorporated herein by reference. - (b) Agreements Concerning Initial Capitalization of the AIM V.I. Growth and Income Fund and the AIM V.I. Utilities Fund were filed as an Exhibit to Registrant's Post-Effective Amendment No. 4 on November 3, 1994, and were filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 7 on April 29, 1996, and are incorporated herein by reference. - (c) Agreement Concerning Initial Capitalization of the AIM V.I. Aggressive Growth Fund, the AIM V.I. Balanced Fund, the AIM V.I. Capital Development Fund and the AIM V.I. High Yield Fund was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 10 on October 2, 1998, and is incorporated herein by reference. - (d) Agreement Concerning Initial Capitalization of the AIM V.I. Blue Chip Fund was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. - (e) Agreement Concerning Initial Capitalization of the AIM V.I. Dent Demographic Trends Fund is hereby electronically. m - Registrant's Plan pursuant to Rule 12b-1 under the 1940 Act - None. n Multiple Class Plan (Rule 18f-3) - None. o (1) - The AIM Management Group Code of Ethics adopted May 1, 1981 and as amended August 17, 1999 relating to A I M Management Group Inc. and A I M Advisors, Inc. was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference. (2) - Code of Ethics of Registrant effective as of February 25, 1993 was filed electronically as an Exhibit to Registrant's Post-Effective Amendment No. 14 on September 28, 1999 and is incorporated herein by reference.
C-17 276 Item 24. Persons Controlled by or Under Common Control with Registrant Provide a list or diagram of all persons directly or indirectly controlled by or under common control with the Registrant. For any person controlled by another person, disclose the percentage of voting securities owned by the immediately controlling person or other basis of that person's control. For each company, also provide the state or other sovereign power under the laws of which the company is organized. None. Item 25. Indemnification State the general effect of any contract, arrangements or statute under which any director, officer, underwriter or affiliated person of the Registrant is insured or indemnified against any liability incurred in their official capacity, other than insurance provided by any director, officer, affiliated person or underwriter for their own protection. Under the terms of the Maryland General Corporation Law and the Registrant's Charter and By-Laws, the Registrant may indemnify any person who was or is a director, officer, employee or agent of the Registrant to the maximum extent permitted by the Maryland General Corporation Law. The specific terms of such indemnification are reflected in the Registrant's Charter and By-Laws, which are incorporated herein as part of this Registration Statement. No indemnification will be provided by the Registrant to any director or officer of the Registrant for any liability to the Registrant or shareholders to which such director or officer would otherwise be subject by reason of willful misfeasance, bad faith, gross negligence or reckless disregard of duty. In addition, under the terms of the agreements described in response to Item 24(b) of this Part C, various third parties have agreed to indemnify the registrant, its directors and officers, and, in some cases, its investment advisor and/or principal underwriter, against certain liabilities that may arise in connection with the performance of the agreements. The specific terms of such indemnification are set out in the agreements, and are incorporated herein by reference. Insofar as indemnification for liability arising under the Securities Act of 1933 may be permitted to directors, officers and controlling persons of the Registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in such Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered hereby, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in such Act and will be governed by the final adjudication of such issue. Insurance coverage is provided under a joint Mutual Fund & Investment Advisory Professional Directors & Officers Liability Policy, issued by ICI Mutual Insurance Company, with a $35,000,000 limit of liability. C-18 277 Item 26. Business and Other Connections of Investment Advisor Describe any other business, profession, vocation or employment of a substantial nature that each investment advisor of the Registrant, and each director, officer or partner of the advisor, is or has been engaged within the last two fiscal years for his or her own account or in the capacity of director, officer, employee, partner, or trustee. The only employment of a substantial nature of the Advisor's directors and officers is with the Advisor and its affiliated companies. Reference is also made to the caption "Fund Management--The Advisor" of the Prospectus which comprises Part A of this Registration Statement, and to the discussion under the caption "Management" of the Statement of Additional Information which comprises Part B of this Registration Statement, and to Item 29(b) of this Part C of the Registration Statement. Item 27. Principal Underwriters (a)State the name of each investment company (other than the Registrant) for which each principal underwriter currently distributing the Registrant's securities also acts as a principal underwriter, depositor, or investment advisor. AIM Advisor Funds, Inc. AIM Equity Funds, Inc. (Retail Classes) AIM Funds Group AIM Growth Series AIM International Funds, Inc. AIM Investment Funds AIM Investment Securities Funds (Retail Classes) AIM Series Trust AIM Special Opportunities Funds AIM Summit Fund, Inc. AIM Tax-Exempt Funds, Inc. GT Global Floating Rate Fund, Inc. d/b/a AIM Floating Rate Fund (b) Provide the information required by the following table for each director, officer, or partner of each principal underwriter named in the response to item 20:
Name and Principal Position and Offices Position and Offices Business Address* with Principal Underwriter with Registrant - ---------------- -------------------------- --------------- Charles T. Bauer Chairman & Director Chairman & Director Michael J. Cemo President & Director None Gary T. Crum Director Senior Vice President Robert H. Graham Senior Vice President & Director President & Director
- ----------------------------- * 11 Greenway Plaza, Suite 100, Houston, Texas 77046 C-19 278
Name and Principal Position and Offices Position and Offices Business Address* with Principal Underwriter with Registrant - ---------------- -------------------------- --------------- William G. Littlepage Senior Vice President & Director None James L. Salners Executive Vice President None John Caldwell Senior Vice President None Gordon J. Sprague Senior Vice President None Michael C. Vessels Senior Vice President None Marilyn M. Miller Senior Vice President None Gene L. Needles Senior Vice President None B. J. Thompson First Vice President None Ofelia M. Mayo Vice President, General Counsel Assistant Secretary & Assistant Secretary James R. Anderson Vice President None Dawn M. Hawley Vice President & Treasurer None Mary K. Coleman Vice President None Mary A. Corcoran Vice President None Melville B. Cox Vice President & Chief Compliance Officer Vice President Glenda A. Dayton Vice President None Sidney M. Dilgren Vice President None Tony D. Green Vice President None Charles H. McLaughlin Vice President None Ivy B. McLemore Vice President None Terri L. Ransdell Vice President None Carol F. Relihan Vice President Senior Vice President & Secretary Kamala C. Sachidanandan Vice President None Frank V. Serebrin Vice President None Christopher T. Simutis Vice President None Gary K. Wendler Vice President None Norman W. Woodson Vice President None
- -------------------------------- * 11 Greenway Plaza, Suite 100, Houston, Texas 77046 C-20 279
Name and Principal Position and Offices Position and Offices Business Address* with Principal Underwriter with Registrant - ---------------- -------------------------- --------------- Kathleen J. Pflueger Secretary Assistant Secretary David E. Hessel Assistant Vice President, None Assistant Treasurer & Controller Luke P. Beausoleil Assistant Vice President None Shelia R. Brown Assistant Vice President None Scott E. Burman Assistant Vice President None Tisha B. Christopher Assistant Vice President None Mary E. Gentempo Assistant Vice President None Simon R. Hoyle Assistant Vice President None Kathryn A. Jordon Assistant Vice President None Kim T. McAuliffe Assistant Vice President None David B. O'Neil Assistant Vice President None Rebecca Starling-Klatt Assistant Vice President None Nicholas D. White Assistant Vice President None Nancy L. Martin Assistant General Counsel & Assistant Secretary Assistant Secretary Samuel D. Sirko Assistant General Counsel & Assistant Secretary Assistant Secretary P. Michelle Grace Assistant Secretary Assistant Secretary Lisa A. Moss Assistant Secretary Assistant Secretary Stephen I. Winer Assistant Secretary Assistant Secretary
- -------------------------------- * 11 Greenway Plaza, Suite 100, Houston, Texas 77046 C-21 280 (c) Not Applicable Item 28. Location of Accounts and Records State the name and address of each person maintaining physical possession of each account, book, or other document required to be maintained by section 31(a) [15 U.S.C. 80a-30(a)] and the rules under that section. A I M Advisors, Inc., 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173, will maintain physical possession of each such account, book or other document of the Registrant at its principal executive offices, except for those maintained by the Registrant's Custodian and Transfer Agent State Street Bank and Trust Company, 225 Franklin Street, Boston, Massachusetts 02110. Item 29. Management Services Provide a summary of the substantive provisions of any management-related service contract not discussed in Part A or B, disclosing the parties to the contract and the total amount paid and by whom for the Registrant's last three fiscal years. Not Applicable Item 30. Undertakings In initial registration statements filed under the Securities Act, provide an undertaking to file an amendment to the registration statement with certified financial statements showing the initial capital received before accepting subscriptions from more than 25 persons if the Registrant intends to raise its initial capital under section 14(a)(3) [15 U.S.C. 80a-14(a)(3)]. Not Applicable C-22 281 SIGNATURES Pursuant to the requirements of the Securities Act of 1933 and the Investment Company Act of 1940, the Registrant certifies that it meets all of the requirements for effectiveness of this Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933 and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, thereto duly authorized, in the city of Houston, Texas on the 16th day of February, 2000. REGISTRANT: AIM VARIABLE INSURANCE FUNDS, INC. By: /s/ ROBERT H. GRAHAM --------------------------------------------- Robert H. Graham, President Pursuant to the requirements of the Securities Act of 1933, this Amendment to the Registration Statement has been signed below by the following persons in the capacities and on the dates indicated:
SIGNATURES TITLE DATE -------------------- ----------- ---------- /s/ CHARLES T. BAUER Chairman & Director February 16, 2000 - ----------------------------------------- (Charles T. Bauer) /s/ ROBERT H. GRAHAM Director & President February 16, 2000 - ----------------------------------------- (Principal Executive Officer) (Robert H. Graham) /s/ BRUCE L. CROCKETT Director February 16, 2000 - ----------------------------------------- (Bruce L. Crockett) /s/ OWEN DALY II Director February 16, 2000 - ----------------------------------------- (Owen Daly II) /s/ EDWARD K. DUNN, JR. Director February 16, 2000 - --------------------------------- (Edward K. Dunn, Jr.) /s/ JACK FIELDS Director February 16, 2000 - ------------------------------------------ (Jack Fields) /s/ CARL FRISCHLING Director February 16, 2000 - ----------------------------------------- (Carl Frischling) /s/ PREMA MATHAI-DAVIS Director February 16, 2000 - ----------------------------------------- (Prema Mathai-Davis) /s/ LEWIS F. PENNOCK Director February 16, 2000 - ----------------------------------------- (Lewis F. Pennock) /s/ LOUIS S. SKLAR Director February 16, 2000 - ----------------------------------------- (Louis S. Sklar) Vice President February 16, 2000 /s/ DANA R. SUTTON Treasurer (Principal Financial - ----------------------------------------- and Accounting Officer) (Dana R. Sutton)
282 INDEX TO EXHIBITS
Exhibit No. Description - ------- ----------- d(3)(e) Amendment No. 4, dated December 29, 1999, to Master Investment Advisory Agreement, dated February 28, 1997, between Registrant and A I M Advisors, Inc. d(4) Form of Master Investment Advisory Agreement between Registrant and A I M Advisors, Inc. d(5) Sub-Advisory Agreement, dated December 14, 1998, between A I M Advisors, Inc. and INVESCO Asset Management Limited d(6) Form of Sub-Advisory between A I M Advisors, Inc. and INVESCO Asset Management Limited d(7) Sub-Advisory Agreement, dated December 29, 1999, between A I M Advisors, Inc. and H.S. Dent Advisors, Inc. e(2)(e) Amendment No. 4, dated December 29, 1999, to Master Distribution Agreement, dated February 28, 1997, between Registrant and A I M Distributors, Inc. h(4)(d) Amendment No. 3, dated November 15, 1999, to Master Administrative Services Agreement, as amended, dated May 1, 1998, between Registrant and A I M Advisors, Inc. h(4)(e) Amendment No. 4, dated December 29, 1999, to Master Administrative Services Agreement, as amended, dated May 1,1998, between Registrant and A I M Advisors, Inc. h(25)(d) Amendment No. 3, dated November 1, 1999, to the Participation Agreement, dated December 3, 1997, between Registrant and Security Life of Denver Insurance Company h(26)(b) Amendment No. 1, dated April 23, 1999, to the Participation Agreement, dated December 31, 1997, between Registrant and Cova Financial Services Life Insurance Company h(60) Participation Agreement, dated November 1, 1999, between Registrant and AETNA Insurance Company of America h(62) Agreement and Plan of Reorganization, dated December 7, 1999, between Registrant and AIM Variable Insurance Funds i(1)(h) Consent of Messrs. Freedman, Levy, Kroll & Simonds i(2) Consent of Messrs. Tait, Weller & Baker
EX-99.D3.E 2 AMEND. #4 TO MASTER INVESTMENT ADVISORY AGMT. 1 EXHIBIT d(3)(e) AMENDMENT NO. 4 TO MASTER INVESTMENT ADVISORY AGREEMENT This amendment dated as of December 29, 1999, amends the Master Investment Advisory Agreement (the "Agreement"), dated February 28, 1997, between AIM Variable Insurance Funds, Inc., a Maryland corporation, and A I M Advisors, Inc., a Delaware corporation. W I T N E S S E T H: WHEREAS, the parties desire to amend the Agreement to add one new portfolio, AIM V.I. Dent Demographic Trends Fund; NOW, THEREFORE, the parties agree as follows: 1. Appendix A to the Agreement is hereby deleted in its entirety and replaced with the following: APPENDIX A TO MASTER INVESTMENT ADVISORY AGREEMENT OF AIM VARIABLE INSURANCE FUNDS, INC. The Company shall pay the Advisor as full compensation for all services rendered and all facilities furnished hereunder, a management fee for each Fund by applying the following annual rates to the average daily net assets of each Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of each Fund. AIM V.I. CAPITAL APPRECIATION FUND AIM V.I. GROWTH FUND AIM V.I. GROWTH AND INCOME FUND AIM V.I. GLOBAL UTILITIES FUND AIM V.I. VALUE FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million ........................................... 0.65% Over $250 million ............................................ 0.60%
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million............................................. 0.80% Over $150 million ............................................. 0.625%
2 AIM V.I. BALANCED FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million.............................................. 0.75% Over $150 million .............................................. 0.50%
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $350 million............................................. 0.75% Over $350 million ............................................. 0.625%
AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $2 billion............................................... 0.85% Over $2 billion................................................ 0.80%
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million............................................ 0.60% Over $250 million ............................................ 0.55%
AIM V.I. GLOBAL GROWTH AND INCOME FUND AIM V.I. TELECOMMUNICATIONS FUND
ANNUAL NET ASSETS RATE - ---------- ------ Average Daily Net Assets....................................... 1.00%
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million ........................................... .50% Over $250 million ............................................ .45%
3 AIM V.I. HIGH YIELD FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $200 million ........................................... 0.625% Next $300 million ............................................ 0.55% Next $500 million ............................................ 0.50% Amount over $1 billion........................................ 0.45%
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million ........................................... 0.75% Over $250 million ............................................ 0.70%
AIM V.I. MONEY MARKET FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million ............................................ 0.40% Over $250 million ............................................. 0.35%
2. In all other respects, the Agreement is hereby confirmed and remains in full force and effect. IN WITNESS WHEREOF, the parties have caused this Amendment to be executed by their respective officers on the date first written above. Date: December 29, 1999 ------------------------------ AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM --------------------- ---------------------------------- Assistant Secretary President (SEAL) A I M ADVISORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM --------------------- ---------------------------------- Assistant Secretary President (SEAL) EX-99.D4 3 FORM OF MASTER INVESTMENT ADVISORY AGREEMENT 1 EXHIBIT d(4) AIM VARIABLE INSURANCE FUNDS, INC. FORM OF MASTER INVESTMENT ADVISORY AGREEMENT THIS AGREEMENT is made this day of , , by and between AIM Variable Insurance Funds, Inc., a Maryland corporation (the "Company") with respect to its series of shares shown on the Appendix A attached hereto, as the same may be amended from time to time, and A I M Advisors, Inc., a Delaware corporation (the "Advisor"). RECITALS WHEREAS, the Company is registered under the Investment Company Act of 1940, as amended (the "l940 Act"), as an open-end, diversified management investment company; WHEREAS, the Advisor is registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as an investment advisor and engages in the business of acting as an investment advisor; WHEREAS, the Company's Charter (the "Charter") authorizes the Board of Directors of the Company (the "Board of Directors") to create separate series of shares of common stock of the Company, and as of the date of this Agreement, the Board of Directors has created seventeen separate series portfolios (such portfolios and any other portfolios hereafter added to the Company being referred to collectively herein as the "Funds"); and WHEREAS, the Company and the Advisor desire to enter into an agreement to provide for investment advisory services to the Funds upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt of which is hereby acknowledged, the parties agree as follows: 1. Advisory Services. The Advisor shall act as investment advisor for the Funds and shall, in such capacity, supervise all aspects of the Funds' operations, including the investment and reinvestment of cash, securities or other properties comprising the Funds' assets, subject at all times to the policies and control of the Board of Directors. The Advisor shall give the Company and the Funds the benefit of its best judgment, efforts and facilities in rendering its services as investment advisor. 1 2 2. Investment Analysis and Implementation. In carrying out its obligations under Section 1 hereof, the Advisor shall: (a) supervise all aspects of the operations of the Funds; (b) obtain and evaluate pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or the Funds, and whether concerning the individual issuers whose securities are included in the assets of the Funds or the activities in which such issuers engage, or with respect to securities which the Advisor considers desirable for inclusion in the Funds' assets; (c) determine which issuers and securities shall be represented in the Funds' investment portfolios and regularly report thereon to the Board of Directors; (d) formulate and implement continuing programs for the purchases and sales of the securities of such issuers and regularly report thereon to the Board of Directors; and (e) take, on behalf of the Company and the Funds, all actions which appear to the Company and the Funds necessary to carry into effect such purchase and sale programs and supervisory functions as aforesaid, including but not limited to the placing of orders for the purchase and sale of securities for the Funds. 3. Securities Lending Duties and Fees. The Advisor agrees to provide the following services in connection with the securities lending activities of each Fund: (a) oversee participation in the securities lending program to ensure compliance with all applicable regulatory and investment guidelines; (b) assist the securities lending agent or principal (the "Agent") in determining which specific securities are available for loan; (c) monitor the Agent to ensure that securities loans are effected in accordance with the Advisor's instructions and with procedures adopted by the Board of Directors; (d) prepare appropriate periodic reports for, and seek appropriate approvals from, the Board of Directors with respect to securities lending activities; (e) respond to Agent inquiries; and (f) perform such other duties as necessary. As compensation for such services provided by the Advisor in connection with securities lending activities of each Fund, a lending Fund shall pay the Advisor a fee equal to 25% of the net monthly interest or fee income retained or paid to the Fund from such activities. 4. Delegation of Responsibilities. The Advisor is authorized to delegate any or all of its rights, duties and obligations under this Agreement to one or more sub-advisors, and may enter into agreements with sub-advisors, and may replace any such sub-advisors from time to time in its discretion, in accordance 2 3 with the 1940 Act, the Advisers Act, and rules and regulations thereunder, as such statutes, rules and regulations are amended from time to time or are interpreted from time to time by the staff of the Securities and Exchange Commission ("SEC"), and if applicable, exemptive orders or similar relief granted by the SEC and upon receipt of approval of such sub-advisors by the Board of Directors and by shareholders (unless any such approval is not required by such statutes, rules, regulations, interpretations, orders or similar relief). 5. Independent Contractors. The Advisor and any sub-advisors shall for all purposes herein be deemed to be independent contractors and shall, unless otherwise expressly provided or authorized, have no authority to act for or represent the Company in any way or otherwise be deemed to be an agent of the Company. 6. Control by Board of Directors. Any investment program undertaken by the Advisor pursuant to this Agreement, as well as any other activities undertaken by the Advisor on behalf of the Funds, shall at all times be subject to any directives of the Board of Directors. 7. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Advisor shall at all times conform to: (a) all applicable provisions of the 1940 Act and the Advisers Act and any rules and regulations adopted thereunder; (b) the provisions of the registration statement of the Company, as the same may be amended from time to time under the Securities Act of 1933 and the 1940 Act; (c) the provisions of the Charter, as the same may be amended from time to time; (d) the provisions of the by-laws of the Company, as the same may be amended from time to time; and (e) any other applicable provisions of state, federal or foreign law. 8. Broker-Dealer Relationships. The Advisor is responsible for decisions to buy and sell securities for the Funds, broker-dealer selection, and negotiation of brokerage commission rates. (a) The Advisor's primary consideration in effecting a security transaction will be to obtain the best execution. (b) In selecting a broker-dealer to execute each particular transaction, the Advisor will take the following into consideration: the best net price available; the reliability, integrity and financial condition of the broker-dealer; and the value of the expected contribution of the broker-dealer to the investment performance of the Funds on a continuing basis. Accordingly, the price to the Funds in any transaction may be less favorable than that 3 4 available from another broker-dealer if the difference is reasonably justified by other aspects of the fund execution services offered. (c) Subject to such policies as the Board of Directors may from time to time determine, the Advisor shall not be deemed to have acted unlawfully or to have breached any duty created by this Agreement or otherwise solely by reason of its having caused the Funds to pay a broker or dealer that provides brokerage and research services to the Advisor an amount of commission for effecting a fund investment transaction in excess of the amount of commission another broker or dealer would have charged for effecting that transaction, if the Advisor determines in good faith that such amount of commission was reasonable in relation to the value of the brokerage and research services provided by such broker or dealer, viewed in terms of either that particular transaction or the Advisor's overall responsibilities with respect to a particular Fund, other Funds of the Company, and to other clients of the Advisor as to which the Advisor exercises investment discretion. The Advisor is further authorized to allocate the orders placed by it on behalf of the Funds to such brokers and dealers who also provide research or statistical material, or other services to the Funds, to the Advisor, or to any sub-advisor. Such allocation shall be in such amounts and proportions as the Advisor shall determine and the Advisor will report on said allocations regularly to the Board of Directors indicating the brokers to whom such allocations have been made and the basis therefor. (d) With respect to one or more Funds, to the extent the Advisor does not delegate trading responsibility to one or more sub-advisors, in making decisions regarding broker-dealer relationships, the Advisor may take into consideration the recommendations of any sub-advisor appointed to provide investment research or advisory services in connection with the Funds, and may take into consideration any research services provided to such sub- advisor by broker-dealers. (e) Subject to the other provisions of this Section 8, the 1940 Act, the Securities Exchange Act of 1934, and rules and regulations thereunder, as such statutes, rules and regulations are amended from time to time or are interpreted from time to time by the staff of the SEC, any exemptive orders issued by the SEC, and any other applicable provisions of law, the Advisor may select brokers or dealers with which it or the Funds are affiliated. 9. Compensation. The compensation that each Fund shall pay the Advisor is set forth in Appendix B attached hereto. 10. Expenses of the Funds. All of the ordinary business expenses incurred in the operations of the Funds and the offering of their shares shall be borne by the Funds unless specifically provided otherwise in this Agreement. These expenses borne by the Funds include but are not limited to brokerage commissions, taxes, legal, accounting, auditing, or governmental fees, the cost of 4 5 preparing share certificates, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Company on behalf of the Funds in connection with membership in investment company organizations and the cost of printing copies of prospectuses and statements of additional information distributed to the Funds' shareholders. 11. Services to Other Companies or Accounts. The Company understands that the Advisor now acts, will continue to act and may act in the future as investment manager or advisor to fiduciary and other managed accounts, and as investment manager or advisor to other investment companies, including any offshore entities, or accounts, and the Company has no objection to the Advisor so acting, provided that whenever the Company and one or more other investment companies or accounts managed or advised by the Advisor have available funds for investment, investments suitable and appropriate for each will be allocated in accordance with a formula believed to be equitable to each company and account. The Company recognizes that in some cases this procedure may adversely affect the size of the positions obtainable and the prices realized for the Funds. 12. Non-Exclusivity. The Company understands that the persons employed by the Advisor to assist in the performance of the Advisor's duties under this Agreement will not devote their full time to such service and nothing contained in this Agreement shall be deemed to limit or restrict the right of the Advisor or any affiliate of the Advisor to engage in and devote time and attention to other businesses or to render services of whatever kind or nature. The Company further understands and agrees that officers or directors of the Advisor may serve as officers or directors of the Company, and that officers or directors of the Company may serve as officers or directors of the Advisor to the extent permitted by law; and that the officers and directors of the Advisor are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies. 13. Effective Date, Term and Approval. This Agreement shall become effective with respect to a Fund, if approved by the shareholders of such Fund, on the Effective Date for such Fund, as set forth in Appendix A attached hereto. If so approved, this Agreement shall thereafter continue in force and effect until June 30, 2001, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually: (a) (i) by the Board of Directors or (ii) by the vote of "a majority of the outstanding voting securities" of such Fund (as defined in Section 2(a)(42) of the 1940 Act); and 5 6 (b) by the affirmative vote of a majority of the trustees who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as Company directors), by votes cast in person at a meeting specifically called for such purpose. 14. Termination. This Agreement may be terminated as to the Company or as to any one or more of the Funds at any time, without the payment of any penalty, by vote of the Board of Directors or by vote of a majority of the outstanding voting securities of the applicable Fund, or by the Advisor, on sixty (60) days' written notice to the other party. The notice provided for herein may be waived by the party entitled to receipt thereof. This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act. 15. Amendment. No amendment of this Agreement shall be effective unless it is in writing and signed by the party against which enforcement of the amendment is sought. 16. Liability of Advisor and Fund. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Advisor or any of its officers, directors or employees, the Advisor shall not be subject to liability to the Company or to the Funds or to any shareholder of the Funds for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. Any liability of the Advisor to one Fund shall not automatically impart liability on the part of the Advisor to any other Fund. No Fund shall be liable for the obligations of any other Fund. 17. Liability of Shareholders. Notice is hereby given that, as provided by applicable law, the obligations of or arising out of this Agreement are not binding upon any of the shareholders of the Company individually but are binding only upon the assets and property of the Company and that the shareholders shall be entitled, to the fullest extent permitted by applicable law, to the same limitation on personal liability as shareholders of private corporations for profit. 18. Notices. Any notices under this Agreement shall be in writing, addressed and delivered, telecopied or mailed postage paid, to the other party entitled to receipt thereof at such address as such party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of the Company and that of the Advisor shall be 11 Greenway Plaza, Suite 100, Houston, Texas 77046-1173. 19. Questions of Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of 6 7 any controlling decision of any such court, by rules, regulations or orders of the SEC issued pursuant to said Acts. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of the Agreement is revised by rule, regulation or order of the SEC, such provision shall be deemed to incorporate the effect of such rule, regulation or order. Subject to the foregoing, this Agreement shall be governed by and construed in accordance with the laws (without reference to conflicts of law provisions) of the State of Texas. 20. License Agreement. The Company shall have the non-exclusive right to use the name "AIM" to designate any current or future series of shares only so long as A I M Advisors, Inc. serves as investment manager or advisor to the Company with respect to such series of shares. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective officers on the day and year first written above. AIM VARIABLE INSURANCE FUNDS, INC. (a Maryland corporation) Attest: By: - --------------------------------------- ---------------------------------- Assistant Secretary President (SEAL) A I M ADVISORS, INC. Attest: By: - --------------------------------------- ---------------------------------- Assistant Secretary President (SEAL)
7 8 APPENDIX A FUNDS AND EFFECTIVE DATES
EFFECTIVE DATE OF NAME OF FUND ADVISORY AGREEMENT - ------------ ------------------ AIM V.I. Aggressive Growth Fund April 17, 2000 AIM V.I. Balanced Fund April 17, 2000 AIM V.I. Blue Chip Fund April 17, 2000 AIM V.I. Capital Appreciation Fund April 17, 2000 AIM V.I. Capital Development Fund April 17, 2000 AIM V.I. Dent Demographic Trends Fund April 17, 2000 AIM V.I. Diversified Income Fund April 17, 2000 AIM V.I. Global Growth and Income Fund April 17, 2000 AIM V.I. Global Utilities Fund April 17, 2000 AIM V.I. Government Securities Fund April 17, 2000 AIM V.I. Growth and Income Fund April 17, 2000 AIM V.I. Growth Fund April 17, 2000 AIM V.I. High Yield Fund April 17, 2000 AIM V.I. International Equity Fund April 17, 2000 AIM V.I. Money Market Fund April 17, 2000 AIM V.I. Telecommunications Fund April 17, 2000 AIM V.I. Value Fund April 17, 2000
8 9 APPENDIX B COMPENSATION TO THE ADVISOR The Company shall pay the Advisor, out of the assets of a Fund, as full compensation for all services rendered, an advisory fee for such Fund set forth below. Such fee shall be calculated by applying the following annual rates to the average daily net assets of such Fund for the calendar year computed in the manner used for the determination of the net asset value of shares of such Fund. 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
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million........................... 0.65% Over $250 million............................ 0.60%
AIM V.I. AGGRESSIVE GROWTH FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million.......................... 0.80% Over $150 million........................... 0.625%
AIM V.I. BALANCED FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $150 million........................... 0.75% Over $150 million............................ 0.50%
AIM V.I. BLUE CHIP FUND AIM V.I. CAPITAL DEVELOPMENT FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $350 million.......................... 0.75% Over $350 million........................... 0.625%
9 10 AIM V.I. DENT DEMOGRAPHIC TRENDS FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $2 billion............................. 0.85% Over $2 billion.............................. 0.80%
AIM V.I. DIVERSIFIED INCOME FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million........................... 0.60% Over $250 million............................ 0.55%
AIM V.I. GLOBAL GROWTH AND INCOME FUND AIM V.I. TELECOMMUNICATIONS FUND
ANNUAL NET ASSETS RATE - ---------- ------ Average Daily Net Assets..................... 1.00%
AIM V.I. GOVERNMENT SECURITIES FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million........................... 0.50% Over $250 million............................ 0.45%
AIM V.I. HIGH YIELD FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $200 million.......................... 0.625% Next $300 million........................... 0.55% Next $500 million........................... 0.50% Amount over $1 billion...................... 0.45%
AIM V.I. INTERNATIONAL EQUITY FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million........................... 0.75% Over $250 million............................ 0.70%
10 11 AIM V.I. MONEY MARKET FUND
ANNUAL NET ASSETS RATE - ---------- ------ First $250 million........................... 0.40% Over $250 million............................ 0.35%
11 EX-99.D5 4 SUB-ADVISORY AGREEMENT - INVESCO ASSET MGMT. 1 EXHIBIT d(5) AIM VARIABLE INSURANCE FUNDS, INC. (AIM V.I. GLOBAL GROWTH AND INCOME FUND) SUB-ADVISORY AGREEMENT THIS AGREEMENT is made as of this 14th day of December, 1998, by and between A I M Advisors, Inc., a Delaware corporation (the "Advisor") and INVESCO Asset Management Limited (the "Sub-Advisor"). RECITALS WHEREAS, AIM Variable Insurance Funds, Inc. (the "Company") is registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, diversified management investment company; WHEREAS, the Advisor is registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as an investment advisor and engages in the business of acting as an investment advisor; WHEREAS, the Sub-Advisor is registered under the Advisers Act, as amended, as an investment advisor and engages in the business of acting as an investment advisor; WHEREAS, the Company's charter authorizes the Board of Directors of the Company to classify or reclassify authorized but unissued shares of the Company, and as of the date of this Agreement, the Company's Board of Directors has authorized the issuance of fifteen series of shares representing interests in fifteen investment portfolios: AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth Fund, AIM V.I. Growth and Income Fund, AIM V.I. High Yield Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund, AIM V.I. Telecommunications Fund and AIM V.I. Value Fund (such series, together with any future series, are collectively referred to herein as the "Portfolios"); WHEREAS, the Advisor has entered into a Master Investment Advisory Agreement dated February 28, 1997, as amended, with the Company (the "Investment Advisory Agreement"), pursuant to which the Advisor shall act as investment advisor with respect to the Portfolios; and WHEREAS, pursuant to Section 3 ("Delegation of Responsibilities") of the Investment Advisory Agreement, the Advisor wishes to retain the Sub-Advisor for purposes of rendering investment research and advisory services to the Advisor in connection with the AIM V.I. Global Growth and Income Fund (the "Fund"), upon the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows: 2 1. Appointment of Sub-Advisor. The Advisor hereby appoints the Sub-Advisor to render investment research and advisory services to the Advisor with respect to the Fund, under the supervision of the Advisor and subject to the approval and direction of the Company's Board of Directors, and the Sub-Advisor hereby accepts such appointment, all subject to the terms and conditions contained herein. 2. Investment Analysis. The duties of the Sub-Advisor shall include: (a) obtaining and evaluating pertinent information about significant developments and economic, statistical and financial data, domestic, foreign or otherwise, whether affecting the economy generally or the Fund, and whether concerning the individual issuers whose securities are included in the Fund or the activities in which such issuers engage, or with respect to securities which the Sub-Advisor considers desirable for inclusion in the Fund's investment portfolio; (b) determining which issuers and securities shall be represented in the Fund's investment portfolio and regularly reporting thereon to the Advisor and, at the request of the Advisor, to the Company's Board of Directors; and (c) formulating and implementing continuing programs for the purchases and sales of the securities of such issuers and regularly reporting thereon to the Advisor and, at the request of the Advisor, to the Company's Board of Directors. 3. Control by Board of Directors. Any investment program undertaken by the Sub-Advisor pursuant to this Agreement, as well as any other activities undertaken by the Sub-Advisor with respect to the Fund, shall at all times be subject to any directives of the Board of Directors of the Company. 4. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Sub-Advisor shall at all times conform to: (a) all applicable provisions of the 1940 Act and the Advisers Act and any rules and regulations adopted thereunder; (b) the provisions of the registration statement of the Company, as the same may be amended from time to time, under the Securities Act of 1933, as amended, and the 1940 Act; (c) the provisions of the corporate charter of the Company, as the same may be amended from time to time; (d) the provisions of the by-laws of the Company, as the same may be amended from time to time; and (e) any other applicable provisions of state, federal or foreign law. 5. Compensation. the Advisor shall pay to the Sub-Advisor, as compensation for services rendered hereunder to a Fund, an annual fee, payable monthly, equal to 0.40% of the average net assets of the Fund. 2 3 6. Sub-Advisor's Expenses. The Sub-Advisor shall furnish at its own expense all administrative services, office space, equipment and facilities, investment advisory, statistical and research services, and executive, supervisory and clerical personnel necessary to perform its duties and obligations hereunder. 7. Fee Waivers and Expense Limitation. If, for any fiscal year of the Company, the amount of the advisory fee which the Fund would otherwise be obligated to pay to the Advisor is reduced because of voluntary fee waivers by the Advisor or pursuant to expense limitation provisions of the Advisory Agreement, the fee payable hereunder to the Sub-Advisor shall be reduced proportionately; and to the extent that the Advisor reimburses the Fund as a result of such expense limitations, the Sub-Advisor shall reimburse the Advisor that proportion of such reimbursement payments which the sub-advisory fee hereunder bears to the advisory fee under the Agreement. 8. Non-Exclusivity. The services of the Sub-Advisor to the Advisor with respect to the Company and the Fund are not deemed to be exclusive, and the Sub-Advisor shall be free to render investment advisory and administrative or other services to others (including other investment companies) and to engage in other activities. It is understood and agreed that officers and directors of the Sub-Advisor may serve as officers or directors of the Advisor or of the Company, and that officers or directors of the Advisor or of the Company may serve as officers or directors of the Sub-Advisor to the extent permitted by law; and that the officers and directors of the Sub-Advisor are not prohibited from engaging in any other business activity or from rendering services to any other person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies. 9. Term and Approval. This Agreement shall become effective with respect to the Fund if approved by the shareholders of the Fund, and if so approved, this Agreement shall thereafter continue in force and effect until June 30, 2000, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually: (a) (i) by the Company's Board of Directors, or (ii) by the vote of "a majority of the outstanding voting securities" of the Fund (as defined under Section 2(a)(42) of the 1940 Act); and (b) by the affirmative vote of a majority of the directors who are not parties to this Agreement or "interested persons" (as defined in the 1940 Act) of a party to this Agreement (other than as Company directors), by votes cast in person at a meeting specifically called for such purpose. 10. Termination. This Agreement may be terminated as to the Fund at any time, without the payment of any penalty, by vote of the Company's Board of Directors or by vote of a majority of the Fund's outstanding voting securities, or by the Advisor, or by the Sub-Advisor on sixty (60) days' written notice to the other party and to the Company. The notice provided for herein may be waived by either party. This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act. 12. Liability of Sub-Advisor. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Sub-Advisor or any of its officers, directors or employees, the Sub-Advisor shall not be subject to liability to the 3 4 Advisor for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 13. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to such address as may be designated for the receipt of such notice, with a copy to the Company. Until further notice, it is agreed that the address of the Company and that of the Advisor shall be as follows: 11 Greenway Plaza, Suite 100 Houston, Texas 77046 Attn: Mr. Robert H. Graham Until further notice, it is agreed that the address of the Sub-Advisor shall be as follows: 11 Devonshire Square London, England EC2M4YR Attn: President 14. Questions of Interpretation. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Securities and Exchange Commission issued pursuant to said Acts. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of this Agreement is revised by rule, regulation or order of the Securities and Exchange Commission, such provision shall be deemed to incorporate the effect of such rule, regulation or order. 4 5 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective duly authorized officers as of the day and year first written above. A I M ADVISORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM - --------------------------------- ------------------------------- Assistant Secretary President (SEAL) INVESCO ASSET MANAGEMENT LIMITED Attest: /s/ MICHAEL S. PERMAN By: /s/ ILLEGIBLE - --------------------------------- ------------------------------- Title: Secretary Title: Director --------------------------- ---------------------------- (SEAL) EX-99.D6 5 FORM OF SUB-ADVISORY AGREEMENT 1 EXHIBIT d(6) AIM VARIABLE INSURANCE FUNDS, INC. FORM OF SUB-ADVISORY AGREEMENT This contract is made as of this day of , , between A I M Advisors, Inc., hereinafter "Adviser" (11 Greenway Plaza, Suite 100, Houston, Texas 77046) and INVESCO Asset Management Limited, hereinafter "Sub- Adviser" (11 Devonshire Square, London, England, EC2 M4YR). WHEREAS: A) Adviser has entered into an investment advisory agreement with AIM Variable Insurance Funds, Inc. (hereinafter "Company"), an open-end management investment company registered under the Investment Company Act of 1940, as amended (the "1940 Act"), with respect to the funds set forth in Exhibit A attached hereto (each a "Fund"); B) Sub-Adviser represents that it is licensed under the (relevant law) as an investment adviser and engages in the business of acting as an investment adviser; C) Adviser is authorized to delegate certain, any or all of its rights, duties and obligations under investment advisory agreements to sub-advisers, including sub-advisers that are affiliated with Adviser. NOW THEREFORE, in consideration of the promises and the mutual covenants herein contained, it is agreed between the parties hereto as follows: 1. Appointment. Adviser hereby appoints Sub-Adviser as Sub-Adviser of each Fund for the period and on the terms set forth in the attachments hereto. Sub-Adviser accepts such appointment and agrees to render the services herein set forth, for the compensation herein provided. 2. Duties as Sub-Adviser. (a) Subject to the supervision of the Company's Board of Directors ("Board") and Adviser, the Sub-Adviser will provide a continuous investment program for each Fund, including investment research and management, with respect to all or a portion of the securities and investments and cash equivalents of the Fund (the "Sub-Advised Assets"), such Sub-Advised Assets to be determined by the Adviser. The Sub-Adviser will determine from time to time what securities and other investments will be purchased, retained or sold with respect to the Sub-Advised Assets of each Fund, and the brokers and dealers through whom trades will be executed. (b) The Sub-Adviser agrees that, in placing orders with brokers and dealers, it will attempt to obtain the best net result in terms of price and execution. Consistent with this obligation, the Sub-Adviser may, in its discretion, purchase and sell portfolio securities from and to brokers and 1 2 dealers who sell shares of the Funds or provide the Funds, Adviser's other clients, or Sub-Adviser's other clients with research, analysis, advice and similar services. The Sub-Adviser may pay to brokers and dealers, in return for such research and analysis, a higher commission or spread than may be charged by other brokers and dealers, subject to the Sub-Adviser determining in good faith that such commission or spread is reasonable in terms either of the particular transaction or of the overall responsibility of the Adviser and the Sub-Adviser to the Funds and their other clients and that the total commissions or spreads paid by each Fund will be reasonable in relation to the benefits to the Fund over the long term. In no instance will portfolio securities be purchased from or sold to the Sub-Adviser, or any affiliated person thereof, except in accordance with the applicable securities laws and the rules and regulations thereunder and any exemptive orders currently in effect. Whenever the Sub-Adviser simultaneously places orders to purchase or sell the same security on behalf of a Fund and one or more other accounts advised by the Sub-Adviser, such orders will be allocated as to price and amount among all such accounts in a manner believed to be equitable to each account. (c) The Sub-Adviser will maintain all required books and records with respect to the securities transactions of the Funds, and will furnish the Board and Adviser with such periodic and special reports as the Board or Adviser reasonably may request. Sub-Adviser hereby agrees that all records which it maintains for the Adviser are the property of the Adviser, and agrees to preserve for the periods prescribed by applicable law any records which it maintains for the Adviser and which are required to be maintained, and further agrees to surrender promptly to the Adviser any records which it maintains for the Adviser upon request by the Adviser. 3. Further Duties. In all matters relating to the performance of this Contract, Sub-Adviser will act in conformity with the Articles of Incorporation, By-Laws and Registration Statement of the Company and with the instructions and directions of the Board and will comply with the requirements of the 1940 Act, the rules, regulations, exemptive orders and no-action positions thereunder, and all other applicable laws and regulations. Sub-Adviser shall maintain compliance procedures for the Funds that it and the Adviser reasonably believe are adequate to ensure compliance with the 1940 Act and the investment objective(s) and policies as stated in the prospectuses and statements of additional information. 4. Services Not Exclusive. The services furnished by Sub-Adviser hereunder are not to be deemed exclusive and Sub-Adviser shall be free to furnish similar services to others so long as its services under this Contract are not impaired thereby. Nothing in this Contract shall limit or restrict the right of any director, officer or employee of Sub-Adviser, who may also be a Director, officer or employee of the Company, to engage in any other business or to devote his or 2 3 her time and attention in part to the management or other aspects of any other business, whether of a similar nature or a dissimilar nature. 5. Compensation. (a) For the services provided to a Fund under this Contract, Adviser will pay Sub-Adviser a fee, computed daily and paid monthly, at the rate of 40% of the Adviser's compensation on the Sub-Advised Assets per year, on or before the last business day of the next succeeding calendar month. (b) If this Contract becomes effective or terminates before the end of any month, the fee for the period from the effective date to the end of the month or from the beginning of such month to the date of termination, as the case may be, shall be prorated according to the proportion which such period bears to the full month in which such effectiveness or termination occurs. 6. Fee Waivers and Expense Limitations. If, for any fiscal year of the Company, the amount of the advisory fee which the Fund would otherwise be obligated to pay to the Adviser is reduced because of contractual or voluntary fee waivers or expense limitations by the Adviser, the fee payable hereunder to the Sub-Adviser shall be reduced proportionately; and to the extent that the Adviser reimburses the Fund as a result of such expense limitations, the Sub-Adviser shall reimburse the Adviser that proportion of such reimbursement payments which the sub-advisory fee hereunder bears to the advisory fee under this Contract. 7. Limitation of Liability of Sub-Adviser and Indemnification. Sub-Adviser shall not be liable for any costs or liabilities arising from any error of judgment or mistake of law or any loss suffered by the Fund or the Company in connection with the matters to which this Contract relates except a loss resulting from willful misfeasance, bad faith or gross negligence on the part of Sub-Adviser in the performance by Sub-Adviser of its duties or from reckless disregard by Sub-Adviser of its obligations and duties under this Contract. Any person, even though also an officer, partner, employee, or agent of Sub-Adviser, who may be or become a Director, officer, employee or agent of the Company, shall be deemed, when rendering services to a Fund or the Company or acting with respect to any business of a Fund or the Company to be rendering such service to or acting solely for the Fund or the Company and not as an officer, partner, employee, or agent or one under the control or direction of Sub-Adviser even though paid by it. 8. Duration and Termination. (a) This Contract shall become effective upon the date hereabove written, provided that this Contract shall not take effect with respect to any Fund unless it has first been approved (i) by a vote of a majority of the independent Directors who are not parties to this Contract or "interested 3 4 persons" (as defined in the 1940 Act) of a party to this Contract, other than as Board members ("Independent Directors"), cast in person at a meeting called for the purpose of voting on such approval, and (ii) by vote of a majority of that Fund's outstanding voting securities, when required by the 1940 Act. (b) Unless sooner terminated as provided herein, this Contract shall continue in force and effect until June 30, 2001. Thereafter, if not terminated, with respect to each Fund, this Contract shall continue automatically for successive periods not to exceed twelve months each, provided that such continuance is specifically approved at least annually (i) by a vote of a majority of the Independent Directors, cast in person at a meeting called for the purpose of voting on such approval, and (ii) by the Board or by vote of a majority of the outstanding voting securities of that Fund. (c) Notwithstanding the foregoing, with respect to any Fund this Contract may be terminated at any time, without the payment of any penalty, by vote of the Board or by a vote of a majority of the outstanding voting securities of the Fund on sixty days' written notice to Sub-Adviser or by Sub-Adviser at any time, without the payment of any penalty, on sixty days' written notice to the Company. Termination of this Contract with respect to one Fund shall not affect the continued effectiveness of this Contract with respect to any other Fund. This Contract will automatically terminate in the event of its assignment. 9. Amendment. No provision of this Contract may be changed, waived, discharged or terminated orally, but only by an instrument in writing signed by the party against which enforcement of the change, waiver, discharge or termination is sought, and, when required by the 1940 Act, no amendment of this Contract shall be effective until approved by vote of a majority of the Fund's outstanding voting securities. 10. Notices. Any notices under this Contract shall be writing, addressed and delivered, telecopied or mailed postage paid, to the other party entitled to receipt thereof at such address as such party may designate for the receipt of such notice. Until further notice to the other party, it is agreed that the address of the Company and that of the Adviser shall be 11 Greenway Plaza, Suite 100, Houston, Texas 77046. Until further notice to the other party, it is agreed that the address of the Sub-Adviser shall be 11 Devonshire Square, London, England, EC2 M4YR. 11. Governing Law. This Contract shall be construed in accordance with the laws of the State of Maryland and the 1940 Act. To the extent that the applicable laws of the State of Maryland conflict with the applicable provisions of the 1940 Act, the latter shall control. 4 5 12. Miscellaneous. The captions in this Contract are included for convenience of reference only and in no way define or delimit any of the provisions hereof or otherwise affect their construction or effect. If any provision of this Contract shall be held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Contract shall not be affected thereby. This Contract shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors. Any question of interpretation of any term or provision of this Contract having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Investment Advisers Act of 1940 ("Advisers Act") shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the SEC issued pursuant to said Acts. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of the Contract is revised by rule, regulation or order of the SEC, such provision shall be deemed to incorporate the effect of such rule, regulation or order. IN WITNESS WHEREOF, the parties hereto have caused this Contract to be executed by their officers designated as of the day and year first above written. A I M ADVISORS, INC. INVESCO ASSET MANAGEMENT LIMITED By: By: - -------------------------------------- -------------------------------------- Name: Name: - -------------------------------------- -------------------------------------- Its: Its: - -------------------------------------- --------------------------------------
5 6 EXHIBIT A TO AIM VARIABLE INSURANCE FUNDS, INC. SUB-ADVISORY AGREEMENT AIM V.I. Global Growth and Income Fund 6 EX-99.D7 6 SUB-ADVISORY AGREEMENT - H.S. DENT ADVISORS, INC. 1 EXHIBIT d(7) AIM V.I. DENT DEMOGRAPHIC TRENDS FUND SUB-ADVISORY AGREEMENT THIS AGREEMENT is made and entered into this 29th day of December, 1999, by and between A I M Advisors, Inc., a Delaware corporation (the "Adviser"), and H.S. Dent Advisors, Inc., a Delaware corporation (the "Sub-Adviser"). RECITALS WHEREAS, AIM V.I. Dent Demographic Trends Fund (the "Fund") is a series of AIM Variable Insurance Funds, Inc. (the "Company"), a Maryland corporation registered under the Investment Company Act of 1940, as amended (the "1940 Act") as an open-end, diversified management investment company; WHEREAS, the Adviser is registered under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), as an investment adviser and engages in the business of acting as an investment adviser; WHEREAS, the Sub-Adviser is also registered under the Advisers Act, and engages in the business of acting as an investment adviser; WHEREAS, the Adviser expects to enter into an investment advisory agreement with the Fund (the "Investment Advisory Agreement") pursuant to which the Adviser will act as investment adviser with respect to the Fund; and WHEREAS, the Adviser wishes to retain the Sub-Adviser for purposes of rendering advisory services to the Adviser in connection with the Fund upon the terms and conditions hereinafter set forth; NOW THEREFORE, in consideration of the mutual covenants herein contained and other good and valuable consideration, the receipt whereof is hereby acknowledged, the parties hereto agree as follows: 1. Appointment of Sub-Adviser. The Adviser hereby appoints the Sub-Adviser to render investment research and advisory services to the Adviser with respect to the Fund under the supervision of the Adviser, and the Sub-Adviser hereby accepts such appointment, all subject to the terms and conditions contained herein. The Sub-Adviser shall use its best judgment, efforts and facilities in rendering its services as investment adviser. 2. Advisory Services. The duties of the Sub-Adviser shall be limited to the following: (a) Rendering investment research and advisory services to the Adviser with respect to the Fund, under the supervision of the Adviser and subject to the approval and direction of the Board of Directors of the Fund; (b) Analyzing and recommending appropriate industry and sector allocations and weightings for the Fund's investment portfolio, in accordance with the philosophies of Harry S. 2 Dent, Jr. ("Mr. Dent") concerning industry and sector allocations based on demographic principles. The duties of the Sub-Adviser shall not include selection of specific securities within the recommended industry or sectors for purchase or sale. (c) Providing, on a monthly basis, recommendations of the appropriate industry and sector allocations and weightings for the Fund. The Sub-Adviser, at its sole and absolute discretion, may elect to make such recommendations more frequently based on market conditions. The Sub-Adviser shall make Mr. Dent available for discussions with respect to industry and sector allocations and weightings of the Fund upon reasonable request by the Adviser. (d) Providing written materials concerning industry and sector allocations and weightings for the Fund to the Board of Directors of the Company upon request by the Board. (e) Making Mr. Dent available to speak at promotional meetings on 25 days selected by mutual agreement of the Adviser and Sub-Adviser. Mr. Dent may agree, at his sole discretion, to appear at more than one meeting on any day upon request by the Adviser. (f) Making Mr. Dent available, upon request by the Adviser and subject to Mr. Dent's availability, for telephone conference calls intended to educate persons involved in distribution of the Fund's shares on the investment principles of the Fund and for other educational and promotional activities not requiring travel. 3. Control by Board of Directors. Any investment program recommended by the Sub-Adviser pursuant to this Agreement, as well as any other activities undertaken by the Sub-Adviser with respect to the Fund, shall at all times be subject to any directives of the Board of Directors of the Fund. 4. Compliance with Applicable Requirements. In carrying out its obligations under this Agreement, the Sub-Adviser shall at all times conform to: (a) all applicable provisions of the 1940 Act and Advisers Act and any rules and regulations adopted thereunder; (b) the provisions of the registration statement of the Fund, as the same may be amended from time to time, under the Securities Act of 1933 and the 1940 Act; (c) the provisions of the corporate charter and by-laws of the Fund, as the same may be amended from time to time; and (d) any other applicable provisions of state or federal law. 3 5. Compensation. The Adviser shall pay the Sub-Adviser, as compensation for services rendered hereunder, an amount per annum based upon the net asset value of the Fund as follows:
Assets Basis Points ------ ------------ Up to $1 billion ................................. 13 Over $1 billion to and including $2 billion ...... 10 Over $2 billion .................................. 7
The Adviser will begin payment of such fees when the net asset value of the Fund has reached $50 million, and the fee will be paid on a monthly basis thereafter. 6. Expenses of the Fund. All of the ordinary business expenses incurred in the operations of the Fund and the offering of its shares shall be borne by the Fund unless specifically provided otherwise in this Agreement. These expenses borne by the Fund include but are not limited to brokerage commissions, taxes, legal, auditing, governmental fees, the cost of preparing share certificates, custodian, transfer and shareholder service agent costs, expenses of issue, sale, redemption and repurchase of shares, expenses of registering and qualifying shares for sale, expenses relating to directors and shareholder meetings, the cost of preparing and distributing reports and notices to shareholders, the fees and other expenses incurred by the Fund in connection with membership in investment company organizations and the cost of printing copies of prospectuses and statements of additional information distributed to the Fund's shareholders. 7. Exclusivity. Sub-Adviser shall not render investment advice or similar services directly or indirectly to any investment company that offers or has offered its shares for sale in a public offering, other than (i) the Fund and other investment companies that are advised or distributed by A I M Management Group Inc. or its affiliates and (ii) unit investment trusts identified on Exhibit A to this Agreement. It is understood and agreed that Exhibit A may be amended from time to time by mutual agreement of the Adviser and Sub-Adviser and that officers or directors of the Sub-Adviser are not prohibited from engaging in any other business activity or from rendering any other services to any other person, or from serving as partners, officers, directors or trustees of any other firm or trust, including other investment advisory companies so long as such activity or service is unrelated to the rendering of investment advice to investment companies that offer or have offered their shares for sale in a public offering. 8. Trading Practices. The Adviser and Sub-Adviser each agree to comply with the requirement of Rule l7j-1 under the 1940 Act and that they shall not engage in any conduct or practice prohibited by said Rule. 9. Term and Approval. This Agreement shall become effective if approved by the shareholders of the Fund, and if so approved, this Agreement shall thereafter continue in force and effect until June 30, 2001, and may be continued from year to year thereafter, provided that the continuation of the Agreement is specifically approved at least annually by the Fund's Board of Directors. 4 10. Termination. (a) This Agreement shall automatically terminate in the event of its assignment, the term "assignment" for purposes of this paragraph having the meaning defined in Section 2(a)(4) of the 1940 Act. (b) This Agreement may be terminated as follows: (i) At any time, without the payment of any penalty, by the vote of the Fund's Board of Directors or by vote of a majority of the Fund's outstanding voting securities. (ii) The Sub-Adviser may terminate this Agreement if the Fund does not commence a public offering of its shares on or before December 31, 1999. (iii) By either party in the event that certain Servicemark License Agreement of even date herewith between Harry S. Dent, Jr. and A I M Management Group Inc. is terminated or expires. (iv) By either party upon the occurrence of a material breach of the terms of the Agreement by the other party that remains uncured for a period of 30 days after notice thereof is given by the terminating party. (c) The party electing to terminate the Agreement under paragraph 10(b) must provide 60 days' prior written notice to the other party and to the Fund of such election. The notice provided for herein may be waived by either party. 11. Liability of Sub-Adviser. In the absence of willful misfeasance, bad faith, gross negligence or reckless disregard of obligations or duties hereunder on the part of the Sub-Adviser or any of its officers, directors or employees, the Sub-Adviser shall not be subject to liability to the Adviser for any act or omission in the course of, or connected with, rendering services hereunder or for any losses that may be sustained in the purchase, holding or sale of any security. 12. Notices. Any notices under this Agreement shall be in writing, addressed and delivered or mailed postage paid to such address as may be designated for the receipt of such notice, with a copy to the Fund. Until further notice, it is agreed that the address of the Fund and that of the Adviser shall be Eleven Greenway Plaza, Suite 100, Houston, Texas 77046 and that of the Sub-Adviser shall be H.S. Dent Advisors, Inc., P.O. Box 914, Moss Beach, CA 94038. 13. Questions of Interpretation; Applicable Law. Any question of interpretation of any term or provision of this Agreement having a counterpart in or otherwise derived from a term or provision of the 1940 Act or the Advisers Act shall be resolved by reference to such term or provision of the 1940 Act or the Advisers Act and to interpretations thereof, if any, by the United States Courts or in the absence of any controlling decision of any such court, by rules, regulations or orders of the Securities and Exchange Commission issued pursuant to said Acts. In addition, where the effect of a requirement of the 1940 Act or the Advisers Act reflected in any provision of the Agreement is revised by rule, regulation or order of the Securities and Exchange Commission, such provision shall be deemed to incorporate the effect of such rule, 5 regulation or order. Texas law shall apply to all matters of construction or interpretation of this Agreement not addressed by the 1940 Act or Advisers Act. 14. Dispute Resolution. All claims, disputes and other matters in question between the parties to this Agreement, arising out of or relating to this Agreement or the breach thereof, shall be decided by arbitration in accordance with the rules of the American Arbitration Association then in effect unless the parties mutually agree otherwise. (a) Any such claim, dispute, or other matter shall be submitted to one arbitrator designated by the Adviser, provided that if the Sub-Adviser objects to the Adviser's arbitrator, each of the Adviser and the Sub-Adviser will designate an arbitrator who will jointly designate a third arbitrator, and the matter shall be submitted to all three arbitrators for decision; otherwise one arbitrator shall be used. This agreement to arbitrate shall be specifically enforceable under the prevailing arbitration law. (b) Notice of the demand for arbitration shall be filed in writing with the other party to this Agreement and with the American Arbitration Association. The demand shall be made within a reasonable time after the claim, dispute or other matter in question has arisen. In no event shall the demand for arbitration be made after the date when institution of legal or equitable proceedings based on such claim, dispute or other matter in question would be barred by the applicable statute of limitations. (c) The award rendered by the arbitrators shall be final, and judgement may be entered upon it in accordance with applicable law in any court having jurisdiction thereof. The prevailing party in any arbitration under this Agreement shall be awarded its reasonable attorneys fees and costs associated with the arbitration. (d) The location for settlement for any and all claims, controversies or disputes arising out of or relating to this Agreement or any breach thereof when decided by arbitration shall be in Houston, Texas. 6 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed in duplicate by their respective officers on the day and year first written above. A I M Advisors, Inc. Attest: /s/ NANCY L. MARTIN By: /s/ [ILLEGIBLE] - --------------------------------- ------------------------------- Assistant Secretary President (SEAL) Attest: H.S. Dent Advisors, Inc. /s/ DONNA R. WINDELL By: /s/ [ILLEGIBLE] - --------------------------------- ------------------------------- Assistant Secretary President (SEAL) 7 EXHIBIT A PERMITTED INVESTMENT COMPANY ADVISORY CLIENTS
Name of Company Sponsor --------------- ------- Roaring 2000's Unit Investment Trusts Van Kampen Funds, Inc.
EX-99.E2.E 7 AMEND. #4 TO MASTER DISTRIBUTION AGREEMENT 1 EXHIBIT e(2)(e) AMENDMENT NO. 4 TO MASTER DISTRIBUTION AGREEMENT The Master Distribution Agreement (the "Agreement"), dated as of February 28, 1997 by and between AIM Variable Insurance Funds, Inc., a Maryland corporation and A I M Distributors, Inc., a Delaware corporation, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: "SCHEDULE A TO MASTER DISTRIBUTION AGREEMENT OF AIM VARIABLE INSURANCE FUNDS, INC. o AIM V.I. Aggressive Growth Fund o AIM V.I. Balanced Fund o AIM V.I. Blue Chip Fund o AIM V.I. Capital Appreciation Fund o AIM V.I. Capital Development Fund o AIM V.I. Dent Demographic Trends Fund o AIM V.I. Diversified Income Fund o AIM V.I. Global Growth and Income Fund o AIM V.I. Global Utilities Fund o AIM V.I. Government Securities Fund o AIM V.I. Growth Fund o AIM V.I. Growth and Income Fund o AIM V.I. High Yield Fund o AIM V.I. International Equity Fund o AIM V.I. Money Market Fund o AIM V.I. Telecommunications Fund o AIM V.I. Value Fund" All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Dated: December 29, 1999 ------------------------------ AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ----------------------------- -------------------------------- Assistant Secretary President A I M DISTRIBUTORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO ----------------------------- -------------------------------- Assistant Secretary President EX-99.H4.D 8 AMEND. #3 TO MASTER ADMIN. SERVICES AGMT. - 11/15 1 EXHIBIT h(4)(d) AMENDMENT NO. 3 TO MASTER ADMINISTRATIVE SERVICES AGREEMENT This Amendment, dated as of November 15, 1999, is made to the Master Administrative Services Agreement, (the "Agreement"), as amended, dated May 1, 1998, by and between A I M Advisors, Inc. (the "Administrator") and AIM Variable Insurance Funds, Inc. (the "Company") to replace Section 5 of the Agreement with the following: "5. As full compensation for the services performed under Item 2, above, the Funds shall pay AIM an amount up to an annual rate of 0.25% of the average net asset value of each Fund, excluding the assets listed for the following Funds: Amounts Fund (in millions) ---- ------------- AIM V. I. Capital Appreciation Fund $ 240 AIM V. I. Diversified Income Fund $ 31 AIM V. I. Global Utilities Fund $ 9 AIM V. I. Government Securities Fund $ 16 AIM V. I. Growth Fund $ 82 AIM V. I. Growth & Income Fund $ 706 AIM V. I. International Equity Fund $ 71 AIM V. I. Value Fund $ 405 In no event will the fee exceed an amount in excess of AIM's costs (including amounts charged by various Insurance Companies and Qualified Plans pursuant to agreements with AIM in amounts up to 0.25% of net assets attributable to separate accounts of such Insurance Companies or Qualified Plans) in providing or causing others to provide such services. Such amounts shall be paid to the Administrator on a quarterly basis. To the extent that the Administrator's costs exceed 0.25%, such excess amount shall be borne by the Administrator and the Administrator will not seek reimbursement at a later time for such excess amounts on services previously rendered if the Administrator's costs are later reduced to an amount below 0.25%." 2 IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed by their officers designated below, as of the day and year first above written. A I M ADVISORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ------------------- ---------------------------------- Assistant Secretary President AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ------------------- ---------------------------------- Assistant Secretary President EX-99.H4.E 9 AMEND. #4 TO MASTER ADMIN. SERVICES AGMT. - 12/29 1 EXHIBIT h(4)(e) AMENDMENT NO. 4 TO MASTER ADMINISTRATIVE SERVICES AGREEMENT This Amendment, dated as of December 29, 1999, is made to the Master Administrative Services Agreement, (the "Agreement"), as amended, dated May 1, 1998, by and between A I M Advisors, Inc. (the "Administrator") and AIM Variable Insurance Funds, Inc. (the "Company") to add the following Fund to the provisions of the agreement: AIM V.I. Dent Demographic Trends Fund IN WITNESS WHEREOF, the parties hereto have caused this amendment to be executed by their officers designated below, as of the day and year first above written. A I M ADVISORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ----------------------- ------------------------------- Assistant Secretary President AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ----------------------- ------------------------------- Assistant Secretary President EX-99.H25.D 10 AMEND. #3 TO PARTICIPATION AGMT. - SECURITY LIFE 1 EXHIBIT h(25)(d) AMENDMENT NO. 3 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated December 3, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, Security Life of Denver Insurance Company, a Colorado life insurance company and ING America Equities, Inc., a Colorado corporation, is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
- ----------------------------------------- ------------------------- --------------------------------------------- FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE POLICIES UTILIZING THE FUNDS ACCOUNTS - ----------------------------------------- ------------------------- --------------------------------------------- AIM V.I. Government Securities Fund Separate Account A1 o THE EXCHEQUER VARIABLE ANNUITY - ----------------------------------------- ------------------------- --------------------------------------------- AIM V.I. Capital Appreciation Fund Separate Account L1 o FIRST LINE VARIABLE UNIVERSAL LIFE AIM V.I. Government Securities Fund o FIRST LINE II VARIABLE UNIVERSAL LIFE o STRATEGIC ADVANTAGE VARIABLE UNIVERSAL LIFE o STRATEGIC ADVANTAGE II VARIABLE UNIVERSAL LIFE o VARIABLE SURVIVORSHIP UNIVERSAL LIFE o CORPORATE VARIABLE UNIVERSAL LIFE - ----------------------------------------- ------------------------- ---------------------------------------------
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: November 1, 1999 AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ P. MICHELLE GRACE By: /s/ ROBERT H. GRAHAM ----------------------- ------------------------- Name: P. Michelle Grace Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) 1 of 2 2 SECURITY LIFE OF DENVER INSURANCE COMPANY Attest: /s/ ERIC G. BANTA By: /s/ GARY W. WAGGONER --------------------------- ------------------------- Name: Eric G. Banta Name: Gary W. Waggoner --------------------------- -------------------------- Title: Assistant Secretary Title: Vice President --------------------------- -------------------------- (SEAL) ING AMERICA EQUITIES, INC. Attest: /s/ ERIC G. BANTA By: /s/ JAMES L. LIVINGSTON, JR. --------------------------- ------------------------- Name: Eric G. Banta Name: James L. Livingston, Jr. --------------------------- -------------------------- Title: Assistant Secretary Title: President --------------------------- -------------------------- (SEAL) 2 of 2 EX-99.H26.B 11 AMEND. #1 TO PARTICIPATION AGMT. - COVA FINANCIAL 1 EXHIBIT h(26)(b) AMENDMENT NO. 1 PARTICIPATION AGREEMENT The Participation Agreement (the "Agreement"), dated December 31, 1997, by and among AIM Variable Insurance Funds, Inc., a Maryland corporation, A I M Distributors, Inc., a Delaware corporation, Cova Financial Services Life Insurance Company, a Missouri life insurance company and Cova Life Sales Company, Inc., is hereby amended as follows: Schedule A of the Agreement is hereby deleted in its entirety and replaced with the following: SCHEDULE A
- ----------------------------------------- ----------------------------------- ---------------------------------------- FUNDS AVAILABLE UNDER THE SEPARATE ACCOUNTS CONTRACTS FUNDED BY THE SEPARATE POLICIES UTILIZING THE FUNDS ACCOUNTS - ----------------------------------------- ----------------------------------- ---------------------------------------- AIM V.I. Capital Appreciation Fund Cova Variable Annuity Account One o CONTRACT FORM #XL-407 AIM V.I. International Equity Fund o CONTRACT FORM #XL-617 AIM V.I. Value Fund - ----------------------------------------- ----------------------------------- ---------------------------------------- AIM V.I. Capital Appreciation Fund Cova Variable Life Account One o CONTRACT FORM #CL-1020 AIM V.I. Value Fund - ----------------------------------------- ----------------------------------- ---------------------------------------- AIM V.I. Capital Appreciation Fund o CONTRACT FORM #CLP001 (5/99) AIM V.I. International Equity Fund o CONTRACT FORM #CLP002 (5/99) AIM V.I. Value Fund - ----------------------------------------- ----------------------------------- ----------------------------------------
All other terms and provisions of the Agreement not amended herein shall remain in full force and effect. Effective Date: 4-23-99 ------- AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM --------------------------- -------------------------- Name: Nancy L. Martin Name: Robert H. Graham Title: Assistant Secretary Title: President (SEAL) A I M DISTRIBUTORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO --------------------------- -------------------------- Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President (SEAL) 1 of 2 2 COVA FINANCIAL SERVICES LIFE INSURANCE COMPANY Attest: /s/ SHARI RUECKER By: /s/ NORMA J. NASELLI --------------------------- --------------------------- Name: Shari Ruecker Name: Norma J. Naselli Title: First Vice President Title: Assistance Vice President (SEAL) COVA LIFE SALES COMPANY, INC. Attest: /s/ SHARI RUECKER By: /s/ PATRICIA E. GUBBE --------------------------- --------------------------- Name: Shari Ruecker Name: Patricia E. Gubbe Title: First Vice President Title: President (SEAL) 2 of 2 EX-99.H60 12 PARTICIPATION AGREEMENT - AETNA INSURANCE 1 EXHIBIT h(60) PARTICIPATION AGREEMENT BY AND AMONG AIM VARIABLE INSURANCE FUNDS, INC., A I M DISTRIBUTORS, INC., AETNA INSURANCE COMPANY OF AMERICA, ON BEHALF OF ITSELF AND ITS SEPARATE ACCOUNTS, AND AETNA LIFE INSURANCE AND ANNUITY COMPANY, AS PRINCIPAL UNDERWRITER 2 DESCRIPTION ----------- Section 1.Available Funds....................................................2 1.1 Availability.................................................2 1.2 Addition, Deletion or Modification of Funds..................3 Section 2. Processing Transactions...........................................3 2.1 Timely Pricing and Orders....................................3 2.2 Timely Payments..............................................4 2.3 Applicable Price.............................................4 2.4 Dividends and Distributions..................................5 2.5 Book Entry 4.................................................5 Section 3. Costs and Expenses................................................5 3.1 General......................................................5 Section 4. Legal Compliance..................................................6 4.1 Tax Laws.....................................................6 4.2 Insurance and Certain Other Laws.............................8 4.3 Securities Laws..............................................9 4.4 Notice of Certain Proceedings and Other Circumstances.......10 4.5 LIFE COMPANY To Provide Documents; Information About AVIF...11 4.6 AVIF To Provide Documents; Information About LIFE COMPANY...12 Section 5. Mixed and Shared Funding.........................................13 5.1 General.....................................................13 5.2 Disinterested Directors.....................................14 5.3 Monitoring for Material Irreconcilable Conflicts............14 5.4 Conflict Remedies...........................................15 5.5 Notice to LIFE COMPANY......................................16 5.6. Information Requested by Board of Directors.................16 5.7 Compliance with SEC Rules...................................17 5.8 Other Requirements..........................................17 Section 6. Termination......................................................17 6.1 Events of Termination.......................................17 6.2 Funds To Remain Available...................................18 6.3 Survival of Warranties and Indemnifications.................19 i 3 Section 7. Parties To Cooperate Respecting Termination......................19 Section 8. Assignment.......................................................19 Section 9. Notices..........................................................19 Section 10. Voting Procedures..............................................20 Section 11. Foreign Tax Credits............................................20 Section 12. Indemnification................................................20 12.1 General.....................................................20 12.2 Effect of Notice............................................22 12.3 Successors..................................................22 Section 13. Applicable Law..................................................22 Section 14. Execution in Counterparts.......................................22 Section 15. Severability....................................................22 Section 16. Rights Cumulative...............................................23 Section 17. Headings........................................................23 Section 18. Confidentiality.................................................23 Section 19. Parties to Cooperate............................................24 ii 4 PARTICIPATION AGREEMENT THIS AGREEMENT, made and entered into as of the 1st day of November, 1999 ("Agreement"), by and among AIM Variable Insurance Funds, Inc., a Maryland corporation ("AVIF"); A I M Distributors, Inc., a Delaware corporation ("AIM"), Aetna Insurance Company of America, a Connecticut life insurance company ("LIFE COMPANY"), on behalf of itself and each of its segregated asset accounts listed in Schedule A hereto, as the parties hereto may amend from time to time (each, an "Account, " and collectively, the "Accounts"); and Aetna Life Insurance and Annuity Company, a registered broker-dealer, the principal underwriter of the Contracts ("UNDERWRITER") (collectively, the "Parties'). WITNESSETH THAT: WHEREAS, AVIF is registered with the Securities and Exchange Commission ("SEC") as an open-end management investment company under the Investment Company Act of 1940, as amended (the "1940 Act"); and WHEREAS, AVIF currently consists of fifteen separate series ("Series"), shares ("Shares") of each of which are registered under the Securities Act of 1933, as amended (the "1933 Act") and are currently sold to one or more separate accounts of life insurance companies to fund benefits under variable annuity contracts and variable life insurance contracts; and WHEREAS, AVIF will make Shares of each Series listed on Schedule A hereto as the Parties hereto may amend from time to time (each a "Fund"; reference herein to "AVIF" includes reference to each Fund, to the extent the context requires) available for purchase by the Accounts; and WHEREAS A I M is registered as a broker-dealer with the SEC under the Securities Exchange Act of 1934 as amended (the "1934 Act") and is a member in good standing of the National Association of Securities Dealers, Inc. (the "NASD"); and; WHEREAS, LIFE COMPANY represents that it has established Variable Annuity Account I and may establish such other accounts as may be set forth in Schedule A attached hereto and as may be amended from time to time with the mutual consent of the parties hereto (the "Accounts"), each of which is a separate account under Connecticut Insurance law, and has registered or will register each of the Accounts (except for such Accounts for which no such registration is required) as a unit investment trust under the Investment Company Act of 1940 (the "1940 Act"), to serve as an investment vehicle for the Contracts. Each Contract provides for the allocation of net amounts received by LIFE COMPANY to an Account for investment in the shares of one or more specified open-end management investment companies available through that Account as underlying 1 5 investment media. Selection of a particular investment management company and changes therein from time to time are made by the participant or Contract owner, as applicable under a particular Contract. WHEREAS, LIFE COMPANY will be the issuer of certain group and individual variable annuity contracts and variable life insurance contracts and Certificates issued to individuals under a group contract (collectively referred to as "Contracts") which Contracts, if required by applicable law, will be registered under the 1933 Act; and WHEREAS, to the extent permitted by applicable insurance laws and regulations, LIFE COMPANY intends to purchase Shares in one or more of the Funds on behalf of the Accounts to fund the Contracts; and WHEREAS, UNDERWRITER is a broker-dealer registered with the SEC under the Securities Exchange Act of 1934 (" 1934 Act") and a member in good standing of the National Association of Securities Dealers, Inc. ("NASD"); NOW, THEREFORE, in consideration of the mutual benefits and promises contained herein, the Parties hereto agree as follows: SECTION 1. AVAILABLE FUNDS -------------------------- 1.1 AVAILABILITY ------------ (a) AVIF will make Shares of each Fund available to LIFE COMPANY for purchase and redemption at net asset value and with no sales charges, subject to the terms and conditions of this Agreement. The Board of Directors of AVIF may refuse to sell Shares of any Fund to any person, or suspend or terminate the offering of Shares of any Fund if such action is required by law or by regulatory authorities having jurisdiction or if, in the sole discretion of the Directors acting in good faith and in light of their fiduciary duties under federal and any applicable state laws, such action is deemed in the best interests of the shareholders of such Fund. (b) AVIF represents and warrants that it will give LIFE COMPANY at least 30 days written notice prior to closing any Fund or Series or to limit sales of Shares of any Fund or Series in any way. In addition, AVIF will use its best efforts to send any agendas or proposed agendas concerning a closing or restriction with respect to a Fund to LIFE COMPANY within 24 hours of the creation of such agenda or proposed agenda. (c) Notwithstanding the above, if severe market conditions exist which require immediate action in order to comply with all applicable laws and regulations or if the continued offering is disadvantageous to the best interest of the shareholders of the Fund being closed or restricted and it is disadvantageous to the best interest of the shareholders of the 2 6 Fund to give 30 days notice, AVIF warrants and represents that it will give notice within 24 hours of a decision to close or restrict the offering of a Fund. 1.2 ADDITION, DELETION OR MODIFICATION OF FUNDS. -------------------------------------------- The Parties hereto may agree, from time to time, to add other Funds to provide additional funding media for the Contracts, or to delete, combine, or modify existing Funds, by amending Schedule A hereto. Upon such amendment to Schedule A, any applicable reference to a Fund, AVIF, or its Shares herein shall include a reference to any such additional Fund. Schedule A, as amended from time to time, is incorporated herein by reference and is a part hereof. SECTION 2. PROCESSING TRANSACTIONS ---------------------------------- 2.1 TIMELY PRICING AND ORDERS. -------------------------- (a) AVIF or its designated agent will use its best efforts to provide LIFE COMPANY with the net asset value per Share, dividend and capital gain information for each Fund by 6:30 p.m. Eastern Time on each Business Day. In the event such information will not be provided by 6:30.p.m Eastern Time, AVIF will notify LIFE COMPANY no later than 7:00 p.m. Eastern Time as to when such information is forthcoming and will grant LIFE COMPANY any additional time it needs under (b) below. As used herein, "Business Day" shall mean any day on which (i) the New York Stock Exchange is open for regular trading, (ii) AVIF calculates the Fund's net asset value, and (iii) LIFE COMPANY is open for business. (b)LIFE COMPANY will use the data provided by AVIF each Business Day pursuant to paragraph (a) immediately above to calculate Account unit values and to process transactions that receive that same Business Day's Account unit values. LIFE COMPANY will perform such Account processing the same Business Day, and will place corresponding orders to purchase or redeem Shares with AVIF by 10:00 a.m. Eastern Time the following Business Day; provided, however, that AVIF shall provide additional time to LIFE COMPANY in the event that AVIF is unable to meet the 7:00 p.m. time stated in paragraph (a) immediately above. Such additional time shall be equal to the additional time that AVIF takes to make the net asset values available to LIFE COMPANY. (c) With respect to payment of the purchase price by LIFE COMPANY and of redemption proceeds by AVIF, LIFE COMPANY and AVIF shall net purchase and redemption orders with respect to each Fund and shall transmit one net payment for all Funds in accordance with Section 2.2 below. 3 7 (d) If AVIF provides materially incorrect Share net asset value information (as determined under SEC guidelines), LIFE COMPANY shall be entitled to an adjustment to the number of Shares purchased or redeemed to reflect the correct net asset value per Share. Any material error in the calculation or reporting of net asset value per Share, dividend or capital gain information shall be reported promptly upon discovery to LIFE COMPANY. 2.2 TIMELY PAYMENTS. ---------------- LIFE COMPANY will wire payment for net purchases to a custodial account designated by AVIF by 4:00 p.m. Eastern Time on the same day as the order for Shares is placed, to the extent practicable. AVIF will wire payment for net redemptions to an account designated by LIFE COMPANY by 2:00 p.m. Eastern Time on the same day as the Order is placed, to the extent practicable. 2.3 APPLICABLE PRICE. ----------------- (a) Share purchase payments and redemption orders that result from purchase payments, premium payments, surrenders and other transactions under Contracts (collectively, "Contract transactions") and that LIFE COMPANY receives prior to the close of regular trading on the New York Stock Exchange on a Business Day will be executed at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the orders. For purposes of this Section 2.3(a), LIFE COMPANY shall be the designated agent of AVIF for receipt of orders relating to Contract transactions on each Business Day and receipt by such designated agent shall constitute receipt by AVIF; provided that AVIF receives notice of such orders by 10:00 a.m. Eastern Time on the next following Business Day or such later time as computed in accordance with Section 2.1(b) hereof. (b) All other Share purchases and redemptions by LIFE COMPANY will be effected at the net asset values of the appropriate Funds next computed after receipt by AVIF or its designated agent of the order therefor, and such orders will be irrevocable. 2.4 DIVIDENDS AND DISTRIBUTIONS. ---------------------------- LIFE COMPANY hereby elects to reinvest all dividends and capital gains distributions in additional Shares of the corresponding Fund at the dividend date net asset values until LIFE COMPANY otherwise notifies AVIF in writing, it being agreed by the Parties that the ex-dividend date and the payment date with respect to any dividend or distribution will be the same Business Day. LIFE COMPANY reserves the right to revoke this election and to receive all such income dividends and capital gain distributions in cash. 4 8 2.5 BOOK ENTRY. ----------- Issuance and transfer of AVIF Shares will be by book entry only. Stock certificates will not be issued to LIFE COMPANY. Shares ordered from AVIF will be recorded in an appropriate title for LIFE COMPANY, on behalf of its Account. SECTION 3. COSTS AND EXPENSES ----------------------------- 3.1 EXPENSES. --------- (a) Except as otherwise provided in this Agreement, all expenses incident to the performance by the Fund under this Agreement shall be paid by AVIF, including the cost of registration of Fund shares with the Securities and Exchange Commission (the "SEC") and in states where required. AVIF and A I M shall pay no fee or other compensation to LIFE COMPANY under this Agreement, and LIFE COMPANY shall pay no fee or other compensation to AVIF or AIM , except as provided herein and in Schedule B attached hereto and made a part of this Agreement as may be amended from time to time with the mutual consent of the parties hereto. All expenses incident to performance by each party of its respective duties under this Agreement shall be paid by that party, unless otherwise specified in this Agreement. (b) AVIF or AIM shall provide to LIFE COMPANY Post Script files of periodic fund reports to shareholders and other materials that are required by law to be sent to Contract owners. In addition, AVIF or AIM shall provide LIFE COMPANY with a sufficient quantity of its prospectuses, statements of additional information and any supplements to any of these materials, to be used in connection with the offerings and transactions contemplated by this Agreement. In addition, AVIF shall provide LIFE COMPANY with a sufficient quantity of its proxy material that is required to be sent to Contract owners. AIM shall be permitted to review and approve the typeset form of such material prior to such printing provided such material has been provided by AIM to LIFE COMPANY within a reasonable period of time prior to typesetting. (c) In lieu of AVIF's or AIM's providing printed copies of prospectuses, statements of additional information and any supplements to any of these materials, and periodic fund reports to shareholders, LIFE COMPANY shall have the right to request that AVIF transmit a copy of such materials (Post Script files), which LIFE COMPANY may use to have such materials printed together with similar materials of other Account funding media that LIFE COMPANY or any distributor will distribute to existing or prospective Contract owners or participants. 5 9 SECTION 4. LEGAL COMPLIANCE --------------------------- 4.1 TAX LAWS. --------- (a) AVIF represents and warrants that each Fund is currently qualified as a regulated investment company ("RIC") under Subchapter M of the Internal Revenue Code of 1986, as amended (the "Code"), and represents that it will use qualify and maintain qualification of each Fund as a RIC. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so qualify or that it might not so qualify in the future. (b) AVIF represents and warrants that it will comply and maintain each Fund's compliance with the diversification requirements set forth in Section 817(h) of the Code and Section 1.817-5(b) of the regulations under the Code. AVIF will notify LIFE COMPANY immediately upon having a reasonable basis for believing that a Fund has ceased to so comply or that a Fund might not so comply in the future. In the event of a breach of this Section 4.1(b) by AVIF, it will adequately diversify the Fund so as to achieve compliance within the grace period afforded by Section 1.817-5 of the regulations under the Code. (c) AVIF and A I M represent and warrant that at all times while this agreement is in effect, all beneficial interests will be owned by one or more insurance companies or by any other party permitted under Section 1.817-5(f)(3) of the Regulations promulgated under the Code or by the successor thereto, or by any other party permitted under a Revenue Ruling or private letter ruling granted by the Internal Revenue Service. (d) LIFE COMPANY agrees that if the Internal Revenue Service ("IRS") asserts in writing in connection with any governmental audit or review of LIFE COMPANY or, to LIFE COMPANY's knowledge, of any Participant, that any Fund has failed to comply with the diversification requirements of Section 817(h) of the Code or LIFE COMPANY otherwise becomes aware of any facts that could give rise to any claim against AVIF or its affiliates as a result of such a failure or alleged failure: (i) LIFE COMPANY shall promptly notify AVIF of such assertion or potential claim (subject to the Confidentiality provisions of Section 18 as to any Participant); (ii) LIFE COMPANY shall consult with AVIF as to how to minimize any liability that may arise as a result of such failure or alleged failure; (iii) LIFE COMPANY shall use its best efforts to minimum any liability of AVIF or its affiliates resulting from such failure, including, without limitation, demonstrating, pursuant to Treasury Regulations Section 1.8175(a)(2), to the Commissioner of the IRS that such failure was inadvertent; 6 10 (iv) LIFE COMPANY shall permit AVIF, its affiliates and their legal and accounting advisers to participate in any conferences, settlement discussions or other administrative or judicial proceeding or contests (including judicial appeals thereof) with the IRS, any Participant or any other claimant regarding any claims that could give rise to liability to AVIF or its affiliates as a result of such a failure or alleged failure; provided, however, that LIFE COMPANY will retain control of the conduct of such conferences discussions, proceedings, contests or appeals; (v) any written materials to be submitted by LIFE COMPANY to the IRS, any Participant or any other claimant in connection with any of the foregoing proceedings or contests (including, without limitation, any such materials to be submitted to the IRS pursuant to Treasury Regulations Section 1.817-5(a)(2)), shall be provided by LIFE COMPANY to AVIF (together with any supporting information or analysis); subject to the confidentiality provisions of Section 18, at least seven (7) business days or such shorter period to which the Parties hereto agree prior to the day on which such proposed materials are to be submitted; (vi) LIFE COMPANY shall provide AVIF or its affiliates and their accounting and legal advisers with such cooperation as AVIF shall reasonably request (including, without limitation, by permitting AVIF and its accounting and legal advisers to review the relevant books and records of LIFE COMPANY) in order to facilitate review by AVIF or its advisers of any written submissions provided to it pursuant to the preceding clause or its assessment of the validity or amount of any claim against its arising from such a failure or alleged failure; (vii) LIFE COMPANY shall not with respect to any claim of the IRS or any Participant that would give rise to a claim against AVIF or its affiliates (a) compromise or settle any claim, (b) accept any adjustment on audit, or (c) forego any allowable administrative or judicial appeals, without the express written consent of AVIF or its affiliates, which shall not be unreasonably withheld, provided that LIFE COMPANY shall not be required to appeal any adverse judicial decision unless (i) counsel, reasonably agreed to by all Parties, provide an opinion that there is a reasonable basis for making such an appeal and (ii) the appeal is limited to a determination as to whether a Fund is adequately diversified within the meaning of Section 817(h) of the Internal Revenue Code. In the event an appeal is made, AVIF and A I M agree to pay LIFE COMPANY for all costs and expenses incurred in its efforts to carry out the appeal; (viii) AVIF and its affiliates shall have no liability as a result of such failure or alleged failure if LIFE COMPANY fails to comply with any of the 7 11 foregoing clauses (i) through (vii), and such failure could be shown to have materially contributed to the liability. Should AVIF or A I M or any of its affiliates refuse to give its written consent to any compromise or settlement of any claim or liability hereunder, LIFE COMPANY may, in its discretion, authorize AVIF or its affiliates to act in the name of LIFE COMPANY in, and to control the conduct of, such conferences, discussions, proceedings, contests or appeals and all administrative or judicial appeals thereof, and in that event AVIF or its affiliates shall bear the fees and expenses associated with the conduct of the proceedings that it is so authorized to control; provided, that in no event shall LIFE COMPANY have any liability resulting from AVIF's refusal to accept the proposed settlement or compromise with respect to any failure caused by AVIF. As used in this Agreement, the term "affiliates" shall have the same meaning as "affiliated person" as defined in Section 2(a)(3) of the 1940 Act. (e) LIFE COMPANY represents and warrants that the Contracts currently are and will be treated as annuity contracts or life insurance contracts under applicable provisions of the Code and that it will maintain such treatment; LIFE COMPANY will notify AVIF immediately upon having a reasonable basis for believing that any of the Contracts have ceased to be so treated or that they might not be so treated in the near future. (f) LIFE COMPANY represents and warrants that each Account is a "segregated asset account" and that interests in each Account are offered exclusively through the purchase of or transfer into a "variable contract," within the meaning of such terms under Section 817 of the Code and the regulations thereunder. LIFE COMPANY will use its best efforts to continue to meet such definitional requirements, and it will notify AVIF immediately upon having a reasonable basis for believing that such requirements have ceased to be met or that they might not be met in the near future. 4.2 INSURANCE AND CERTAIN OTHER LAWS. --------------------------------- (a) AVIF and A I M represent and warrant that they will notify LIFE COMPANY of any material changes in the operation or diversification of the Funds that may impact the LIFE COMPANY's compliance with state insurance laws, regulation or pronouncements. (b) LIFE COMPANY represents and warrants that (i) it is an insurance company duly organized, validly existing and in good standing under the laws of the State of Connecticut and has full corporate power, authority and legal right to execute, deliver and perform its duties and comply with its obligations under this Agreement, (ii) it has legally and validly established and maintains each Account as a segregated asset account under Section 38a of the Connecticut Insurance Law and the regulations thereunder, and (iii) the Contracts comply in all material respects with all other applicable federal and state laws and regulations. (c) AVIF represents and warrants that (i) it is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland and has full power, authority, and legal right to execute, deliver, and perform its duties and comply with its obligations under this Agreement, (ii) it has provided to LIFE COMPANY the Shared Funding Exemptive Order issued by the SEC dated December 6, 1995 (File No. 812-9642), and (iii) the Funds comply in all material respects with all applicable federal and state laws and regulations. 8 12 4.3 SECURITIES LAWS. --------------- (a) LIFE COMPANY represents and warrants that (i) interests in each Account pursuant to the Contracts will be registered under the 1933 Act to the extent required by the 1933 Act, (ii) the Contracts will be duly authorized for issuance and sold in compliance with all applicable federal and state laws; including, without limitation, the 1933 Act, the 1934 Act, the 1940 Act and Connecticut law, (iii) each Account is and will remain registered under the1940 Act, to the extent required by the 1940 Act, (iv) each Account does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, to the extent required, (v) each Account's 1933 Act registration statement relating to the Contracts, together with any amendments thereto, with at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder, (vi) LIFE COMPANY will amend the registration statement for its Contracts under the 1933 Act and for its Accounts under the 1940 Act from time to time as required in order to effect the continuous offering of its Contracts or as may otherwise be required by applicable law, and (vii) each Account Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (b) AVIF and A I M represent and warrant that (i) Shares sold pursuant to this Agreement will be registered under the 1933 Act to the extent required by the 1933 Act and duly authorized for issuance and sold in compliance with Maryland law, (ii) AVIF is and will remain registered under the 1940 Act to the extent required by the 1940 Act, (iii) AVIF will amend the registration statement for its Shares under the 1933 Act and itself under the 1940 Act from time to time as required in order to effect the continuous offering of its Shares, (iv) AVIF does and will comply in all material respects with the requirements of the 1940 Act and the rules thereunder, (v) AVIF's 1933 Act registration statement, together with any amendments thereto, will at all times comply in all material respects with the requirements of the 1933 Act and rules thereunder, and (vi) AVIF's Prospectus will at all times comply in all material respects with the requirements of the 1933 Act and the rules thereunder. (c) AVIF will at its expense register and qualify its Shares for sale in accordance with the laws of any state or other jurisdiction if and to the extent reasonably deemed advisable by AVIF. 9 13 (d) AVIF currently does not intend to make any payments to finance distribution expenses pursuant to Rule 12b-1 under the 1940 Act or otherwise, although it reserves the right to make such payments in the future. To the extent that it decides to finance distribution expenses pursuant to Rule 12b-1, AVIF undertakes to have its Board of Directors, a majority of whom are not "interested" persons of the Fund, formulate and approve any plan under Rule 12b-1 to finance distribution expenses. (e) AVIF represents and warrants that all of its trustees, officers, employees, investment advisers, and other individuals/entities having access to the funds and/or securities of the Fund are and continue to be at all times covered by a blanket fidelity bond or similar coverage for the benefit of the Fund in an amount not less than the minimal coverage as required currently by Rule 17g-(l) of the 1940 Act or related provisions as may be promulgated from time to time. The aforesaid bond includes coverage for larceny and embezzlement and is issued by a reputable bonding company. 4.4 NOTICE OF CERTAIN PROCEEDINGS AND OTHER CIRCUMSTANCES. ------------------------------------------------------ (a) AVIF and AIM will immediately notify LIFE COMPANY of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to AVIF's registration statement under the 1933 Act or AVIF Prospectus, (ii) any request by the SEC for any amendment to such registration statement or AVIF Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of AVIF's Shares, or (iv) any other action or circumstances-that may prevent the lawful offer or sale of Shares of any Fund in any state or jurisdiction, including, without limitation, any circumstances in which (a) such Shares are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law, or (b) such law precludes the use of such Shares as an underlying investment medium of the Contracts issued or to be issued by LIFE COMPANY. AVIF will make every reasonable effort to prevent the issuance, with respect to any Fund, of any such stop order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. (b) LIFE COMPANY will immediately notify AVIF and AIM of (i) the issuance by any court or regulatory body of any stop order, cease and desist order, or other similar order with respect to each Account's registration statement under the 1933 Act relating to the Contracts or each Account Prospectus, (ii) any request by the SEC for any amendment to such registration statement or Account Prospectus that may affect the offering of Shares of AVIF, (iii) the initiation of any proceedings for that purpose or for any other purpose relating to the registration or offering of each Account's interests pursuant to the Contracts, or (iv) any other action or circumstances that may prevent the lawful offer or sale of said interests in any state or jurisdiction, including, without limitation, any circumstances in which said interests are not registered and, in all material respects, issued and sold in accordance with applicable state and federal law. LIFE COMPANY will make every reasonable effort to prevent the issuance of any such stop 10 14 order, cease and desist order or similar order and, if any such order is issued, to obtain the lifting thereof at the earliest possible time. 4.5 LIFE COMPANY TO PROVIDE DOCUMENTS: INFORMATION ABOUT AVIF. --------------------------------------------------------- (a) LIFE COMPANY will, upon reasonable request, provide to AVIF or its designated agent at least one (1) complete copy of all SEC registration statements, Account Prospectuses, reports, any preliminary and final voting instruction solicitation material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to each Account or the Contracts, as soon as possible after the filing with the filing of such document with the SEC or other regulatory authorities. (b) LIFE COMPANY will provide AVIF or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which AVIF or any of its affiliates is named (except "standardized material" as defined hereafter), at least two (2) business days, or such shorter period as the Parties hereto may, from time to time, agree upon, prior to its first use. For purposes of this paragraph, "standardized material" is sales literature or other promotional material that is not materially different, in format and/or content, from materials that have previously been reviewed and authorized for use under the terms of this paragraph. LIFE COMPANY agrees to bear all responsibility and liability for any error in any standardized material (e.g., transposition of numbers) to the extent any information contained therein does not conform to the information provided to LIFE COMPANY by A I M or AVIF. No such sales literature or other promotional material shall be used if AVIF or its designated agent reasonably objects to such use within two (2) business days, or such shorter period as the Parties hereto may, from time to time, agree upon, after receipt of such materials. AVIF hereby designates A I M as the entity to receive such literature, until such time as AVIF appoints another designated agent by giving notice to LIFE COMPANY in the manner required by Section 9 hereof. LIFE COMPANY will notify AVIF when it is sending material for review for purposes of confirmation of receipt. AVIF has the right to request subsequent review of standardized material and its proposed usage. (c) Neither LIFE COMPANY nor any of its affiliates, will give any information or make any representations or statements on behalf of or concerning AVIF or its affiliates in connection with the sale of the Contracts other than (i) the information or representations contained in the registration statement, including the AVIF Prospectus contained therein, relating to Shares, as such registration statement and AVIF Prospectus may be amended from time to time; or (ii) in reports or proxy materials for AVIF; or (iii) in published reports for AVIF that are in the public domain and approved by AVIF for distribution; or (iv) in sales literature or other promotional material approved by AVIF, except with the express written permission of AVIF. (d) LIFE COMPANY shall adopt and implement procedures reasonably designed to ensure that information concerning AVIF and its affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for 11 15 distribution to Participants) ("broker only materials") is so used, and neither AVIF nor any of its affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials. (e) For the purposes of this Section 4.5, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act. 4.6 AVIF TO PROVIDE DOCUMENTS: INFORMATION ABOUT LIFE COMPANY. ---------------------------------------------------------- (a) AVIF wi1l provide to LIFE COMPANY at least one (1) complete copy of all SEC registration statements, AVIF Prospectuses, reports, any preliminary and final proxy material, applications for exemptions, requests for no-action letters, and all amendments to any of the above, that relate to AVIF or the Shares of a Fund, contemporaneously with the filing of such document with the SEC or other regulatory authorities. (b) AVIF will provide to LIFE COMPANY Post Script files for all AVIF prospectuses and printed copies, in an amount specified by LIFE COMPANY, of AVIF statements of additional information, proxy materials, periodic reports to shareholders and other materials required by law to be sent to Participants who have allocated any Contract value to a Fund. AVIF will provide such copies to LIFE COMPANY in a timely manner so as to enable LIFE COMPANY, as the case may be, to print and distribute such materials within the time required by law to be furnished to Participants. (c) AVIF will provide to LIFE COMPANY or its designated agent at least one (1) complete copy of each piece of sales literature or other promotional material in which LIFE COMPANY, or any of its respective affiliates is named, or that refers to the Contracts, at least five (5) Business-Days prior to its use or such shorter period as the Parties hereto may, from time to time, agree upon. No such material shall be used if LIFE COMPANY or its designated agent objects to such use within five (5) Business Days after receipt of such material or such shorter period as the Parties hereto may, from time to time, agree upon. LIFE COMPANY shall receive all such sales literature until such time as it appoints a designated agent by giving notice to AVIF in the manner required by Section 9 hereof. 12 16 (d) Neither AVIF nor any of its affiliates will give any information or make any representations or statements on behalf of or concerning LIFE COMPANY, each Account, or the Contracts other than (i) the information or representations contained in the registration statement, including each Account Prospectus contained therein, relating to the Contracts, as such registration statement and Account Prospectus may be amended from time to time; or (ii) in published reports for the Account or the Contracts that are in the public domain and approved by LIFE COMPANY for distribution; or (iii) in sales literature or other promotional material approved by LIFE COMPANY or its affiliates, except with the express written permission of LIFE COMPANY. (e) AVIF shall cause its principal underwriter to adopt and implement procedures reasonably designed to ensure that information concerning LIFE COMPANY, and its respective affiliates that is intended for use only by brokers or agents selling the Contracts (i.e., information that is not intended for distribution to Participants) ("broker only materials") is so used, and neither LIFE COMPANY, nor any of its respective affiliates shall be liable for any losses, damages or expenses relating to the improper use of such broker only materials. (f) For purposes of this Section 4.6, the phrase "sales literature or other promotional material" includes, but is not limited to, advertisements (such as material published, or designed for use in, a newspaper, magazine, or other periodical, radio, television, telephone or tape recording, videotape display, signs or billboards, motion pictures, or other public media, (e.g., on-line networks such as the Internet or other electronic messages), sales literature (i.e., any written communication distributed or made generally available to customers or the public, including brochures, circulars, research reports, market letters, form letters, seminar texts, reprints or excerpts of any other advertisement, sales literature, or published article), educational or training materials or other communications distributed or made generally available to some or all agents or employees, registration statements, prospectuses, statements of additional information, shareholder reports, and proxy materials and any other material constituting sales literature or advertising under the NASD rules, the 1933 Act or the 1940 Act. SECTION 5. MIXED AND SHARED FUNDING ----------------------------------- 5.1. GENERAL. -------- The SEC has granted an order to AVIF exempting it from certain provisions of the 1940 Act and rules thereunder so that AVIF may be available for investment by certain other entities, including, without limitation, separate accounts funding variable annuity contracts or variable life insurance contracts, separate accounts of insurance companies unaffiliated with LIFE COMPANY, and trustees of qualified pension and retirement plans (collectively, "Mixed and Shared Funding"). The Parties recognize that the SEC has imposed terms and conditions for such orders that are substantially identical to many of the provisions of this Section 5. Sections 5.2 through 5.8 below shall apply pursuant to 13 17 such an exemptive order granted to AVIF. AVIF hereby notifies LIFE COMPANY that, in the event that AVIF implements Mixed and Shared Funding, it may be appropriate to include in the prospectus pursuant to which a Contract is offered disclosure regarding the potential risks of Mixed and Shared Funding. 5.2 DISINTERESTED DIRECTORS. ------------------------ AVIF agrees that its Board of Directors shall at all times consist of directors a majority of whom (the "Disinterested Directors") are not interested persons of AVIF within the meaning of Section 2(a)(19) of the 1940 Act and the rules thereunder and as modified by any applicable orders of the SEC, except that if this condition is not met by reason of the death, disqualification, or bona fide resignation of any director, then the operation of this condition shall be suspended (a) for a period of forty-five (45) days if the vacancy or vacancies may be filled by the Board; (b) for a period of sixty (60) days if a vote of shareholders is required to fill the vacancy or vacancies; or (c) for such longer period as the SEC may prescribe by order upon application. 5.3 MONITORING FOR MATERIAL IRRECONCILABLE CONFLICTS. ------------------------------------------------- AVIF agrees that its Board of Directors will monitor for the existence of any material irreconcilable conflict between the interests of the Participants in all separate accounts of life insurance companies utilizing AVIF ("Participating Insurance Companies"), including each Account, and participants in all qualified retirement and pension plans investing in AVIF ("Participating Plans"). LIFE COMPANY agrees to inform the Board of Directors of AVIF of the existence of or any potential for any such material irreconcilable conflict of which it is aware. The concept of a "material irreconcilable conflict" is not defined by the 1940 Act or the rules thereunder, but the Parties recognize that such a conflict may arise for a variety of reasons, including, without limitation: (a) an action by any state insurance or other regulatory authority; (b) a change in applicable federal or state insurance, tax or securities laws or regulations, or a public ruling, private letter ruling, no-action or interpretative letter, or any similar action by insurance, tax or securities regulatory authorities; (c) an administrative or judicial decision in any relevant proceeding; (d) the manner in which the investments of any Fund are being managed; (e) a difference in voting instructions given by variable annuity contract and variable life insurance contract Participants or by Participants of different Participating Insurance companies; 14 18 (f) a decision by a Participating Insurance Company to disregard the voting instructions of Participants; or (g) a decision by a Participating Plan to disregard the voting instructions of Plan participants. Consistent with the SEC's requirements in connection with exemptive orders of the type referred to in Section 5.1 hereof, LIFE COMPANY will assist the Board of Directors in carrying out its responsibilities by providing the Board of Directors with all information reasonably necessary for the Board of Directors to consider any issue raised, including information as to a decision by LIFE COMPANY to disregard voting instructions of Participants. 5.4 CONFLICT REMEDIES. ------------------ (a) It is agreed that if it is determined by a majority of the members of the Board of Directors or a majority of the Disinterested Directors that a material irreconcilable conflict exists, LIFE COMPANY will, if it is a Participating Insurance Company for which a material irreconcilable conflict is relevant, at its own expense and to the extent reasonably practicable (as determined by a majority of the Disinterested Directors), take whatever steps are necessary to remedy or eliminate the material irreconcilable conflict, which steps may include, but are not limited to: (i) withdrawing the assets allocable to some or all of the Accounts from AVIF or any Fund and reinvesting such assets in a different investment medium, including another Fund of AVIF, or submitting the question whether such segregation should be implemented to a vote of all affected Participants and, as appropriate, segregating the assets of any particular group (e.g., annuity Participants, life insurance Participants or all Participants) that votes in favor of such segregation, or offering to the affected Participants the option of making such a change; and (ii) establishing a new registered investment company of the type defined as a "management company" in Section 4(3) of the 1940 Act or a new separate account that is operated as a management company. (b) If the material irreconcilable conflict arises because of LIFE COMPANY's decision to disregard Participant voting instructions and that decision represents a minority position or would preclude a majority vote, LIFE COMPANY may be required, at AVIF's election, to withdraw each Account's investment in AVIF or any Fund. No charge or penalty will be imposed as a result of such withdrawal. Any such withdrawal must take place within six (6) months after AVIF gives notice to LIFE COMPANY that this provision is being implemented, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. 15 19 (c) If a material irreconcilable conflict arises because a particular state insurance regulator's decision applicable to LIFE COMPANY conflicts with the majority of other state regulators, then LIFE COMPANY will withdraw each Account's investment in AVIF within six (6) months after AVIF's Board of Directors informs LIFE COMPANY that it has determined that such decision has created a material irreconcilable conflict, and until such withdrawal AVIF shall continue to accept and implement orders by LIFE COMPANY for the purchase and redemption of Shares of AVIF. No charge or penalty will be imposed as a result of such withdrawal. (d) LIFE COMPANY agrees that any remedial action taken by it in resolving any material irreconcilable conflict will be carried out at its expense and with a view only to the interests of Participants. (e) For purposes hereof, a majority of the Disinterested Directors will determine whether or not any proposed action adequately remedies any material irreconcilable conflict. In no event, however, will AVIF or any of its affiliates be required to establish a new funding medium for any Contracts. LIFE COMPANY will not be required by the terms hereof to establish a new funding medium for any Contracts if an offer to do so has been declined by vote of a majority of Participants materially adversely affected by the material irreconcilable conflict. 5.5 NOTICE TO LIFE COMPANY. ----------------------- AVIF will promptly make known in writing to LIFE COMPANY the Board of Directors' determination of the existence of a material irreconcilable conflict, a description of the facts that give rise to such conflict and the implications of such conflict. 5.6 INFORMATION REQUESTED BY BOARD OF DIRECTORS. -------------------------------------------- LIFE COMPANY and AVIF (or its investment adviser) will at least annually submit to the Board of Directors of AVIF such reports, materials or data as the Board of Directors may reasonably request so that the Board of Directors may fully carry out the obligations imposed upon it by the provisions hereof or any exemptive order granted by the SEC to permit Mixed and Shared Funding, and said reports, materials and data will be submitted at any reasonable time deemed appropriate by the Board of Directors. All reports received by the Board of Directors of potential or existing conflicts, and all Board of Directors actions with regard to determining the existence of a conflict, notifying Participating Insurance Companies and Participating Plan of a conflict, and determining whether any proposed action adequately remedies a conflict, will be properly recorded in the minutes of the Board of Directors or other appropriate records, and such minutes or other records will be made available to the SEC upon request. 16 20 5.7 COMPLIANCE WITH SEC RULES. -------------------------- If, at any time during which AVIF is serving as an investment medium for variable life insurance Contracts, 1940 Act Rules 6e-3(T) or, if applicable, 6e-2 are amended or Rule 6e-3 is adopted to provide exemptive relief with respect to Mixed and Shared Funding, AVIF agrees that it will comply with the terms and conditions thereof and that the terms of this Section 5 shall be deemed modified if and only to the extent required in order also to comply with the terms and conditions of such exemptive relief that is afforded by any of said rules that are applicable. 5.8 OTHER REQUIREMENTS. ------------------- AVIF will require that each Participating Insurance Company and Participating Plan enter into an agreement with AVIF that contains in substance the same provisions as are set forth in Sections 4.1(b), 4.1(e), 4.3(a), 4.4(b), 4.5(a), 5, and 10 of this Agreement. SECTION 6. TERMINATION ---------------------- 6.1 EVENTS OF TERMINATION. --------------------- Subject to Section 6.3 below, this Agreement will terminate as to a Fund: (a) at the option of either LIFE COMPANY, A I M or the Fund, upon sixty days advance written notice to the other parties; (b) at the option of LIFE COMPANY, upon one week advance written notice to A I M and the Fund, if Fund shares are not available for any reason to meet the requirement of Contracts as determined by LIFE COMPANY. (c) at the option of AVIF upon institution of formal proceedings against LIFE COMPANY or its affiliates by the NASD, the SEC, any state insurance regulator or any other regulatory body regarding LIFE COMPANY's obligations under this Agreement or related to the sale of the Contracts, the operation of each Account, or the purchase of Shares, if, in each case, AVIF reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on the Fund with respect to which the Agreement is to be terminated; (d) at the option of LIFE COMPANY upon institution of formal proceedings against AVIF, its principal underwriter, or its investment adviser by the NASD, the SEC, or any state insurance regulator or any other regulatory body regarding AVIF's obligations under this Agreement or related to the operation or management of AVIF or the purchase of AVIF Shares, if, in each case, LIFE COMPANY reasonably determines that such proceedings, or the facts on which such proceedings would be based, have a material likelihood of imposing material adverse consequences on LIFE COMPANY, or 17 21 the Subaccount corresponding to the Fund with respect to which the Agreement is to be terminated; (e) upon the determination of the Accounts to substitute for the Fund's shares the shares of another investment company in accordance with the terms of the applicable Contracts. LIFE COMPANY will give 60 days written notice to the Fund and A I M of any decision to replace the Fund's shares; (f) upon assignment of this Agreement, unless made with the written consent of all other parties hereto; (g) if Fund shares are not registered, issued or sold in conformance with Federal law or such law precludes the use of Fund shares as an underlying investment medium for Contracts issued or to be issued by LIFE COMPANY. Prompt notice shall be given by the appropriate party should such situation occur; (h) upon termination of the corresponding Subaccount's investment in the Fund pursuant to Section 5 hereof; (i) at the option of AVIF if the Contracts issued by LIFE COMPANY cease to qualify as annuity contracts or life insurance contracts under the Code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code) or if interests in an Account under the Contracts are not registered, where required, and in all material respects, are not issued or sold in accordance with any applicable federal state law (j) upon another Party's material breach of any provision of this Agreement, provided the breaching party is given five days notice of the breach and a reasonable opportunity to cure. 6.2 FUNDS TO REMAIN AVAILABLE. -------------------------- Notwithstanding any termination of this Agreement, except for termination because the Contracts ceased to qualify as annuity contracts or life insurance contracts under the code (other than by reason of the Fund's noncompliance with Section 817(h) or Subchapter M of the Code), AVIF will, at the option of LIFE COMPANY, continue to make available additional shares of the Fund pursuant to the terms and conditions of this Agreement, for all Contracts in effect on the effective date of termination of this Agreement (hereinafter referred to as "Existing Contracts"). Specifically, without limitation, the owners of the Existing Contracts will be permitted to reallocate investments in the Fund (as in effect on such date), redeem investments in the Fund and/or invest in the Fund upon the making of additional purchase payments under the Existing Contracts. The Parties agree that this Section 6.2 will not apply to any terminations under Section 5 and the effect of such terminations will be governed by-Section 5 of this Agreement. 18 22 6.3 SURVIVAL OF WARRANTIES AND INDEMNIFICATIONS. -------------------------------------------- All warranties and indemnifications will survive the termination of this Agreement to the extent they apply to this Agreement. SECTION 7. PARTIES TO COOPERATE RESPECTING TERMINATION ------------------------------------------------------ The Parties hereto agree to cooperate and give reasonable assistance to one another in taking all necessary and appropriate steps for the purpose of ensuring that an Account owns no Shares of a Fund after the termination date specified in the notice of termination. Such steps may include combining the affected Account with another Account, substituting other mutual fund shares for those of the affected Fund, or otherwise terminating participation by the Contracts in such Fund. SECTION 8. ASSIGNMENT --------------------- This Agreement may not be assigned by any Party, except with the written consent of each other Party. SECTION 9. NOTICES ------------------ All notices and other communications hereunder shall be given or made in writing and shall be delivered personally, or sent by telex, telecopier or registered or certified mail, postage prepaid, return receipt requested, or recognized overnight courier service to the party or parties to whom they are directed at the following addresses, or at such other addresses as may be designated by notice from such party to all other parties. AIM VARIABLE INSURANCE FUNDS, INC. A I M DISTRIBUTORS, INC. 11 Greenway Plaza, Suite 100 Houston, Texas 77046-1173 Facsimile: (713) 993-9185 Attn: Nancy L. Martin, Esq. AETNA INSURANCE COMPANY OF AMERICA AETNA LIFE INSURANCE AND ANNUITY COMPANY 151 Farmington Avenue Hartford, Connecticut 06156 Facsimile: (860) 273-9407 Attn: Julie Rockmore, Counsel 19 23 Any notice, demand or other communication given in a manner prescribed in this section shall be deemed to have been delivered on receipt. SECTION 10. VOTING PROCEDURES ----------------------------- (a) LIFE COMPANY shall provide pass-through voting privileges on Fund shares held by registered separate accounts to all Contract owners and participants or Certificate Holders to the extent the SEC continues to interpret the 1940 Act as requiring such privileges. LIFE COMPANY shall ensure that each registered Separate Account calculates voting privileges in a manner consistent with other insurance companies whose registered separate accounts invest in the Fund Shares. LIFE COMPANY shall provide pass-through voting privileges on Fund shares held by unregistered separate accounts to all Contract owners. (b) LIFE COMPANY will distribute to Contract owners and participants, or as appropriate, all proxy material furnished by the Fund and will vote Fund shares in accordance with instructions received from such Contract owners and participants. If and to the extent required by law, LIFE COMPANY, with respect to each group Contract and in each Account shall vote Fund shares for which no instructions have been received, as well as any shares it owns, in the same proportion as shares for which such instructions have been received. LIFE COMPANY and its agents shall not oppose or interfere with the solicitation of proxies for Fund shares held for such Contract owners and participants or Certificate Holders. SECTION 11. FOREIGN TAX CREDITS ------------------------------- AVIF agrees to consult in advance with LIFE COMPANY concerning any decision to elect or not to elect pursuant to Section 853 of the Code to pass through the benefit of any foreign tax credits to its shareholders. SECTION 12. INDEMNIFICATION --------------------------- 12.1 GENERAL. -------- (a) LIFE COMPANY agrees to indemnify and hold harmless AVIF and A I M , and their directors, officers, employees, agents and each person, if any, who controls AVIF or A I M within the meaning of the Securities Act of 1933 (the "1933 Act") against any losses, claims, damages or liabilities to which AVIF or A I M or any director, officer, employee, agent, or controlling person of AVF or A I M may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages, or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, prospectus or sales literature of LIFE COMPANY, or (ii) any omission or the alleged omission to state 20 24 therein a material fact required to be stated therein or necessary to make the statements therein not misleading, or (iii) conduct, statements or representations (other than statements or representations contained in the prospectuses or sales literature of AVIF) of LIFE COMPANY or its agents, with respect to the sale and distribution of Contracts for which Fund shares are the underlying investment or (iv) any breach of LIFE COMPANY's representations and warranties under this Agreement. LIFE COMPANY will reimburse any legal or other expenses reasonably incurred by AVIF or A I M or any director, officer, employee, agent, investment adviser, or controlling person of AVIF or A I M in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that LIFE COMPANY will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or omission or alleged omission made in such Registration Statement or prospectus in conformity with written materials furnished to LIFE COMPANY by AVIF or AIM specifically for use therein or (ii) the willful misfeasance, bad faith, or gross negligence by AVIF or AIM in the performance of its duties or AVIF's or A I M's reckless disregard of obligations or duties under this Agreement or to LIFE COMPANY, whichever is applicable. This indemnity agreement will be in addition to any liability which LIFE COMPANY may otherwise have. (b) AVIF and A I M agree to indemnify and hold harmless LIFE COMPANY and its directors, officers, employees, agents and each person, if any, who controls LIFE COMPANY within the meaning of the 1933 Act against any losses, claims, damages or liabilities to which LIFE COMPANY or any such director, officer, employee, agent or controlling person may become subject, under the 1933 Act or otherwise, insofar as such losses, claims, damages or liabilities (or actions in respect thereof) arise out of or are based upon (i) any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, prospectuses or sales literature of AVIF, or (ii) any omission or the alleged omission to state therein a material fact required to be stated therein or material fact required to be stated therein or necessary to make the statements therein not misleading or (iii) any breach of the Fund's or A I M's representations and warranties under this Agreement. AVIF and AIM will reimburse any legal or other expenses reasonably incurred by LIFE COMPANY or any such director, officer, employee, agent, or controlling person in connection with investigating or defending any such loss, claim, damage, liability or action; provided, however, that AVIF and A I M will not be liable in any such case to the extent that any such loss, claim, damage or liability arises out of or is based upon (i) an untrue statement or omission or alleged omission made in such Registration Statement or prospectuses which are in conformity with written materials furnished to AVIF or A I M by LIFE COMPANY specifically for use therein, or (ii) the willful misfeasance, bad faith, or gross negligence by LIFE COMPANY in the performance of its duties or LIFE COMPANY's reckless disregard of obligations or duties under this Agreement or to A I M or AVIF, whichever is applicable. This indemnity agreement will be in addition to any liability which A I M or AVIF may otherwise have. 21 25 (c) Promptly after receipt by an indemnified party hereunder of notice of the commencement of action, such indemnified party will, if a claim in respect thereof is to be made against the indemnifying party hereunder, notify the indemnifying Party of the commencement thereof; but the failure so to notify the indemnifying Party will not relieve it from any liability which it may have to any indemnified Party otherwise than under this Section 12. In case any such action is brought against any indemnified Party, and it notifies the indemnifying Party of the commencement thereof, the indemnifying Party will be entitled to participate therein and, to the extent that it may wish to, assume the defense thereof, with counsel satisfactory to such indemnified Party, and after notice from the indemnifying Party to such indemnified Party of its election to assume the defense thereof, the indemnifying Party will not be liable to such indemnified party under this Section 12 for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof other than reasonable costs of investigation. 12.2 EFFECT OF NOTICE. ----------------- Any notice given by the indemnifying Party to an indemnified Party referred to in Sections 12.l(c) or 12.2(d) above of participation in or control of any action by the indemnifying Party will in no event be deemed to be an admission by the indemnifying Party of liability, culpability or responsibility, and the indemnifying Party will remain free to contest liability with respect to the claim among the Parties or otherwise. 12.3 SUCCESSORS. ----------- A successor by law of any Party shall be entitled to the benefits of the indemnification contained in this Section 12. SECTION 13. APPLICABLE LAW -------------------------- This Agreement will be construed and the provisions hereof interpreted under and in accordance with Connecticut law, without regard for that state's principles of conflict of laws. SECTION 14. EXECUTION IN COUNTERPARTS ------------------------------------- This Agreement may be executed simultaneously in two or more counterparts, each of which taken together will constitute one and the same instrument. SECTION 15. SEVERABILITY ------------------------ If any provision of this Agreement is held or made invalid by a court decision, statute, rule or otherwise, the remainder of this Agreement will not be affected thereby. 22 26 SECTION 16. RIGHTS CUMULATIVE ----------------------------- The rights, remedies and obligations contained in this Agreement are cumulative and are in addition to any and all rights, remedies and obligations, at law or in equity, that the Parties are entitled to under federal and state laws. SECTION 17. HEADINGS -------------------- The Table of Contents and headings used in this Agreement are for purposes of reference only and shall not limit or define the meaning of the provisions of this Agreement. SECTION 18. CONFIDENTIALITY --------------------------- AVIF acknowledges that the identities of the customers of LIFE COMPANY or any of its affiliates (collectively, the "LIFE COMPANY Protected Parties" for purposes of this Section 18), information maintained regarding those customers, and all computer programs and procedures or other information developed by the LIFE COMPANY Protected Parties or any of their employees or agents in connection with LIFE COMPANY's performance of its duties under this Agreement are the valuable property of the LIFE COMPANY Protected Parties. AVIF agrees that if it comes into possession of any list or compilation of the identities of or other information about the LIFE COMPANY Protected Parties' customers, or any other information or property of the LIFE COMPANY Protected Parties, other than such information as may be independently developed or compiled by AVIF from information supplied to it by the LIFE COMPANY Protected Parties' customers who also maintain accounts directly with AVIF, AVIF will hold such information or property in confidence and refrain from using, disclosing or distributing any of such information or other property except: (a) with LIFE COMPANY's prior written consent (executed by an officer at a Vice President level or higher); or (b) as required by law or judicial process. LIFE COMPANY acknowledges that the identities of the customers of AVIF or any of its affiliates (collectively, the "AVIF Protected Parties' for purposes of this Section 18), information maintained regarding those customers, and all computer programs and procedures or other information developed by the AVIF Protected Parties or any of their employees or agents in connection with AVIF's performance of its duties under this Agreement are the valuable property of the AVIF Protected Parties. LIFE COMPANY agrees that if it comes into possession of any list or compilation of the identities of or other information about the AVIF Protected Parties' customers or any other information or property of the AVIF Protected Parties, other than such information as may be independently developed or compiled by LIFE COMPANY from information supplied to it by the AVIF Protected Parties' customers who also maintain accounts directly with LIFE COMPANY, LIFE COMPANY will hold such information or property in confidence and refrain from using, disclosing or distributing any of such information or other property except: (a) with 23 27 AVIF's prior written consent (executed by an officer at a Vice President level or higher); or (b) as required by law or judicial process. Each party acknowledges that any breach of the agreements in this Section 18 would result in immediate and irreparable harm to the other parties for which there would be no adequate remedy at law and agree that in the event of such a breach, the other parties will be entitled to equitable relief by way of temporary and permanent injunctions, as well as such other relief as any court of competent jurisdiction deems appropriate. SECTION 19. PARTIES TO COOPERATE -------------------------------- Each party to this Agreement will cooperate with each other party and all appropriate governmental authorities (including, without limitation, the SEC, the NASD and state insurance regulators) and will permit each other and such authorities reasonable access to its books and records (including copies thereof) in connection with any investigation or inquiry relating to this Agreement or the transactions contemplated hereby. ------------------------------------------------------------ 24 28 IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names and, on their behalf by and through their duly authorized officers signing below. AIM VARIABLE INSURANCE FUNDS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM ------------------------------ ------------------------------ Name: Nancy L. Martin Name: Robert H. Graham Title: Assistant Secretary Title: President A I M DISTRIBUTORS, INC. Attest: /s/ NANCY L. MARTIN By: /s/ MICHAEL J. CEMO ------------------------------ ------------------------------ Name: Nancy L. Martin Name: Michael J. Cemo Title: Assistant Secretary Title: President AETNA INSURANCE COMPANY OF AMERICA, on behalf of itself and its separate accounts Attest :/s/ ROSEMARIE DERENSIS By: /s/ LAURIE M. LEBLANC ------------------------------ ------------------------------ Name: RoseMarie Derensis Name: Laurie M. LeBlanc Title: Assistant Corporate Secretary Title: Pursuant to Delegation of Authority dated August 12, 1998 AETNA LIFE INSURANCE AND ANNUITY COMPANY, as Principal Underwriter Attest: /s/ ROSEMARIE DERENSIS By: /s/ LAURIE M. LEBLANC ------------------------------ ------------------------------ Name: RoseMarie Derensis Name: Laurie M. LeBlanc Title: Assistant Corporate Secretary Title: Vice President 25 29 SCHEDULE A FUNDS AVAILABLE UNDER THE CONTRACTS - ----------------------------------- AIM V.I. Capital Appreciation Fund AIM V.I. Government Securities Fund AIM V.I. Growth Fund AIM V.I. Growth and Income Fund AIM V.I. International Equity Fund AIM V.I. Value Fund SEPARATE ACCOUNTS UTILIZING THE FUNDS - ------------------------------------- Variable Annuity Account I 26 30 SCHEDULE B The following costs, expenses and reimbursements will be paid by the party indicated: 1. For purposes of Sections 2, 3 and 4, AVIF or A I M shall be liable to LIFE COMPANY for systems and out of pocket costs incurred by the LIFE COMPANY in making a Contract owner's, a participant's or beneficiary's account whole, if such costs or expenses are a result of A I M's or AVIF's failure to provide timely or correct net asset values (determined in accordance with the pricing error policies established by AVIF's Board of Directors), dividend and capital gains or financial information and if such information is not corrected by 4 p.m. EST of the next business day after releasing such incorrect information provided the incorrect NAV as well as the correct NAV for each day that the error occurred is provided. If a mistake is caused in supplying such information or confirmations, which results in a determination by the Fund that a material error has occurred in the calculation of the net asset values of the Fund, the amount required to make a Contract owner's, Participant's or a beneficiary's account whole shall be borne by the Fund, regardless of when the error is corrected. The following limits shall apply to the collective liabilities of A I M and/or AVIF, as appropriate to LIFE COMPANY for systems and out of pocket costs incurred by LIFE COMPANY if such costs or expenses are a result of the A I M or AVIF's failure to provide LIFE COMPANY with such correct or timely information: (i) $1,000 per day for each day that incorrect information provided by either A I M or AVIF is not corrected, if such period does not include a month-end or a fiscal quarter-end, (ii) $1,500 per day for each day that such incorrect information provided by either A I M or AVIF is not corrected, if such period does include a month-end or a fiscal quarter-end, and (iii) up to $50,000 per occurrence in the aggregate under (i) or (ii) above. Any incorrect information that has as a common nexus any single error shall be deemed to be one occurrence for these purposes provided all corrections are provided all corrections are provided at the same time. 2. For purposes of this Agreement, AVIF or A I M shall pay for the cost of typesetting and printing periodic fund reports to shareholders, prospectuses, prospectus supplements, statements of additional information and other materials that are required by law to be sent to Contract owners or participants, as well as the cost of distributing such materials. LIFE COMPANY shall pay for the cost of prospectuses and statements of additional information and the distribution thereof for prospective Contract owners or participants. Each party shall be provided with such supporting data as may reasonably be requested for determining expenses under this Agreement. 27 31 3. AVIF shall pay all expenses in connection with the provision to LIFE COMPANY of a sufficient quantity of its proxy material under this Agreement. The cost associated with proxy preparation, group authorization letters, programming for tabulation and necessary materials (including postage) will be paid by AVIF. Dated this 1st day of November, 1999. AETNA INSURANCE COMPANY OF AMERICA By: /s/ LAURIE M. LEBLANC ----------------------------------------- Name: Laurie M. LeBlanc --------------------------------------- Title: Pursuant to a Delegation of Authority dated August 12, 1998 -------------------------------------- AIM VARIABLE INSURANCE FUNDS, INC. By: /s/ ROBERT H. GRAHAM ----------------------------------------- Name: Robert H. Graham Title: President A I M DISTRIBUTORS, INC. By: /s/ MICHAEL J. CEMO ----------------------------------------- Name: Michael J. Cemo Title: President 28 EX-99.H62 13 AGREEMENT AND PLAN OF REORGANIZATION 1 EXHIBIT h(62) AIM VARIABLE INSURANCE FUNDS, INC. AGREEMENT AND PLAN OF REORGANIZATION AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement"), dated as of December 7, 1999, is entered into by and between AIM Variable Insurance Funds, Inc., a Maryland corporation (the "Company"), acting on its own behalf and on behalf of each of its series portfolios, all of which are identified on Schedule A to this Agreement, and AIM Variable Insurance Funds, a Delaware business trust (the "Trust"), acting on its own behalf and on behalf of each of its series portfolios, all of which are identified on Schedule A to this Agreement. BACKGROUND The Company is organized as a series management investment company and is registered with the Securities and Exchange Commission under the Investment Company Act of 1940. The Company currently publicly offers shares of common stock representing interests in seventeen separate series portfolios. Each of these series portfolios is listed on Schedule A and is referred to in this Agreement as a "Current Fund." The Board of Directors of the Company has designated a single class of common stock that represent interests in each Current Fund. The Company desires to change its form and place of organization by reorganizing as the Trust. In anticipation of such reorganization (the "Reorganization"), the Board of Trustees of the Trust has established seventeen series portfolios corresponding to the Current Funds (each a "New Fund"), and has designated a single class of shares of beneficial interest in each New Fund. Schedule A lists the New Funds. The Reorganization will occur through the transfer of all of the assets of each Current Fund to the corresponding New Fund. In consideration of its receipt of these assets, each New Fund will assume all of the liabilities of the corresponding Current Fund, and will issue to the Current Fund shares of beneficial interest in the New Fund ("New Fund Shares"). New Fund Shares received by the Current Fund will have an aggregate net asset value equal to the aggregate net asset value of the shares of the Current Fund immediately prior to the Reorganization (the "Current Fund Shares"). The Current Fund will then distribute the New Fund Shares it has received to its shareholders. The Reorganization is subject to, and shall be effected in accordance with, the terms of this Agreement. This Agreement is intended to be and is adopted by the Company, on its own behalf and on behalf of the Current Funds, and by the Trust, on its own behalf and on behalf of the New Funds, as a Plan of 1 2 Reorganization within the meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code"). NOW THEREFORE, the parties hereto, intending to be legally bound, hereby agree as follows: 1. DEFINITIONS. Any capitalized terms used herein and not otherwise defined shall have the meanings set forth in the preamble or background to this Agreement. In addition, the following terms shall have the following meanings: 1.1 "Assets" shall mean all assets including, without limitation, all cash, cash equivalents, securities, receivables (including interest and dividends receivable), claims and rights of action, rights to register shares under applicable securities laws, books and records, deferred and prepaid expenses shown as assets on a Current Fund's books, and other property owned by a Current Fund at the Effective Time. 1.2 "Closing" shall mean the consummation of the transfer of assets, assumption of liabilities and issuance of shares described in Sections 2.1 and 2.2 of this Agreement, together with the related acts necessary to consummate the Reorganization, to occur on the date set forth in Section 3.1. 1.3 "Code" shall mean the Internal Revenue Code of 1986, as amended. 1.4 "Current Fund" shall mean each of the Company's seventeen series portfolios. 1.5 "Current Fund Shares" shall mean the shares of the Current Funds outstanding immediately prior to the Reorganization. 1.6 "Effective Time" shall have the meaning set forth in Section 3.1. 1.7 "Liabilities" shall mean all liabilities of a Current Fund including, without limitation, all debts, obligations, and duties of whatever kind or nature, whether absolute, accrued, contingent, or otherwise, whether or not determinable at the Effective Time, and whether or not specifically referred to herein. 1.8 "New Fund" shall mean each of the series portfolios of the Trust, one of which shall correspond to one of the Current Funds as shown on Schedule A. 1.9 "New Fund Shares" shall mean those shares of beneficial interest in a New Fund, issued to a Current Fund in consideration of the New Fund's receipt of the Current Fund's Assets. 1.10 "Registration Statement" shall have the meaning set forth in Section 5.4 1.11 "RIC" shall mean a regulated investment company under Subchapter M of the Code. 2 3 1.12 "SEC" shall mean the Securities and Exchange Commission. 1.13 "Shareholder(s)" shall mean a Current Fund's shareholder(s) of record, determined as of the Effective Time. 1.14 "Shareholders' Meeting" shall have the meaning set forth in Section 5.1. 1.15 "Transfer Agent" shall have the meaning set forth in Section 2.2 1.16 "1940 Act" shall mean the Investment Company Act of 1940, as amended. 2. PLAN OF REORGANIZATION. 2.1 The Company agrees, on behalf of each Current Fund, to assign, sell convey, transfer and deliver all of the Assets of each Current Fund to its corresponding New Fund. The Trust, on behalf of the each New Fund agrees in exchange therefor: (a) to issue and deliver to the Current Fund the number of full and fractional (rounded to the third decimal place) New Fund Shares equal to the number of full and fractional Current Fund Shares; and (b) to assume all of the Current Fund's Liabilities. Such transactions shall take place at the Closing. 2.2 At the Effective Time (or as soon thereafter as is reasonably practicable), (a) the New Fund Shares issued pursuant to Section 5.2 shall be redeemed by each New Fund for $1.00 and (b) each Current Fund shall distribute the New Fund Shares received by it pursuant to Section 2.1 to the Current Fund's Shareholders in exchange for such Shareholders' Current Fund Shares. Such distribution shall be accomplished through opening accounts, by the transfer agent for the Trust (the "Transfer Agent"), on each New Fund's share transfer books in the Shareholders' names and transferring New Fund Shares to such accounts. Each Shareholder's account shall be credited with the respective pro rata number of full and fractional (rounded to the third decimal place) New Fund Shares due that Shareholder. All outstanding Current Fund Shares, including those represented by certificates, shall simultaneously be canceled on each Current Fund's share transfer books. The Trust shall not issue certificates representing the New Fund Shares in connection with the Reorganization. However, certificates representing Current Fund Shares shall represent New Fund Shares after the Reorganization. 2.3 As soon as reasonably practicable after distribution of the New Fund Shares pursuant to Section 2.2, the Company shall dissolve its existence as corporation under Maryland law. 3 4 2.4 Any transfer taxes payable on issuance of New Fund Shares in a name other than that of the registered holder of the Current Fund Shares exchanged therefor shall be paid by the person to whom such New Fund Shares are to be issued, as a condition of such transfer. 2.5 Any reporting responsibility of the Company or each Current Fund to a public authority is, and shall remain its responsibility up to and including the date on which it is terminated. 3. CLOSING. 3.1 The Closing shall occur at the principal office of the Company on April 17, 2000, or on such other date and at such other place upon which the parties may agree. All acts taking place at the Closing shall be deemed to take place simultaneously as of the Company's and the Trust's close of business on the date of the Closing or at such other time as the parties may agree (the "Effective Time"). 3.2 The Company or its fund accounting agent shall deliver to the Trust at the Closing, a certificate of an authorized officer verifying that the information (including adjusted basis and holding period, by lot) concerning the Assets, including all portfolio securities, transferred by the Current Funds to the New Funds, as reflected on the New Funds' books immediately following the Closing does or will conform to such information on the Current Funds' books immediately before the Closing. The Company shall cause the custodian for each Current Fund to deliver at the Closing a certificate of an authorized officer of the custodian stating that (a) the Assets held by the custodian will be transferred to each corresponding New Fund at the Effective Time and (b) all necessary taxes in conjunction with the delivery of the Assets, including all applicable federal and state stock transfer stamps, if any, have been paid or provision for payment has been made. 3.3 The Company shall deliver to the Trust at the Closing a list of the names and addresses of each Shareholder of each Current Fund and the number of outstanding Current Fund Shares owned by each Shareholder, all as of the Effective Time, certified by the Company's Secretary or Assistant Secretary. The Trust shall cause the Transfer Agent to deliver at the Closing a certificate as to the opening on each New Fund's share transfer books of accounts in the Shareholders' names. The Trust shall issue and deliver a confirmation to the Company evidencing the New Fund Shares to be credited to each corresponding Current Fund at the Effective Time or provide evidence satisfactory to the Company that such shares have been credited to each Current Fund's account on such books. At the Closing, each party shall deliver to the other such bills of sale, checks, assignments, stock certificates, receipts, or other documents as the other party or its counsel may reasonably request. 4 5 3.4 The Company and the Trust shall deliver to the other at the Closing a certificate executed in its name by its President or a Vice President in form and substance satisfactory to the recipient and dated the Effective Time, to the effect that the representations and warranties it made in this Agreement are true and correct at the Effective Time except as they may be affected by the transactions contemplated by this Agreement. 4. REPRESENTATIONS AND WARRANTIES. 4.1 The Company represents and warrants on its own behalf and on behalf of each Current Fund as follows: (a) The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Maryland, and its Charter is on file with the Maryland Department of Assessments and Taxation; (b) The Company is duly registered as an open-end series management investment company under the 1940 Act, and such registration is in full force and effect; (c) Each Current Fund is a duly established and designated series of the Company; (d) At the Closing, each Current Fund will have good and marketable title to its Assets and full right, power, and authority to sell, assign, transfer, and deliver its Assets free of any liens or other encumbrances; and upon delivery and payment for the Assets, the corresponding New Fund will acquire good and marketable title to the Assets; (e) The New Fund Shares are not being acquired for the purpose of making any distribution thereof, other than in accordance with the terms hereof; (f) Each Current Fund is a "fund" as defined in Section 851(g)(2) of the Code; each Current Fund qualified for treatment as a RIC for each past taxable year since it commenced operations and will continue to meet all the requirements for such qualification for its current taxable year (and the Assets will be invested at all times through the Effective Time in a manner that ensures compliance with the foregoing); each Current Fund has no earnings and profits accumulated in any taxable year in which the provisions of Subchapter M did not apply to it; and each Current Fund has made all distributions for each such past taxable year that are necessary to avoid the imposition of federal excise tax or has paid or provided for the payment of any excise tax imposed for any such year; (g) There is no plan or intention of the Shareholders who individually own 5% or more of any Current Fund Shares and, to the best of the Company's knowledge, there is no plan or intention of the remaining Shareholders to redeem or otherwise dispose of any New Fund Shares to be 5 6 received by them in the Reorganization. The Company does not anticipate dispositions of those shares at the time of or soon after the Reorganization to exceed the usual rate and frequency of redemptions of shares of the Current Fund as a series of an open-end investment company. Consequently, the Company is not aware of any plan that would cause the percentage of Shareholder interests, if any, that will be disposed of as a result of or at the time of the Reorganization will be one percent (1%) or more of the shares of the Current Fund outstanding as of the Effective Time; (h) The Liabilities were incurred by the Current Funds in the ordinary course of their business and are associated with the Assets; (i) The Company 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; (j) As of the Effective Time, no Current Fund will have outstanding any warrants, options, convertible securities, or any other type of rights pursuant to which any person could acquire Current Fund Shares except for the right of investors to acquire its shares at net asset value in the normal course of its business as an open-end diversified management investment company operating under the 1940 Act; (k) At the Effective Time, the performance of this Agreement shall have been duly authorized by all necessary action by the Company's shareholders; and (l) Throughout the five-year period ending on the date of the Closing, each Current Fund will have conducted its historic business within the meaning of Section 1.368-1(d) of the Income Tax Regulations under the Code in a substantially unchanged manner; (m) The fair market value of the Assets of each Current Fund transferred to the corresponding New Fund will equal or exceed the sum of the Liabilities assumed by the New Fund plus the amount of Liabilities, if any, to which the transferred Assets are subject. 4.2 The Trust represents and warrants on its own behalf, and on behalf of each New Fund as follows: (a) The Trust is a business trust duly organized, validly existing, and in good standing under the laws of the State of Delaware, and its Certificate of Trust has been duly filed in the office of the Secretary of State of Delaware; (b) At the Effective Time, the Trust will succeed to the Company's registration statement filed under the 1940 Act with the SEC and thus will become duly registered as an open-end management investment company under the 1940 Act; 6 7 (c) At the Effective Time, each New Fund will be a duly established and designated series of the Trust; (d) No New Fund has commenced operations nor will it commence operations until after the Closing; (e) Prior to the Effective Time, there will be no issued and outstanding shares in any New Fund or any other securities issued by the Trust on behalf of any New Fund, except as provided in Section 5.2; (f) No consideration other than New Fund Shares (and the New Fund's assumption of the Liabilities) will be issued in exchange for the Assets in the Reorganization; (g) The New Fund Shares to be issued and delivered to the corresponding Current Fund hereunder will, at the Effective Time, have been duly authorized and, when issued and delivered as provided herein, will be duly and validly issued and outstanding shares of the New Fund, fully paid and non-assessable; (h) Each New Fund will be a "fund" as defined in Section 851(g)(2) of the Code and will meet all the requirements to qualify for treatment as a RIC for its taxable year in which the Reorganization occurs; (i) The Trust, on behalf of the New Funds, has no plan or intention to issue additional New Fund Shares following the Reorganization except for shares issued in the ordinary course of its business as a series of an open-end investment company; nor does the Trust, on behalf of the New Funds, have any plan or intention to redeem or otherwise reacquire any New Fund Shares issued pursuant to the Reorganization, other than in the ordinary course of its business or to the extent necessary to comply with its legal obligation under Section 22(e) of the 1940 Act; (j) Each New Fund will actively continue the corresponding Current Fund's business in substantially the same manner that the Current Fund conducted that business immediately before the Reorganization; and no New Fund has any plan or intention to sell or otherwise dispose of any of the Assets, except for dispositions made in the ordinary course of its business or dispositions necessary to maintain its qualification as a RIC, although in the ordinary course of its business the New Fund will continuously review its investment portfolio (as each Current Fund did before the Reorganization) to determine whether to retain or dispose of particular stocks or securities, including those included in the Assets; (k) There is no plan or intention for any of the New Funds to be dissolved or merged into another corporation or business trust or "fund" thereof (within the meaning of section 851(g)(2) of the Code) following the Reorganization; and 7 8 4.3 Each of the Company and the Trust, on its own behalf and on behalf of each Current Fund or each New Fund, as appropriate, represents and warrants as follows: (a) The fair market value of the New Fund Shares of each New Fund received by each Shareholder will be equal to the fair market value of the Current Fund Shares of the corresponding Current Fund surrendered in exchange therefor; (b) Immediately following consummation of the Reorganization, the Shareholders will own all the New Fund Shares of each New Fund and will own such shares solely by reason of their ownership of the Current Fund Shares of the corresponding Current Fund immediately before the Reorganization; (c) The Shareholders will pay their own expenses, if any, incurred in connection with the Reorganization; (d) There is no intercompany indebtedness between a Current Fund and a New Fund that was issued or acquired, or will be settled, at a discount; and (e) Immediately following consummation of the Reorganization, each New Fund will hold the same assets, except for assets distributed to shareholders in the course of its business as a RIC and assets used to pay expenses incurred in connection with the Reorganization, and be subject to the same liabilities that the corresponding Current Fund held or was subject to immediately prior to the Reorganization. Assets used to pay (i) expenses, (ii) all redemptions (other than redemptions at the usual rate and frequency of the Current Fund as a series of an open-end investment company), and (iii) distributions (other than regular, normal distributions), made by a Current Fund after the date of this Agreement will, in the aggregate, constitute less than one percent (1%) of its net assets. 5. COVENANTS 5.1 As soon as practicable after the date of this Agreement, the Company shall call a meeting of its Shareholders (the "Shareholders Meeting") to consider and act on this Agreement. The Board of Directors of the Company shall recommend that Shareholders approve this Agreement and the transactions contemplated by this Agreement. Approval by Shareholders of this Agreement will authorize the Company, and the Company hereby agrees, to vote on the matters referred to in Sections 5.2 and 5.3. 5.2 The Trust's trustees shall authorize the issuance of, and each New Fund shall issue, prior to the Closing, one New Fund Share of each New Fund to the Company in consideration of the payment of $1.00 per share for the purpose of enabling the Company to elect the Company's directors as the Trust's trustees 8 9 (to serve without limit in time, except as they may resign or be removed by action of the Trust's trustees or shareholders), to ratify the selection of the Trust's independent accountants, and to vote on the matters referred to in Section 5.3; 5.3 Immediately prior to the Closing, the Trust (on its own behalf of and with respect to each New Fund, as appropriate) shall enter into a Master Investment Advisory Agreement, a Master Sub-Advisory Agreement, a Master Administrative Services Agreement, Master Distribution Agreements, a Custodian Agreement and a Transfer Agency and Servicing Agreement; and shall enter into or adopt, as appropriate, such other agreements and plans as are necessary for each New Fund's operation as a series of an open-end investment company. Each such agreement and plan shall have been approved by the Trust's trustees and, to the extent required by law, by such of those trustees who are not "interested persons" of the Trust (as defined in the 1940 Act) and by the Company as the sole shareholder of each New Fund. 5.4 The Company or the Trust, as appropriate, shall file with the SEC one or more post-effective amendments to the Company's Registration Statement on Form N-1A under the Securities Act of 1933, as amended, and the 1940 Act, as amended (the "Registration Statement"), (i) which contain such amendments to such Registration Statement as are determined by the Company to be necessary and appropriate to effect the Reorganization and (ii) pursuant to which the Trust adopts such Registration Statement, as so amended, as its own, and shall use its best efforts to have such post-effective amendment or amendments to the Registration Statement become effective as of the Closing. 6. CONDITIONS PRECEDENT. The obligations of the Company, on its own behalf and on behalf of each Current Fund, and the Trust, on its own behalf and on behalf of each New Fund, will be subject to (a) performance by the other party of all its obligations to be performed hereunder at or before the Effective Time, (b) all representations and warranties of the other party contained herein being true and correct in all material respects as of the date hereof and, except as they may be affected by the transactions contemplated hereby, as of the Effective Time, with the same force and effect as if made on and as of the Effective Time, and (c) the further conditions that, at or before the Effective Time: 6.1 The Shareholders of the Company shall have approved this Agreement and the transactions contemplated by this Agreement in accordance with applicable law. 6.2 All necessary filings shall have been made with the SEC and state securities authorities, and no order or directive shall have been received that any other or further action is required to permit the parties to carry out the transactions contemplated hereby. All consents, orders, and permits of federal, 9 10 state, and local regulatory authorities (including the SEC and state securities authorities) deemed necessary by either the Company or the Trust to permit consummation, in all material respects, of the transactions contemplated hereby shall have been obtained, except where failure to obtain such consults, orders, and permits would not involve a risk of a material adverse effect on the assets or properties of either a Current Fund or a New Fund, provided that either the Company or the Trust may for itself waive any of such conditions. 6.3 Each of the Company and the Trust shall have received an opinion from Ballard Spahr Andrews & Ingersoll, LLP as to the federal income tax consequences mentioned below. In rendering such opinion, such counsel may rely as to factual matters, exclusively and without independent verification, on the representations made in this Agreement (or in separate letters of representation that the Company and the Trust shall use their best efforts to deliver to such counsel) and the certificates delivered pursuant to Section 3.4. Such opinion shall be substantially to the effect that, based on the facts and assumptions stated therein and conditioned on consummation of the Reorganization in accordance with this Agreement, for federal income tax purposes: (a) The Reorganization will constitute a Reorganization within the meaning of section 368(a) of the Code, and each Current Fund and each New Fund will be "a party to a Reorganization" within the meaning of section 368(b) of the Code; (b) No gain or loss will be recognized to a Current Fund on the transfer of the Assets to the corresponding New Fund in exchange solely for New Fund Shares and the New Fund's assumption of the Liabilities or on the subsequent distribution of New Fund Shares to the Shareholders, in constructive exchange for their Current Fund Shares, in liquidation of the Current Fund; (c) No gain or loss will be recognized to a New Fund on its receipt of the Assets in exchange for New Fund Shares and its assumption of the Liabilities; (d) Each New Fund's basis for the Assets will be the same as the basis thereof in the corresponding Current Fund's hands immediately before the Reorganization, and the New Fund's holding period for the Assets will include the Current Fund's holding period therefor; (e) A Shareholder will recognize no gain or loss on the constructive exchange of Current Fund Shares solely for New Fund Shares pursuant to the Reorganization; and (f) A Shareholder's basis for the New Fund Shares of each New Fund to be received in the Reorganization will be the same as the basis for the Current Fund Shares of the corresponding Current Fund to be constructively surrendered in exchange for such New Fund Shares, and a Share- 10 11 holder's holding period for such New Fund Shares will include its holding period for the Current Fund Shares constructively surrendered, provided that the New Fund Shares are held as capital assets by the Shareholder at the Effective Time. 6.4 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). At any time prior to the Closing, any of the foregoing conditions (except those set forth in Section 6.1) may be waived by the directors/trustees of either the Company or the Trust if, in their judgment, such waiver will not have a material adverse effect on the interests of the Current Fund's shareholders. 7. EXPENSES. Except as otherwise provided in Section 4.3(c), all expenses incurred in connection with the transactions contemplated by this Agreement (regardless of whether they are consummated) will be borne by the parties as they mutually agree. 8. ENTIRE AGREEMENT. Neither party has made any representation, warranty, or covenant not set forth herein, and this Agreement constitutes the entire agreement between the parties. 9. AMENDMENT. This Agreement may be amended, modified, or supplemented at any time, notwithstanding its approval by the Company's Shareholders, in such manner as may be mutually agreed upon in writing by the parties; provided that following such approval no such amendment shall have a material adverse effect on the Shareholders' interests. 10. TERMINATION. This Agreement may be terminated at any time at or prior to the Effective Time, whether before or after approval by the Company's Shareholders: 10.1 By either the Company or the Trust (a) in the event of the other party's material breach of any representation, warranty, or covenant contained herein to be performed at or prior to the Effective Time, (b) if a condition to its obligations has not been met and it reasonably appears that such condition will not or cannot be met, or (c) if the Closing has not occurred on or before July 31, 1999; or 11 12 10.2 By the parties' mutual agreement. Except as otherwise provided in Section 7, in the event of termination under Sections 10.1(c) or 10.2, there shall be no liability for damages on the part of either the Company or the Trust or any Current Fund or corresponding New Fund, to the other. 11. MISCELLANEOUS. 11.1 This Agreement shall be governed by and construed in accordance with the internal laws of the State of Delaware; provided that, in the case of any conflict between such laws and the federal securities laws, the latter shall govern. 11.2 Nothing expressed or implied herein is intended or shall be construed to confer upon or give any person, firm, trust, or corporation other than the parties and their respective successors and assigns any rights or remedies under or by reason of this Agreement. 11.3 The execution and delivery of this Agreement have been authorized by the Trust's trustees, and this Agreement has been executed and delivered by authorized officers of the Trust acting as such; neither such authorization by such trustees nor such execution and delivery by such officers shall be deemed to have been made by any of them individually or to impose any liability on any of them or any shareholder of the Trust personally, but shall bind only the assets and property of the New Funds, as provided in the Trust's Agreement and Declaration of Trust. 12 13 IN WITNESS WHEREOF, each party has caused this Agreement to be executed and delivered by its duly authorized officers as of the day and year first written above. Attest: AIM VARIABLE INSURANCE FUNDS, INC., on behalf of each of its series listed in Schedule A to this Agreement /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM - --------------------------------- --------------------------------- Title: President --------------------------- Attest: AIM VARIABLE INSURANCE FUNDS, on behalf of each of its series listed in Schedule A to this Agreement /s/ NANCY L. MARTIN By: /s/ ROBERT H. GRAHAM - --------------------------------- --------------------------------- Title: President ---------------------------
13 14 SCHEDULE A
SERIES OF AIM VARIABLE INSURANCE FUNDS, INC. CORRESPONDING SERIES OF AIM VARIABLE INSURANCE FUNDS (EACH A "CURRENT FUND") (EACH A "NEW FUND") - -------------------------------------------- ---------------------------------------------------- AIM V.I. Aggressive Growth Fund AIM V.I. Aggressive Growth Fund AIM V.I. Balanced Fund AIM V.I. Balanced Fund AIM V.I. Blue Chip Fund AIM V.I. Blue Chip Fund AIM V.I. Capital Appreciation Fund AIM V.I. Capital Appreciation Fund AIM V.I. Capital Development Fund AIM V.I. Capital Development Fund AIM V.I. Dent Demographic Trends Fund AIM V.I. Dent Demographic Trends Fund AIM V.I. Diversified Income Fund AIM V.I. Diversified Income Fund AIM V.I. Global Growth and Income Fund AIM V.I. Global Growth and Income Fund AIM V.I. Global Utilities Fund AIM V.I. Global Utilities Fund AIM V.I. Government Securities Fund AIM V.I. Government Securities Fund AIM V.I. Growth and Income Fund AIM V.I. Growth and Income Fund AIM V.I. Growth Fund AIM V.I. Growth Fund AIM V.I. High Yield Fund AIM V.I. High Yield Fund AIM V.I. International Equity Fund AIM V.I. International Equity Fund AIM V.I. Money Market Fund AIM V.I. Money Market Fund AIM V.I. Telecommunications Fund AIM V.I. Telecommunications Fund AIM V.I. Value Fund AIM V.I. Value Fund
14 EX-99.I1.H 14 CONSENT OF MESSRS. FREEDMAN, LEVY, KROLL & SIMONDS 1 Exhibit i(1)(h) [Freedman, Levy, Kroll & Simonds Letterhead] CONSENT OF ------------------------------- FREEDMAN, LEVY, KROLL & SIMONDS ------------------------------- We hereby consent to the reference to our firm under the caption "Legal Matters" in the statement of additional information contained in Post-Effective Amendment No. 15 to the Form N-1A Registration Statement of AIM Variable Insurance Funds, Inc. (File No. 33-57340). /s/ Freedman, Levy, Kroll & Simonds ---------------------------------------- FREEDMAN, LEVY, KROLL & SIMONDS Washington D.C. February 10, 2000 EX-99.I2 15 CONSENT OF MESSRS. TAIT, WELLER & BAKER 1 Exhibit i(2) CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We consent to the use of our reports each dated February 4, 2000 on the financial statements and financial highlights of AIM V.I. Aggressive Growth Fund, AIM V.I. Balanced Fund, AIM V.I. Blue Chip Fund, AIM V.I. Capital Appreciation Fund, AIM V.I. Capital Development Fund, AIM V.I. Dent Demographic Trends Fund, AIM V.I. Diversified Income Fund, AIM V.I. Global Growth and Income Fund, AIM V.I. Global Utilities Fund, AIM V.I. Government Securities Fund, AIM V.I. Growth and Income Fund, AIM V.I. Growth Fund, AIM V.I. High Yield Fund, AIM V.I. International Equity Fund, AIM V.I. Money Market Fund, AIM V.I. Telecommunications Fund, and AIM V.I. Value Fund, each a series of AIM Variable Insurance Funds, Inc. Such financial statements and financial highlights are included in the Post-Effective Amendment No. 15 to the Registration Statement on Form N-1A of AIM Variable Insurance Funds, Inc. We also consent to the references to our Firm in such Registration Statement. /s/ TAIT, WELLER & BAKER -------------------------- TAIT, WELLER & BAKER Philadelphia, Pennsylvania February 15, 2000 -----END PRIVACY-ENHANCED MESSAGE-----